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3 Buy-Ranked Stocks That Beat on Earnings This Week
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Estimates have been coming down steadily over the past year, as the market adjusted to the probability of an economic slowdown, possibly a recession, as a result of one of the fastest tightening cycles in history. Since we have set our expectations rather low (the S&P 500’s 2023 aggregate earnings estimates on an ex-Energy basis are already down by more than 14% since mid-April 2022), there is now a relatively good chance of companies beating estimates.
While some analysts say that the recent banking crisis has further increased uncertainty (and to a certain extent that is true), the big banks often come out stronger from such crises. In this case, the loss of confidence in smaller banks has worked in favor of the bigger banks. Credit card usage is also robust, as consumer discretionary/leisure spending remains healthy and the outlook for the summer is strong as of now. So overall, what we are seeing so far in this quarter is that banking/Finance sector results are coming in better than expected.
Other sectors are also doing well, depending on their exposure to certain segments of the market that remain relatively strong. Here are three Buy-ranked stocks that beat estimates this week:
This is a provider of air transportation services in North America, Asia, Europe, Africa, the Pacific, the Middle East and Latin America. It transports people and cargo through its mainline and regional fleets.
United Airlines reported March quarter earnings that were 13.7% ahead of estimates on sales that were more or less in line. The company’s available seat miles were ahead of expectations which led to a lower passenger load factor, bringing both passenger revenue per available seat mile and total revenue per available seat mile below estimates. Cargo revenue was also below expectations, while other revenue exceeded.
Operating cash flow was at record levels and management expressed confidence in strong demand and continued execution. The international business where United has some competitive advantage, is doing particularly well, growing at double the domestic rate and testimony to the strength in leisure travel. Whether and to what extent it holds up is something we’ll have to wait and see. United is on track to reach its full-year adjusted diluted EPS and cost targets although macroeconomic risks are being carefully monitored. Fuel cost could also play spoilsport. Although they’ve guided conservatively, OPEC production cuts could affect negatively.
The Zacks Rank #2 (Buy) stock has scored an A for Value, Growth and Momentum. Its estimates have already started climbing since the earnings announcement, with the 2023 estimate increasing 13 cents and the 2024 estimate increasing 5 cents. About half the covering analysts are yet to react. So there’s a very good chance of these shares getting upgraded to a Zacks #1 (Strong Buy) rating.
Lockheed Martin is involved in the research, design, development, manufacture, integration and sustainment of technology systems, products and services worldwide. It operates through four segments: Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space.
Many of its signature platforms, including the geosynchronous orbit infrared-sensing satellites, the F-35s, the Aegis radar systems and submarine combat systems are being actively incorporated into an open digital architecture for the U.S. and its allies. This increases their effectiveness and attractiveness for years to come.
In the last quarter, Lockheed Martin’s revenue came in 1.9% above estimates while its earnings came in 5.9% higher. Three of its four segments saw revenue declines however.
Aeronautics is a big attraction given its contracts to supply weapons to Ukraine. But although the volume of such contracts increased, supply will be spread out totaling $6 billion in value up to 2027. Clearly, nobody expects the war to end soon.
Offsetting this positive is China’s stand on Lockheed and Raytheon, both of which are being punished for supplying Taiwan. They’re not allowed to import or export anything related to China and their senior executives are banned from entering working, staying and residing in the country. The quarter’s revenue performance was not affected by these factors. It was hurt by lower deliveries as a backlog of F-35 fighter jets built up.
During the quarter, Lockheed Martin secured a contract for the first U.S. sea-based hypersonic missile program, Conventional Prompt Strike (CPS) and was selected to provide 88 F-35 fifth generation fighter aircraft to Canada. It also delivered the first F-16 fighter aircraft out of its new Greenville, South Carolina factory.
Management reiterated 2023 guidance and promised to keep returning value to investors through both share repurchases and dividends.
Zacks has a #2 rating on the shares along with a Value Score of B and Growth Score of A. Analysts are yet to upgrade their models, therefore estimate revisions are still pending.
Omnicom offers a range of services in the areas of advertising and media; precision marketing; commerce and brand consulting; as well as experiential, execution and support, public relations, and healthcare solutions.
The company beat earnings estimates for the March quarter by 13.0% on revenue that beat by 2.3%. Management said that organic revenue grew 5.2%.
The company is growing despite the macro concerns on the strength of its highly-specialized marketing and communications services that are driven by leading analytics, creativity, data and digital media solutions to help companies manage their brands. But it is also working to increase operational efficiency to mitigate the impact of the macroeconomic factors on its profitability. These actions, along with an expansion of its services and suitable capital allocation are expected to continue supporting its business.
The Zacks Rank of this stock is also #2. The Value Score is A and Growth Score B. Analysts are likely to raise their estimates after this strong showing.
Wrapping Up
These three stocks reported strong results in the March quarter, beating estimates on both the top and bottom lines. Analysts are therefore expected to raise their estimates, which could lead to their upgrade. Since they appear to be stocks that are relatively well positioned to deal with macro softness, investors could benefit from accumulating some shares.
