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5 High-Flying Stocks With Room to Run on Q3 Earnings This Week

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The third-quarter 2020 earnings season is likely to have strong implications on Wall Street after disappointing results for the coronavirus-hit second quarter. Corporate profits in the third quarter and the guidance issued will be thoroughly scrutinized by financial experts and economists to gauge whether the U.S. economy will witness a V-shaped recovery this year from the coronavirus-led devastations.

Meanwhile, five companies with a favorable Zacks Rank are poised to beat earnings estimates this week. All these stocks have surged in the third quarter. An earnings beat is likely to result in further upward movement of their stock prices in the near future.  

Q3 at a Glance

The third quarter has two characteristics —  U.S. economic recovery, which witnessed a noticeable momentum in May and June, buoyed by the unprecedented fiscal and monetary stimulus by the U.S. government and the Fed, continued in July.

However, a series of economic data for August and September indicated that the economic momentum has lost its pace. The primary reason for this slow pace of growth is the termination of the $2.2-trillion fiscal stimulus — popularly known as the CARES Act — at the end of July.

Both Republicans and Democrats have agreed on a second round of fiscal stimulus. Coronavirus woes continue to hurt the economy. Resurgence of COVID-19 infections in several states has compelled the U.S. economy to operate at a significant sub-optimal level. Moreover, lack of vaccine or a proper line of treatment has only worsened the situation.

Nevertheless, disagreements appear related to the size and scope of the aid package. Notably, the Democrats initially demanded a $3.4-trillion package, which they later reduced to $2.2 trillion. Meanwhile, the Republicans initially offered a $1-trillion package, which was later increased to $1.8 trillion. No Congressional deal about a new fiscal stimulus has been reached to date.

Our Top Picks

We have narrowed down our search to five stocks slated to release third-quarter results this week. Each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.

Our research shows that for stocks with the combination of a Zacks Rank #3 (Hold) or better and a positive Earnings ESP,  the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after earnings releases. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The chart below shows the price performance of our five picks in the third quarter.

 

Danaher Corp. (DHR - Free Report) designs, manufactures, and markets professional, medical, industrial, and commercial products and services worldwide. It operates through three segments — Life Sciences, Diagnostics, and Environmental & Applied Solutions. The company has an Earnings ESP of +2.56%.

The company has an expected earnings growth rate of 24% for the current year. The Zacks Consensus Estimate for the current year has improved 0.2% over the last 30 days. It has a trailing four-quarter earnings surprise of 10.8%, on average. The stock price of the Zacks Rank #2 company has climbed  21.8% in the third quarter. The company is set to release earnings on Oct 22, before the opening bell.

PulteGroup Inc. (PHM - Free Report) is engaged in the homebuilding and financial services businesses, primarily in the United States. The company has an Earnings ESP of +5.99%. The stock price of the Zacks Rank #1 company soared 36% in the third quarter.

The company has an expected earnings growth rate of 23.5% for the current year. The Zacks Consensus Estimate for the current year has improved 0.2% over the last 7 days. It has a trailing four-quarter earnings surprise of 14.5%, on average. The company is set to release earnings on Oct 22, before the opening bell.

Penske Automotive Group Inc. (PAG - Free Report) is a diversified transportation services company that operates automotive and commercial truck dealerships. It operates through four segments: Retail Automotive, Retail Commercial Truck, Other, and Non-Automotive Investments. The company has an Earnings ESP of +5.55%.

The Zacks Consensus Estimate for the current year has improved 2.1% over the last 7 days. It has a trailing four-quarter earnings surprise of 1.7%, on average. The stock price of the Zacks Rank #2 company has jumped 23.1% in the third quarter. It is set to release earnings on Oct 22, before the opening bell.

Mattel Inc. (MAT - Free Report) is a children's entertainment company, which designs and produces toys and consumer products worldwide. It operates through the North America, International, and American Girl segments. The Zacks Rank #2 company has an Earnings ESP of +6.38%.

The company has an expected earnings growth rate of 60% for the current year. The Zacks Consensus Estimate for the current year has improved 20% over the last 30 days. It has a trailing four-quarter earnings surprise of 74.4%, on average. The stock price has appreciated 21% in the third quarter. The company is set to release earnings on Oct 22, after the closing bell.

Altra Industrial Motion Corp. (AIMC - Free Report) designs, produces and markets a range of electromechanical power transmission motion control products for use in various motion related applications, and high-volume manufacturing and non-manufacturing processes worldwide. It operates through two segments, Power Transmission Technologies and Automation & Specialty. The company has an Earnings ESP of +2.04%.

The Zacks Consensus Estimate for the current year has improved 3.2% over the last 7 days. It has a trailing four-quarter earnings surprise of 31.4%, on average. The stock price of the Zacks Rank #2 company advanced 16% in the third quarter. It is set to release earnings on Oct 23, before the opening bell.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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