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4 Stocks Worth Buying After Strong Earnings Reports This Week

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Just 8.6% of the S&P 500 have reported earnings results so far, of which 86% have topped earnings estimates while 79% have topped revenue estimates. The earnings results are stronger than the five-year average while being slightly lower than last year.

Revenues, on the other hand, are stronger on both counts. So while it’s too early to identify a trend using this group as a barometer, initial results seem to indicate that this earnings season will be more or less as expected.

The three sectors with the most results out so far are transportation, finance and retail. All of the transportation and retail stocks have beaten both revenue and earnings results. And in the case of finance, 83% have beaten on earnings and 61% on revenue.

The retail sector appears to be benefiting from the ability to pass on increased costs to a strong consumer in the final quarter of the year.

The transportation sector continues to benefit from strong demand for finished goods, as well as ongoing economic recovery and construction strength that are driving materials demand. Container and labor shortages continue to help prices and profitability.

One transportation stock that reported strong results this week is J.B. Hunt Transport Services (JBHT - Free Report) . The company beat earnings estimates by 14.6% on revenue that beat by 6.4%. Technology enhancements, operating efficiencies and stronger pricing offset increased expenses. J.B. Hunt recently raised its quarterly dividend by 33%.

The Transportation – Truck industry to which J.B. Hunt belongs is in the top 6% of Zacks ranked industries. The Zacks #1 (Strong Buy) stock has a Growth Score of B but a Value Score of D, but it’s still worth considering given its growth prospects and because it is currently trading below its median value over the past year. In the last 7 days, analysts have taken their 2022 and 2023 earnings estimates up an average 2.2% and 4.1%, respectively.

Bank stocks are a mixed bag. The increasing loan demand can only be considered a good thing, since they increase a bank’s net interest income (NII). And at the moment, strength is coming not only from higher loan balances but also from strong equity trading and investment banking business.

The expected increase in interest rates through the current year should also raise the NII. But since they also depress the value of fixed-income assets with the bank, they are a double-edged sword. Additionally, some banks are increasing spending on employee retention, which has an effect on their efficiency ratio, while others are trimming their workforces. So the impact on their earnings results is different.

Which brings us to the two banking stocks I will be highlighting here: BankUnited (BKU - Free Report) and PacWest Bancorp (PACW - Free Report) .

BankUnited’s reported earnings were about 24% higher than expected on revenue that was 10% better than expected. The company’s loan balance grew by a billion dollars, the strongest since the second quarter of 2016. NII increased both sequentially and from the prior year. It offered a special employee bonus during the quarter.

BankUnited is also a relatively safer stock to buy right now since it combines both value and growth (it scores a B for both in our style score system). The Zacks Rank #2 (Buy) stock belongs to the Banks - Major Regional industry (top 18%).

PacWest Bancorp beat earnings expectations by 7.6% on revenue that beat by 3.7%. It reported loan growth of 11.8% and NII growth of 8.8%. the 10.5% increase in expenses was attributed to the HOA acquisition costs and related operating expenses. The Zacks Rank #2 stock belongs to the Banks – West industry (top 22%) and has a Value Score of B, which makes it a relatively safe stock.

Analysts are yet to update their estimates on the two banking stocks.

Another stock worth buying is bauxite, alumina and aluminum products producer Alcoa (AA - Free Report) . The continued strength in alumina and aluminum pricing, and solid operational performance led to the 22.6% earnings surprise that came on revenue that surprised by a more sedate 1.4%.

The Zacks Rank #2 stock belongs to the Metal Products – Distribution (top 10%), which is in the industrial products sector. Alcoa is a balanced choice with As on both value and growth considerations. Its estimates are yet to be updated.

One-Month Price Performance

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