One-Month Price Performance
Image Source: Zacks Investment Research
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3 Buy-Ranked Stocks That Beat on Earnings This Week
Estimates have been coming down steadily over the past year, as the market adjusted to the probability of an economic slowdown, possibly a recession, as a result of one of the fastest tightening cycles in history. Since we have set our expectations rather low (the S&P 500’s 2023 aggregate earnings estimates on an ex-Energy basis are already down by more than 14% since mid-April 2022), there is now a relatively good chance of companies beating estimates.
While some analysts say that the recent banking crisis has further increased uncertainty (and to a certain extent that is true), the big banks often come out stronger from such crises. In this case, the loss of confidence in smaller banks has worked in favor of the bigger banks. Credit card usage is also robust, as consumer discretionary/leisure spending remains healthy and the outlook for the summer is strong as of now. So overall, what we are seeing so far in this quarter is that banking/Finance sector results are coming in better than expected.
Other sectors are also doing well, depending on their exposure to certain segments of the market that remain relatively strong. Here are three Buy-ranked stocks that beat estimates this week:
United Airlines Holdings, Inc. (UAL - Free Report)
This is a provider of air transportation services in North America, Asia, Europe, Africa, the Pacific, the Middle East and Latin America. It transports people and cargo through its mainline and regional fleets.
United Airlines reported March quarter earnings that were 13.7% ahead of estimates on sales that were more or less in line. The company’s available seat miles were ahead of expectations which led to a lower passenger load factor, bringing both passenger revenue per available seat mile and total revenue per available seat mile below estimates. Cargo revenue was also below expectations, while other revenue exceeded.
Operating cash flow was at record levels and management expressed confidence in strong demand and continued execution. The international business where United has some competitive advantage, is doing particularly well, growing at double the domestic rate and testimony to the strength in leisure travel. Whether and to what extent it holds up is something we’ll have to wait and see. United is on track to reach its full-year adjusted diluted EPS and cost targets although macroeconomic risks are being carefully monitored. Fuel cost could also play spoilsport. Although they’ve guided conservatively, OPEC production cuts could affect negatively.
The Zacks Rank #2 (Buy) stock has scored an A for Value, Growth and Momentum. Its estimates have already started climbing since the earnings announcement, with the 2023 estimate increasing 13 cents and the 2024 estimate increasing 5 cents. About half the covering analysts are yet to react. So there’s a very good chance of these shares getting upgraded to a Zacks #1 (Strong Buy) rating.
Lockheed Martin Corporation (LMT - Free Report)
Lockheed Martin is involved in the research, design, development, manufacture, integration and sustainment of technology systems, products and services worldwide. It operates through four segments: Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space.
Many of its signature platforms, including the geosynchronous orbit infrared-sensing satellites, the F-35s, the Aegis radar systems and submarine combat systems are being actively incorporated into an open digital architecture for the U.S. and its allies. This increases their effectiveness and attractiveness for years to come.
In the last quarter, Lockheed Martin’s revenue came in 1.9% above estimates while its earnings came in 5.9% higher. Three of its four segments saw revenue declines however.
Aeronautics is a big attraction given its contracts to supply weapons to Ukraine. But although the volume of such contracts increased, supply will be spread out totaling $6 billion in value up to 2027. Clearly, nobody expects the war to end soon.
Offsetting this positive is China’s stand on Lockheed and Raytheon, both of which are being punished for supplying Taiwan. They’re not allowed to import or export anything related to China and their senior executives are banned from entering working, staying and residing in the country. The quarter’s revenue performance was not affected by these factors. It was hurt by lower deliveries as a backlog of F-35 fighter jets built up.
During the quarter, Lockheed Martin secured a contract for the first U.S. sea-based hypersonic missile program, Conventional Prompt Strike (CPS) and was selected to provide 88 F-35 fifth generation fighter aircraft to Canada. It also delivered the first F-16 fighter aircraft out of its new Greenville, South Carolina factory.
Management reiterated 2023 guidance and promised to keep returning value to investors through both share repurchases and dividends.
Zacks has a #2 rating on the shares along with a Value Score of B and Growth Score of A. Analysts are yet to upgrade their models, therefore estimate revisions are still pending.
Omnicom Group Inc. (OMC - Free Report)
Omnicom offers a range of services in the areas of advertising and media; precision marketing; commerce and brand consulting; as well as experiential, execution and support, public relations, and healthcare solutions.
The company beat earnings estimates for the March quarter by 13.0% on revenue that beat by 2.3%. Management said that organic revenue grew 5.2%.
The company is growing despite the macro concerns on the strength of its highly-specialized marketing and communications services that are driven by leading analytics, creativity, data and digital media solutions to help companies manage their brands. But it is also working to increase operational efficiency to mitigate the impact of the macroeconomic factors on its profitability. These actions, along with an expansion of its services and suitable capital allocation are expected to continue supporting its business.
The Zacks Rank of this stock is also #2. The Value Score is A and Growth Score B. Analysts are likely to raise their estimates after this strong showing.
Wrapping Up
These three stocks reported strong results in the March quarter, beating estimates on both the top and bottom lines. Analysts are therefore expected to raise their estimates, which could lead to their upgrade. Since they appear to be stocks that are relatively well positioned to deal with macro softness, investors could benefit from accumulating some shares.
One-Month Price Performance
Image Source: Zacks Investment Research