Back to top

Image: Bigstock

5 Large-Cap Stocks Likely to Gain on Q2 Earnings Next Week

Read MoreHide Full Article

U.S. stock markets are gearing up for second-quarter 2022 earnings results that will commence today as the major banks are slated to release their quarterly results. Market participants will keenly watch this earnings season as it will provide the most descriptive view of U.S. corporate health amid record-high inflation and an extremely hawkish Fed.

In addition to revenues and the net profit numbers of companies, several metrics of margins, like gross margin, operating margin and net margin will be of immense importance to investors this earnings cycle. Moreover, the outlook of U.S. corporates will guide the next course of Wall Street’s movement.

We have identified five large-cap stocks that are set to beat on second-quarter earnings next week. Investment in these stocks should be fruitful as an earnings beat is expected to drive stock prices going forward. These companies are — Synchrony Financial (SYF - Free Report) , Johnson & Johnson (JNJ - Free Report) , J.B. Hunt Transport Services Inc. (JBHT - Free Report) , Citizens Financial Group Inc. (CFG - Free Report) and Truist Financial Corp. (TFC - Free Report) .

Q2 At a Glance

Like the first quarter, the second quarter of 2022 also remained tough for the U.S. economy. Various measures of inflation remained elevated at a 41-year high. The Fed hiked the benchmark interest rate by 1.25% to the range of 1.5% to 1.75% at the end of second quarter from a range of 0.25% to 0.50% at the end of the first quarter. Moreover, the central bank has started to reduce the size of its $9 trillion balance sheet systematically from June.

Despite these aggressive monetary policies adopted by the Fed, inflation is showing no signs of declining. The latest measure of inflation showed that the consumer price index jumped 9.1% year over year in June, marking the highest monthly rise since November 1981.

The complete devastation of the global supply-chain system and shortage of labor continued to put pressure on businesses in the form of higher input costs and wages. The lingering war between Russia and Ukraine and lockdown in China due to the resurgence of COVID-19 infections were the major hindrances to the restoration of the global supply-chain system.

Despite these headwinds, our latest estimation has projected that for second quarter as a whole, total earnings of the S&P 500 Index will rise 2.1% year over year on 9.7% higher revenues. However, the aggregate net margin is expected to be compressed by 0.95%.

Stocks in Focus

Five large-cap companies will report second-quarter 2022 earnings results next week. Each of these stocks carries Zacks Rank #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 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 their 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 five stocks in the last quarter.

Zacks Investment Research
Image Source: Zacks Investment Research

Synchrony Financial’s CareCredit platform with an intensified focus on health systems is impressive. SYF’s continuoued efforts in forging alliances and making acquisitions are likely to boost business growth and enhance digital capabilities. Its restructuring measures should reduce operating expenses and aid margins.

Synchrony Financial carries a strong balance sheet. SYF boasts a robust capital position which enables it to return value to shareholders. Synchrony Financial plans to increase its dividend by 5% to 23 cents per share in the third quarter.

SYF has an Earnings ESP of +0.29%. The Zacks Consensus Estimate for current-year earnings improved 0.2% over the last 60 days. Synchrony Financial recorded earnings surprises in the last four reported quarters, with an average beat of 17.5%. The company is set to release earnings results on Jul 18, before the opening bell.

Johnson & Johnson’s diversification makes it relatively resilient amid macroeconomic turmoil. JNJ’s Pharma unit is performing at above-market levels, supported by its blockbuster drugs, Darzalex and Stelara, and contribution from newer drugs, Erleada and Tremfya.

Sales in the MedTech unit of Johnson & Johnson recovered in first-quarter 2022 and the company is focusing on growing this business through new products. JNJ is making rapid progress with its pipeline and line extensions. Several pivotal data readouts are expected in 2022.

JNJ has an Earnings ESP of +0.89%. It has an expected earnings growth rate of 4.2% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.1% over the last 60 days.

Johnson & Johnson recorded earnings surprises in the last four reported quarters, with an average beat of 5.4%. The company is set to release earnings results on Apr 19, before the opening bell.

Truist Financial is the sixth largest commercial bank in the United States. The rise in the demand for loans, a strong balance sheet and TFC’s focus on improving non-interest income will likely keep supporting revenue growth.

The acquisition of Service Finance Company will likely augment Truist Financial’s point-of-sale lending business. Given a solid balance sheet position, TFC is expected to continue with strategic acquisitions.

TFC has an Earnings ESP of +0.53%. Truist Financial’s recorded earnings surprises in the last four reported quarters, with an average beat of 17.5%. The company is set to release earnings results on Apr 19, before the opening bell.

Citizens Financial’s  efforts to enhance the deposit base and a robust loan pipeline indicate balance-sheet strength. CFG’s focus on revenue and efficiency initiatives is a tailwind. Moreover, with its robust capital position and liquidity, Citizens Financial has expanded and diversified through various acquisitions. The recent increase in share repurchase authorization to $1 billion indicates sustainable capital deployment activities.

CFG has an Earnings ESP of +4.98%. The Zacks Consensus Estimate for current-year earnings improved 0.9% over the last 7 days. Citizens Financial  recorded earnings surprises in the last four reported quarters, with an average beat of 13.3%. The company is set to release earnings results on Apr 19, before the opening bell.

J.B. Hunt Transport Services is benefiting from strong performances of the Dedicated Contract Services (DCS), Truckload and Final Mile Services (FMS) units. While the DCS unit is being aided by fleet productivity improvement and rise in average revenue-producing trucks, the truckload unit is gaining from rise in load count and revenue per load.

The FMS unit of JBHT is seeing higher revenues on the back of multiple customer contracts implemented over the past year. J.B. Hunt’s efforts to reward its shareholders are impressive.

JBHT has an Earnings ESP of +2.55%. It has an expected earnings growth rate of 30.8% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.5% over the last 7 days.

J.B. Hunt recorded earnings surprises in the last four reported quarters, with an average beat of 11.1%. The company is set to release earnings results on Apr 19, after the closing bell.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.