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Top 6 Stocks Poised to Beat Earnings Estimate Next Week

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The fourth-quarter 2020 earnings season will be in full swing from next week. This earnings season is likely to have strong implications on Wall Street. Strong overall earnings results and future guidance will support the current stock market valuation, which a section of economists and financial experts have already characterized as overvalued.

The earnings picture has markedly improved  in the first two weeks of this reporting cycle. Although most of the heavyweight U.S. corporates from different sectors and industries are yet to report their financial results, six stocks with a favorable Zacks Rank are set to beat earnings estimate next week. Investment in these stocks should be fruitful going forward.

Fourth-Quarter Earnings Picture Improves

As of Jan 20, 43 S&P 500 companies reported their quarterly results. Total earnings of these companies were up 7.4% from the same period last year on 3.3% higher revenues, with 93% beating EPS estimates and 76.7% beating revenue estimates.

This reflects better performance by the same group of companies than the first three quarters of 2020. Overall, the fourth-quarter earnings for the S&P 500 Index are projected to be down 6.4% year over year on 0.5% higher revenues. This is a notable improvement over the projection of 7.8% decline in earnings on 0.3% higher revenues at the beginning of the reporting cycle.

Notably, first-quarter earnings were down 12.8% year over year on 1.6% higher revenues. Second-quarter earnings plunged 32.2% on 9.3% lower revenues. Third-quarter earnings dropped 7% year over year on 0.7% lower revenues. The fourth-quarter earnings estimates were steadily improving since July 2020. (Read More: Early Q4 Results Show an Improving Earnings Picture)

Our Top Picks

We have narrowed down our search to six stocks slated to release earnings results next 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 the 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 six picks in the last quarter.

 

Bank of Hawaii Corp. (BOH - Free Report) operates as the bank holding company for Bank of Hawaii that provides financial products and services in Hawaii, Guam, and other Pacific Islands. It operates in four segments: Retail Banking, Commercial Banking, Investment Services and Private Banking, and Treasury and Other. The company currently has a Zacks Rank #2 and an Earnings ESP of +4.72% for fourth-quarter 2020.

Bank of Hawaii has an expected earnings growth rate of 16.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 6.3% over the last 30 days. It has a trailing four-quarter earnings surprise of 13.4%, on average. The company is set to release earnings results on Jan 25, before the opening bell.

Graco Inc. (GGG - Free Report) designs, manufactures, and markets systems and equipment used to move, measure, control, dispense, and spray fluid and powder materials worldwide. The company currently has a Zacks Rank #2 and an Earnings ESP of +1.68% for fourth-quarter 2020.
Graco has an expected earnings growth rate of 14.3% for the current year.

The Zacks Consensus Estimate for current-year earnings has improved 1% over the last 7 days. It has a trailing four-quarter earnings surprise of 21.7%, on average. The company is set to release earnings results on Jan 25, after the closing bell.

Boot Barn Holdings Inc. (BOOT - Free Report) operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories. It also provides gifts and home merchandise. The company has an Earnings ESP of +2.74% for the third quarter of fiscal 2021 (ended December 2020).

The Zacks Consensus Estimate of Boot Barn for current-year earnings has improved 0.7% over the last 7 days. It has a trailing four-quarter earnings surprise of 21.9%, on average. The Zacks Rank #1 company is set to release earnings results on Jan 25, after the closing bell.

Freeport-McMoRan Inc. (FCX - Free Report) is engaged in mineral exploration and development; mining and milling of copper, gold, molybdenum and silver; as well as the smelting and refining of copper concentrates. The company has an Earnings ESP of +2.71% for fourth-quarter 2020.

Freeport-McMoRan has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 9.4% over the last 7 days. It has a trailing four-quarter earnings surprise of 87%, on average. The Zacks Rank #2 company is set to release earnings results on Jan 26, before the opening bell.

Invesco Ltd. (IVZ - Free Report) provides its investment management services to retail clients, institutional clients, high-net worth clients, public entities, corporations, unions, non-profit organizations, endowments, foundations, pension funds, financial institutions and sovereign wealth funds. The company has an Earnings ESP of +1.7% for fourth-quarter 2020.

Invesco has an expected earnings growth rate of 31.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 7 days. The Zacks Rank #1 company is set to release earnings results on Jan 26, before the opening bell.

D.R. Horton Inc. (DHI - Free Report) operates as a homebuilding company in East, Midwest, Southeast, South Central, Southwest, and West United States. The company currently has a Zacks Rank #2 and an Earnings ESP of +8.91% for the first quarter of fiscal 2021 (ended December 2020).

D.R. Horton has an expected earnings growth rate of 25.1% for the current year (ending September 2021). The Zacks Consensus Estimate for current-year earnings has improved 1.3% over the last 30 days. It has a trailing four-quarter earnings surprise of 21.6%, on average. The company is set to release earnings results on Jan 26, before the opening bell.

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