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5 Must-Buy Financial Stocks Ahead of Q4 Earnings This Week

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The fourth-quarter 2020 earnings season started last week. The results are likely to have strong implications on Wall Street. Although overall earnings declined in the last three reported quarters primarily due to severe coronavirus-induced economic devastations, the final results were far better than what were expected at the start of the reporting cycles. Investors will closely monitor the upcoming results to see if they resemble the last three quarters.

Meanwhile, five Zacks top-ranked financial companies are poised beat on fourth-quarter earnings this week. Investment in those stocks should be fruitful going forward.

Q4 at a Glance

The momentum of U.S. economic recovery slowed down in the fourth quarter 2020. The resurgence of coronavirus in several states has forced local governments to re-impose partial lockdown and restrict daily economic activities even during the holiday season. Moreover, lack of a fresh round of fiscal stimulus owing to the disagreement in the U.S. Congress dented consumers' confidence.

The financial sector  is bearing the brunt of low interest rates, economic slowdown and muted consumer sentiments. As the economy continued to operate at a sub-optimal level, demand for loans was tepid. However, the U.S. economy expanded in the fourth-quarter, albeit at a slow pace. The financial sector was busy restructuring businesses and expansion activities.

Moreover, solid investment in technological upgrade helped the financial sector operators to cope with economic slowdown. The efforts are expected to improve online and mobile banking services, as well as ward off competition from Fintech and other large tech companies.

Fourth-Quarter Earnings Likely to Remain Negative

As of Jan 15, 26 S&P 500 companies reported their quarterly results. Total earnings of these companies were up 7.6% from the same period last year on 1.9% lower revenues, with 96.2% beating EPS estimates and 73.1% beating revenue estimates. Overall, the fourth-quarter earnings for the S&P 500 Index are projected to be down 7.8% year over year on 0.3% higher revenues. (Read More: Positive Start to Q4 Earnings Season)

Our Top Picks

We have narrowed down our search to five financial stocks slated to release fourth-quarter results this week. Each of these stocks carries a Zacks Rank #1 (Strong 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 fourth-quarter 2020.

 

The Goldman Sachs Group Inc. (GS - Free Report) operates as an investment banking, securities and investment management company worldwide. It operates in four segments: Investment Banking, Global Markets, Asset Management, and Consumer & Wealth Management. The company has an Earnings ESP of +1.88%.

The Goldman Sachs has an expected earnings growth rate of 28.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.6% over the last 7 days. It has a trailing four-quarter earnings surprise of 32.8%, on average. The company is set to release earnings results on Jan 19, before the opening bell.

Pinnacle Financial Partners Inc. (PNFP - Free Report) provides a full range of banking, investment, trust, mortgage and insurance products and services designed for businesses and their owners and individuals interested in a comprehensive relationship with their financial institution. The company has an Earnings ESP of +3.03%.

Pinnacle Financial Partners has an expected earnings growth rate of 18.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.5% over the last 30 days. The company is set to release earnings results on Jan 19, after the closing bell.

Citizens Financial Group Inc. (CFG - Free Report) operates as the bank holding company for Citizens Bank, National Association that provides retail and commercial banking products and services in the United States. It operates in two segments, Consumer Banking and Commercial Banking. The company has an Earnings ESP of +1.13%.

Citizens Financial has an expected earnings growth rate of 41.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last 7 days. It has a trailing four-quarter earnings surprise of 108.5%, on average. The company is set to release earnings results on Jan 20, before the opening bell.

Discover Financial Services (DFS - Free Report) is a direct banking and payment services company in the United States. It operates in two segments, Direct Banking and Payment Services. The company has an Earnings ESP of +5.79%.

Discovery Financial has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.1% over the last 30 days. The company is set to release earnings results on Jan 20, after the closing bell.

Sterling Bancorp (STL - Free Report) operates as the bank holding company for Sterling National Bank that provides various banking products and services to commercial, consumer, and municipal clients in the United States. The company has an Earnings ESP of +0.71%.

Sterling Bancorp has an expected earnings growth rate of 55.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.1% over the last 30 days. The company is set to release earnings results on Jan 20, after the closing bell.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>