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5 Mid-Cap Growth Picks Ahead of Earnings for Long-Term Gain

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The third-quarter 2021 earnings season is in full swing. Market participants have high expectations from this reporting cycle as overall earnings of corporate America are likely to remain robust after skyrocketing in the second quarter.

Results are pretty encouraging so far despite prolonged supply-chain disruptions, a labor shortage, higher inflationary pressure and the resurgence of the Delta variant of the coronavirus. The earnings scenario is improving as we are entering deep into the reporting cycle.

Third-quarter 2021 was not a good one for mid-cap stocks. The mid-cap-specific S&P 400 Index fell 2.1%, mainly due to a market meltdown in September.

Nevertheless, five mid-cap growth stocks with a favorable Zacks Rank are poised to beat on earnings within the next week. The combination of a likely earnings beat, a favorable Zacks Rank and strong growth potential augur well for these stocks’ price movement in the long-term.

Impressive Third-Quarter Earnings So Far

As of Oct 27, 192 S&P 500 companies reported third-quarter results. Total earnings of these companies are up 37.6% year over year on 15.3% higher revenues with 82.3% beating EPS estimates and 74% surpassing revenue estimates. The proportion of these 192 index members beating both EPS and revenue estimates is 64.1%.

At present, total third-quarter earnings of the market's benchmark — the S&P 500 Index — are projected to jump 35.9% from the same period last year on 14.5% higher revenues. This suggests a steady improvement from 26.1% earnings growth on 14% higher revenues, estimated at the beginning of the reporting cycle.  

Earnings results of the first two quarters of this year were favorably impacted since the corresponding quarters of last year were affected by the pandemic-led lockdowns and restrictions. This was evident from 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.

Nevertheless, the U.S. economy started reopening partially albeit at a languid pace since the third quarter of 2020. Notwithstanding favorable comparisons with last year, third-quarter 2021 earnings estimates reflect genuine growth, climbing more than 23% from the pre-pandemic third-quarter of 2019.

Our Top Picks

We have narrowed down our search to five mid-cap (market capital >$2 billion <$10 billion) growth stocks that will report earnings results within next week. Each of our picks carries either a Zacks Rank#1 (Strong Buy) or 2 (Buy), a Growth Score A and 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 last quarter.

Zacks Investment ResearchImage Source: Zacks Investment Research

Carter's Inc. (CRI - Free Report) designs, sources, and markets branded childrenswear under the Carter's, OshKosh, Skip Hop, Child of Mine, Just One You, Simple Joys, Carter's little baby basics, and other brands in the United States and internationally. It operates through three segments: U.S. Retail, U.S. Wholesale, and International.  

Better marketing, enhanced pricing and robust product portfolio benefitted the company. The company lifted its 2021 view and issued an upbeat third-quarter view. Continued momentum in online demand, driven by expanded products, and a new mobile app bode well.

This Zacks Rank #2 company has an Earnings ESP of +0.71%. It has an expected earnings growth rate of 76.4% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.7% over the last 30 days.

It recorded earnings surprises in three out of the last four reported quarters, with an average beat of 191.7%. The company is set to release third-quarter 2021 earnings results on Oct 29, before the opening bell.

Ralph Lauren Corp. (RL - Free Report) designs, markets and distributes lifestyle products in North America, Europe, Asia, and internationally. The company is progressing well with its “Next Great Chapter” plan that was announced in June 2018. This strategic growth plan focuses on delivering sustainable long-term growth and value creation.

The company has gained from solid performance across the Europe and North America regions and its brand strength. Fast recovery across North America and Europe due to the easing of restrictions aided its businesses. Based on digital strength with higher AURs and the ability to translate top-line growth to operating margin expansion, the company has raised its view for fiscal 2022.

This Zacks Rank #1 company has an Earnings ESP of +5.58%. It has an expected earnings growth rate of more than 100% for the current year (ending March 2022). The Zacks Consensus Estimate for current-year earnings improved 0.6% over the last 7 days.

It recorded earnings surprises in the last four reported quarters, with an average beat of 91.4%. The company is set to release second-quarter fiscal 2022 earnings results on Nov 2, before the opening bell.

Synaptics Inc. (SYNA - Free Report) develops and supplies semiconductor products and solutions worldwide. The company is a leader in designing and marketing human interface solutions such as touchpads for notebook computers, capactive touch screen controllers for handsets and biometric fingerprint sensors for mobile devices.

This Zacks Rank #2 company has an Earnings ESP of +0.38%. It has an expected earnings growth rate of 21.1% for the current year (ending June 2022). The Zacks Consensus Estimate for current-year earnings improved 1.2% over the last 30 days.

It recorded earnings surprises in the last four reported quarters, with an average beat of 8.1%. The company is set to release first-quarter fiscal 2022 earnings results on Nov 4, after the closing bell.

The Chemours Co. (CC - Free Report) is a leading provider of performance chemicals that are the key ingredients in end-products and processes across a host of industries. The company should gain from the strong adoption of the Opteon platform and its cost management actions.  

The company is seeing higher demand for Opteon in mobile and stationery applications and is taking actions to drive adoption. The ramp-up of the Corpus Christi facility will allow the company to meet future demand. Chemours is also taking actions to reduce costs. Its productivity and operational improvement actions across its businesses are also expected to support its margins in 2021.

This Zacks Rank #2 company has an Earnings ESP of +1.26%. It has an expected earnings growth rate of 86.9% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.4% over the last 7 days.

It recorded earnings surprises in the last four reported quarters, with an average beat of 238.9%. The company is set to release third-quarter 2021 earnings results on Nov 4, after the closing bell.

Cushman & Wakefield plc (CWK - Free Report) is a real estate services firm. It acquires and develops commercial properties as well as provides property leasing, facilities management, tenant representation and valuation services.

The company provides commercial real estate services under the Cushman & Wakefield brand in the United States, Australia, the United Kingdom, and internationally. The company operates through the Americas, Europe, Middle East, and Africa, and Asia Pacific segments.

This Zacks Rank #1 company has an Earnings ESP of +14.09%. It has an expected earnings growth rate of 79% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.7% over the last 7 days.

It recorded earnings surprises in three out of the last four reported quarters, with an average beat of 92.6%. The company is set to release third-quarter 2021 earnings results on Nov 4, after the closing bell.