Wall Street is gearing up to kick start the third-quarter 2021 earnings season this week. Market participants have high expectations from this earnings season as overall earnings of corporate America are likely to remain robust after skyrocketing in the second quarter.

As of Oct 8, total second-quarter earnings of the market's benchmark — the S&P 500 Index — are projected to jump 26.1% from the same period last year on 14% higher revenues, following 95% year-over-year earnings growth on 25.3% higher revenues in the second quarter and 49.3% year-over-year earnings growth on 10.3% higher revenues in first-quarter 2021.

The first two quarters of this year were favourably impacted since the corresponding quarters of last year were under lockdown owing to the global outbreak of the deadly coronavirus. However, the U.S. economy started reopening partially albeit at a very slow pace since the beginning of the third quarter of 2020.

Notwithstanding favorable comparisons with last year, the third-quarter 2021 earnings estimates reflect genuine growth, climbing 16.9% from the pre-pandemic third-quarter 2019.

Q3 2021 At a Glance

The U.S. economy continued to witness a strong recovery from the pandemic-led devastations in the third quarter. Nationwide deployment of COVID-19 vaccines on a priority basis, massive fiscal stimulus and the continuation of easy money policies by the Fed resulted in a faster-than-expected reopening of the economy.

Strong pent-up demand supported by record-high personal savings, labor shortage and supply-chain disruptions resulted in a spike in inflation. Although the Fed initially considered the inflation to be transitory, it did recognize in its September FOMC meeting that inflation will remain elevated for a longer period than expectation.

Moreover, the rapid spread of the highly infectious Delta variant of the coronavirus also disrupted normal economic activities to some extent. As a result, the revisions trend for third-quarter earnings showed signs of deceleration after remaining positive for the last few quarters. The negative impacts of the Delta variant and supply-chain disruptions resulted in the unfavorable shift in the revisions trend.

Stocks in Focus

Five corporate bigwigs (market capital > $85 billion) are slated to release third-quarter earnings results this week. Each of these stocks carries either a Zacks Rank#2 (Buy) or 3 (Hold) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) 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 last quarter.

Image Source: Zacks Investment Research

JPMorgan Chase & Co. (JPM Quick QuoteJPM - Free Report) is expanding its footprint in new regions by opening branches. Aside from this, strategic buyouts, global expansion and digitization initiatives, and decent mortgage banking business are expected to continue aiding the company’s financials.

JPMorgan's impressive capital deployments reflect earnings strength and a solid balance sheet will enhance shareholder value. Fed Chairman Jerome Powell’s signal of a possible tapering of the quantitative easing program this year and a likely rate hike in the second half of 2022 bode well for the financial sector.  

This Zacks Rank #3 company has an Earnings ESP of +0.60%. It has an expected earnings growth rate of 59.4% for the current year. The Zacks Consensus Estimate for current year-earnings improved 0.2% over the last 7 days. It recorded earnings surprises in the last four reported quarters, with an average beat of 33.3%. The company is set to release earnings results on Oct 13, before the opening bell.

Bank of America Corp. (BAC Quick QuoteBAC - Free Report) has an impressive earnings surprise history. Its earnings have surpassed the Zacks Consensus Estimate in three of the trailing four quarters. Opening of new branches, enhancing digital capabilities, opportunistic acquisitions and initiatives to manage costs will keep supporting profitability.

The company plans to add 2,200 more ATMs to its network too. These initiatives, along with the success of Zelle and Erica, have enabled it to improve digital offerings, and cross sell several products including mortgages, auto loans and credit cards. The acquisition of Axia Technologies will further strengthen the company's healthcare payments business.

This Zacks Rank #3 company has an Earnings ESP of +0.30%. It has an expected earnings growth rate of 78.6% for the current year. The Zacks Consensus Estimate for the current year-earnings improved 0.3% over the last 7 days. It recorded earnings surprises in the last three out of four reported quarters, with an average beat of 16.9%. The company is set to release earnings results on Oct 14, before the opening bell.

UnitedHealth Group Inc. (UNH Quick QuoteUNH - Free Report) has a strong market position and an attractive core business that continues to be driven by new deals, renewed agreements and expansion of service offerings. Its solid health services segment provides significant diversification benefits.

Its health service business, branded as Optum, is becoming increasingly valuable. The primary growth drivers for Optum are pharmacy care services, care delivery, technology, government services, and international. A sturdy balance sheet and a consistent cash flow generation enables investments in business and secures dividend to shareholders.

This Zacks Rank #2 company has an Earnings ESP of +1.95%. It has an expected earnings growth rate of 11% for the current year. The Zacks Consensus Estimate for the current year-earnings improved 0.1% over the last 30 days. It recorded earnings surprises in the last four reported quarters, with an average beat of 12.5%. The company is set to release earnings results on Oct 14, before the opening bell.

U.S. Bancorp. (USB Quick QuoteUSB - Free Report) provides banking and investment services through a network of 3,018 banking offices principally operating in the Midwest and West regions of the United States through online services and over mobile devices.

The acquisition of MUFG Union Bank will enhance its existing West Coast franchise. Its solid business model and diverse revenue streams are likely to aid its financials. Given a decent liquidity position, along with a manageable debt level and improving credit quality the company is expected perform well going forward.

This Zacks Rank #3 company has an Earnings ESP of +0.38%. It has an expected earnings growth rate of 64.1% for the current year. The Zacks Consensus Estimate for current year-earnings improved 0.2% over the last 7 days. It recorded earnings surprises in the last four reported quarters, with an average beat of 17.8%. The company is set to release earnings results on Oct 14, before the opening bell.

The PNC Financial Services Group Inc. (PNC Quick QuotePNC - Free Report) is one of the largest diversified financial services institutions in the United States. Going forward, the focus to expand the middle-market lending franchise, and bolster digital products and service offerings will likely drive bottom-line growth.

Given a strong balance sheet position, the execution of inorganic growth strategies to diversify revenue sources is likely to support the performance. Strong capital deployment activities are likely to drive confidence in the stock.

This Zacks Rank #3 company has an Earnings ESP of +2.16%. The Zacks Consensus Estimate for the current year-earnings improved 0.1% over the last 7 days. It recorded earnings surprises in the last four reported quarters, with an average beat of 44.2%. The company is set to release earnings results on Oct 15, before the opening bell.