The second-quarter 2022 earnings season is slowly gathering pace. We are at the initial stage of the reporting cycle and earnings results are mixed so far. This earnings season is extremely significant against mounting inflation and a tougher-than-expected Fed. The real strength of corporate America will be tested in this time around.
Wall Street suffered a bloody blow in the first half of 2022. The broad-market S&P 500 Index and the tech-heavy Nasdaq Composite fell into the bear market and the Dow was on the verge of entering that territory. Similar to large-cap stocks, the mid caps also bore the brunt of severe volatility. The mid-cap benchmark — the S&P 400 Index — tumbled 20.2% in the same period.
Despite these headwinds, we have selected five mid-cap stocks that are set to beat earnings estimates this month. The combination of a possible earnings beat and a favorable Zacks Rank is likely to drive stock prices in near future. The stocks are, namely,
ExlService Holdings Inc. ( EXLS Quick Quote EXLS - Free Report) , Range Resources Corp. ( RRC Quick Quote RRC - Free Report) , Pebblebrook Hotel Trust ( PEB Quick Quote PEB - Free Report) , PBF Energy Inc. ( PBF Quick Quote PBF - Free Report) and First Interstate BancSystem Inc. ( FIBK Quick Quote FIBK - 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 the 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.
Q2 Earnings Results So Far
As of Jul 15, 35 companies within the S&P 500 Index reported their financial numbers. Total earnings of these companies are down 10.5% year over year on 9.3% higher revenues, with 68.6% beating EPS estimates and 62.9% beating revenue estimates.
Our latest projection is that for the second quarter as a whole, total earnings of the S&P 500 Index will rise 2.6% year over year on 9.6% higher revenues. However, the aggregate net margin is expected to be compressed by 0.95%.
Our Top Picks
Five mid-cap (market capital > $1 billion but < $10 billion) companies will report second-quarter 2022 earnings results this month. Each of these stocks sports Zacks Rank #1 (Strong Buy) and has 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 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 our five picks in the last quarter.
Image Source: Zacks Investment Research Range Resources has extensive oil and gas resources in key regions like Marcellus Shale & North Louisiana. RRC is ideally positioned to reap benefits in the long term from its projects in the Appalachian Basin.
Range Resources’ core operating regions in the basin comprise a huge inventory of low-risk drilling inventories that will likely fetch incremental gas production. As most of its production comprises natural gas, RRC is well-positioned to capitalize on mounting clean energy demand.
RRC has an Earnings ESP of +11.56%. It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 1.4% over the last 7 days.
Range Resources recorded earnings surprises in three out of the last four reported quarters, with an average beat of 0.2%. The company is set to release
earnings results on Jul 25, after the closing bell. Pebblebrook Hotel s an internally managed hotel investment company organized to acquire and invest in hotel properties located primarily in large United States cities with exposure to the major coastal markets.
PEB also invests in resort properties located near its primary urban target markets, as well as in select destination markets. Pebblebrook Hotel focuses on hotel properties in the lodging industry. In addition, PEB may seek to acquire service properties in its primary urban target markets.
Pebblebrook Hotel has an Earnings ESP of +3.50%. It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 12.5% over the last 60 days.
PEB recorded earnings surprises in two out of the last four reported quarters, with an average beat of 62.5%. The company is set to release
earnings results on Jul 26, after the closing bell. First Interstate delivers a range of banking products and services to individuals, businesses, municipalities and other entities throughout its market areas. FIBK’s banking products and services include demand, time, checking, and savings deposits.
First Interstate’s loan portfolio consists of a mix of real estate, consumer, commercial, agricultural, and other loans, including fixed and variable rate loans. FIBK’s real estate loans comprise commercial real estate, construction, residential, agricultural, and other real estate loans.
First Interstate has an Earnings ESP of +7.14%. The Zacks Consensus Estimate for current-year earnings improved 1.4% over the last 30 days.
FIBK recorded earnings surprises in three out of the last four reported quarters, with an average beat of 109.5%. The company is set to release
earnings results on Jul 26, after the closing bell. ExlService Holdings is a leading operations management and analytics company that designs and enables agile, customer-centric operating models to help clients improve their revenue growth and profitability.
EXLS’ delivery model provides market-leading business outcomes using its proprietary Business EXLerator Framework, cutting-edge analytics, digital transformation and domain expertise. ExlService Holdings serves the insurance, healthcare, banking and financial services, utilities, travel, transportation and logistics industries.
EXLS has an Earnings ESP of +1.13%. It has an expected earnings growth rate of 15.3% for the current year. The Zacks Consensus Estimate for current-year earnings improved 1.3% over the last 90 days.
ExlService Holdings recorded earnings surprises in the last four reported quarters, with an average beat of 12.3%. The company is set to release
earnings results on Jul 28, before the opening bell. PBF Energy has one of the most complex refining systems in the United States. As a result, PBF has the capacity to generate lighter and better grades of refined products. PBF Energy’s daily processing capacity of 1,000,000 barrels of crude is higher than most of its peers. PBF has one of the most complex refining systems in the United States, with an overall Nelson Complexity Index reading of 13.2.
PBF Energy expects fuel demand to recover incrementally in 2022, which is likely to have positive effects on its profits. For 2022, PBF expects crude and feedstocks throughput volumes of 865-925 thousand bpd. Also, PBF Energy is progressing with the renewable diesel fuel project at its Chalmette refinery with a view to diversify its income source.
PBF Energy has an Earnings ESP of +24.46%. It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 18% over the last 7 days.
PBF recorded earnings surprises in three out of the last four reported quarters, with an average beat of 61.5%. The company is set to release
earnings results on Jul 28, before the opening bell.
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