The Q3 earnings season, which is in its last leg, has thrown up a healthy picture. Of the S&P 500 companies, which have already reported, 79.3% of them have surpassed the Zacks Consensus Estimate for earnings per share, per our
latest earnings preview report.
Generally, an earnings beat leads to stock price appreciation. Given this favorable background, investors would like to add outperformers to their portfolios for handsome returns.
However, the task is anything but easy as a number of companies are flooding the market at any given point of time. Moreover, the complexities associated with the stock market make it even more difficult for individual investors to select outperformers in the absence of proper guidance.
Be Guided by Broker Advice
The requisite guidance to design a winning portfolio comes from brokers. The opinion of brokers is highly sought after by investors as they have a clear insight into the complexities of the investment world. Consequently, it makes sense for individual investors to be guided by broker advice in order to design a winning portfolio, as investors generally do not have access to such detailed and well-researched information.
Brokers revise their earnings estimates after carefully examining the pros and cons of an event for the concerned stock. Naturally, their stock related actions (upgrade or downgrade) serve as an invaluable guide as far as fixing target price of stock (s) is concerned.
To take care of the earnings performance, we have designed a screen based on improving analyst recommendation and upward estimate revisions over the last four weeks.
What About Revenues?
While we have talked about the bottom line in detail, the top line (revenue portion) cannot be ignored. Actually, according to many market watchers, a revenue beat is more creditable for a company than a mere earnings outperformance. To address top-line concerns, we have included in our screen the price/sales ratio, which serves as a strong complementary valuation metric.
Screening Criteria # (Up- Down Rating)/ Total (4 weeks) =Top #75: This gives the list of top 75 companies that have witnessed net upgrades over the last 4 weeks. % change in Q (1) est. (4 weeks) = Top #10: This gives the top 10 stocks that have witnessed earnings estimate revisions over the past 4 weeks for the upcoming quarter.
To ensure that the strategy is a winning one, covering all bases, we have added the following screening parameters:
Price-to-Sales = Bot%10: The lower the ratio the better, companies meeting this criteria are in bottom 10% of our universe of over 7,700 stocks with respect to this ratio. Price greater than 5: A stock trading below $5 will not likely create significant interest for most investors. Average Daily Volume greater than 100,000 shares over the last 20 trading days: Volume has to be significant to ensure that these are easily traded. Market value ($ mil) = Top #3000: This gives us stocks that are the top 3000 if one judges by market capitalization. Com/ADR/Canadian= Com: This eliminates the ADR and Canadian stocks.
Here are five of the 10 stocks that made it through the screen:
C.H. Robinson Worldwide ( CHRW Quick Quote CHRW - Free Report) , currently carrying a Zacks Rank #2 (Buy), operates as an asset-light logistics company. This Minnesota-based freight broker is being aided by the improving freight scenario in the United States. Efforts to control costs also bode well. Measures to reward its shareholders instill further confidence. You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
C.H. Robinson has an impressive track record with respect to earnings, which surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 22%. CHRW has witnessed the Zacks Consensus Estimate for current-year earnings being revised upward by 17.4% over the past 60 days.
Atlas Air Worldwide Holdings ( AAWW Quick Quote AAWW - Free Report) is the parent company of Atlas Air and Polar Air Cargo, which together operate a fleet of freighter aircrafts. AAWW is primarily involved in the airport-to-airport air transportation of heavy freight. AAWW is being supported by strong demand for air freight amid the coronavirus pandemic. The boom in e-commerce trends amid the current scenario is a catalyst.
Over the past 60 days, this presently Zacks #1 Ranked company has seen the Zacks Consensus Estimate for 2021 earnings being revised upward by 15.5%. The Atlas Airstock has appreciated 60.8% so far this year.
Bunge Limited ( BG Quick Quote BG - Free Report) , which is based in St. Louis, MO, has more than two centuries of experience and operates as an agribusiness and food company. BG has above 23,000 dedicated employees working across approximately 300 facilities located in more than 40 countries. BG is being well-served by its strong customer base.
Over the past 60 days, this presently Zacks #1 Ranked company has seen the Zacks Consensus Estimate for current-year earnings being revised upward by 36.1%. Shares of Bunge jumped 46.6% so far this year.
Cross Country Healthcare ( CCRN Quick Quote CCRN - Free Report) is a national leader in providing innovative healthcare workforce solutions and staffing services. Their diverse client base includes both clinical and nonclinical settings, servicing acute care hospitals, physician practice groups, outpatient and ambulatory-care centers, nursing facilities both public schools and charter schools, rehabilitation and sports medicine clinics, government facilities, and homecare.
CCRN’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings improved 44.1% over the past 60 days. Cross Country Healthcare currently sports a Zacks Rank #1.
Arch Resources ( ARCH Quick Quote ARCH - Free Report) based in St. Louis, MO, is one of the largest coal producers in the United States. The stock, currently sporting a Zacks Rank #1, has seen the Zacks Consensus Estimate for current-year earnings move north by 58.2% over the past 60 days.
Factors like its strong liquidity position are serving Arch Resources’ shares well. ARCH recently commenced longwall production at the Leer South mine, which will add high-quality 3 million tons of metallurgical coal annually to its total production. The ongoing rebound in production in the steel industry will create fresh demand for met coal supplied by ARCH.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and backtest them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
. Click here to sign up for a free trial to the Research Wizard today Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance .