The ongoing second-quarter 2022 earnings season, which is in its last leg, has turned out to be quite satisfactory despite sore points like supply-chain woes and red-hot inflation posing a challenge. The pretty decent picture so far has been highlighted by the improvement in the top and the bottom lines of the S&P 500 companies (that already reported), which grew 15.3% and 8.1%, respectively, on a year-over-year basis (data provided by our latest
While 77.4% companies beat expectations on the revenue front, 68.4% participants outpaced on earnings. Generally, an earnings beat by a company leads to an appreciation in its stock price. Moreover, the fact that inflation in the United States moderated a bit (the consumer price index was up 8.5% year over year in July, down from a 9.1% year-over-year increase in June) brightens the scenario. Against this bullish backdrop, broker-favorite stocks like
C.H. Robinson Worldwide ( CHRW Quick Quote CHRW - Free Report) , Covenant Logistics Group ( CVLG Quick Quote CVLG - Free Report) , ArcBest Corporation ( ARCB Quick Quote ARCB - Free Report) , American Airlines ( AAL Quick Quote AAL - Free Report) and Bunge Limited ( BG Quick Quote BG - Free Report) should be on investors’ watch list. Why is Broker Advice Important?
Brokers not only scrutinize the publicly available financial documents but also attend company conference calls and other presentations. Naturally, it is rewarding for investors to adhere to such well-researched information as the same aims to generate maximum returns from their portfolio. The estimate revisions serve as an important pointer regarding the price of a stock.
Of the three types of brokers/analysts (sell-side, buy-side and independent) present in the investment world, sell-side analysts are most common. Various brokerage firms employ them to provide an unbiased opinion to investors after a thorough research. Buy-side analysts are employed by hedge funds, mutual funds, etc., while the independent ones simply sell their reports to investors.
To take care of the earnings performance, we designed a screen based on improving broker recommendations and upward estimate revisions over the last four weeks.
Do Not Ignore the Top Line
However, designing a strategy based solely on the bottom line is unlikely to result in a winning approach. Actually, according to many market watchers, a revenue beat is more creditable for a company than a mere earnings beat. To address the top-line concerns, we 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).
We have also added the following screening parameters to ensure that the strategy is a winning one:
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(as a stock trading below $5 will not likely create significant interest for most of the investors). Average Daily Volume greater than 100,000 shares over the last 20 trading days (Volume has to be significant to ensure that these are easily traded). Market value ($ mil) = Top #3000 (This gives us stocks that are the top 3000 in terms of market capitalization). Com/ADR/Canadian= Com (This takes out the ADR and Canadian stocks).
Here are five of the 10 stocks that made it through the screen:
C.H. Robinson Worldwide, currently sporting a Zacks Rank #1 (Strong Buy), operates as an asset-light logistics player. The improving freight scenario in the United States is aiding this Minnesota-based freight broker. Efforts to control costs also bode well. Measures to reward CHRW's shareholders instill further confidence in the stock.
C.H. Robinson has an encouraging earnings track record. The bottom line surpassed the Zacks Consensus Estimate in three of the trailing four quarters (missing the mark in the remaining one). CHRW has witnessed the Zacks Consensus Estimate for 2022 earnings being revised 14.1% upward over the past 60 days.
You can see
the complete list of today's Zacks #1 Rank stocks Covenant Logistics offers a portfolio of transportation and logistics services, including asset-based expedited, dedicated and irregular route truckload capacity, as well as asset-light warehousing, transportation management and freight brokerage capability.
The gradually improving freight market scenario is a tailwind to Covenant. CVLG’s cost-control efforts are encouraging as well. CVLG currently flaunts a Zacks Rank of 1. CVLG has witnessed the Zacks Consensus Estimate for 2022 earnings being revised 14.3% upward over the past 60 days.
ArcBest: Based in Fort Smith, AK, ARCB provides freight transportation services and solutions. Strong freight demand and favorable pricing are driving growth across ArcBest’s Asset-Based and Asset-Light segments.
The Zacks Consensus Estimate for ArcBest’s 2022 earnings has been revised 4.7% upward in the past 60 days. ARCB currently carries a Zacks Rank #2 (Buy).
American Airlines is based in Fort Worth, TX. The gradual increase in air-travel demand (particularly for leisure) is aiding AAL. However, high fuel costs are hurting the bottom line.
Over the past 60 days, the stock has seen the Zacks Consensus Estimate for 2022 earnings being revised 7.8% upward. AAL currently carries a Zacks Rank #3 (Hold).
Bunge Limited: Headquartered in St. Louis, MO, Bunge operates as an agribusiness firm, delivering essential food, feed and fuel across the globe. BG is reportedly the world’s leader in oilseed processing, and a leading producer and supplier of specialty plant-based oils and fats.
Bunge delivered a trailing four-quarter earnings surprise of 50.7%, on average. BG has a long-term earnings growth expectation of 6.7%. It currently carries a Zacks Rank of 3.
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