Back to top

Image: Bigstock

5 Large-Cap Stocks to Buy Ahead of Earnings Results This Week

Read MoreHide Full Article

The fourth-quarter earnings season has started with better-than-expected results. 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 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.

Despite the above-mentioned negatives, the earnings picture markedly improved  in the first two weeks of this reporting cycle. Meanwhile, five large-cap stocks with a favorable Zacks Rank are poised to beat earnings estimates this week. Investment in these stocks should be fruitful going forward.

Better-Than-Expected Fourth-Quarter Earnings Results So Far

As of Jan 22, 66 S&P 500 companies reported their quarterly results. Total earnings of these companies were up 0.3% from the same period last year on 0.6% higher revenues, with 87.9% beating EPS estimates and 78.8% beating revenue estimates.

Overall, the fourth-quarter earnings for the S&P 500 Index are projected to be down 5.3% year over year on 0.6% higher revenues. This is a notable improvement over the projection of a 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: Q4 and 2021 Earnings Estimates Keep Going Up)

Our Top Picks

We have narrowed down our search to five large-cap stocks slated to release earnings 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 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 five picks in the last quarter.

 

W. R. Berkley Corp. (WRB - Free Report) is an insurance holding company, operates as a commercial lines writer in the United States and internationally. It operates through two segments, Insurance and Reinsurance. The company currently has a Zacks Rank #2 and an Earnings ESP of +6.75% for fourth-quarter 2020.

W. R. Berkley has an expected earnings growth rate of 60.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 7 days. The company is set to release earnings results on Jan 26, after the closing bell.

V.F. Corp. (VFC - Free Report) engages in the design, production, procurement, marketing and distribution of branded lifestyle apparel, footwear, and related products for men, women and children in the Americas, Europe and the Asia-Pacific. It operates through four segments: Outdoor, Active, Work, and Jeans.

The company currently has a Zacks Rank #2 and an Earnings ESP of +4.76% for the third quarter of fiscal 2021(December 2020). V.F. Corp.'s 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 120.6%, on average. The company is set to release earnings results on Jan 27, before the opening bell.

Tesla Inc. (TSLA - Free Report) has acquired substantial market share within the electric car segment. Strong performance and impressive design of the firm’s products are ramping up sales volumes. Increasing Model 3 delivery is aiding the company’s top line. Along with Model 3, Model Y is contributing to its revenues. The company currently has a Zacks Rank #1 and an Earnings ESP of +18.12% for fourth-quarter 2020.

Tesla has an expected earnings growth rate of 62.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last 7 days. It has a trailing four-quarter earnings surprise of 319.7%, on average. The company is set to release earnings results on Jan 27, after the closing bell.

United Rentals Inc. (URI - Free Report) operates as a rent equipment company to a diverse customer base including construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government entities in the United States and Canada. It operates in two segments, General Rentals, and Trench, Power and Fluid Solutions. The company currently has a Zacks Rank #2 and an Earnings ESP of +10.34% for fourth-quarter 2020.

United Rentals has an expected earnings growth rate of 3.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last 7 days. It has a trailing four-quarter earnings surprise of 41%, on average. The company is set to release earnings results on Jan 27, after the closing bell.

Ameriprise Financial Inc. (AMP - Free Report) is a leading asset management company. It operates through five segments: Advice & Wealth Management, Asset Management , Annuities, Protection and Corporate & Other. The company currently has a Zacks Rank #2 and an Earnings ESP of +1.43% for fourth-quarter 2020.

Ameriprise Financial has an expected earnings growth rate of 34.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the last 30 days. It has a trailing four-quarter earnings surprise of 9.3%, on average. The company is set to release earnings results on Jan 27, after the closing bell.

Just Released: Zacks’ 7 Best Stocks for Today

Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.

These 7 were selected because of their superior potential for immediate breakout.

See these time-sensitive tickers now >>

Published in