Every earnings season is important for management perspectives on the operations and outlook of companies. However, this one is especially important because of the state of the economy, where experts are increasingly of the opinion that we will be in a recession by year-end.
That is because the Fed is watching the numbers for a sustained impact on prices, and there is a difference of opinion among Fed officials themselves about whether the impact of previous actions has already played out across the economy or whether the ripple effects continue.
Although overall inflation is headed in the right direction, and there is welcome reprieves in both energy and oil prices, those are typically the more volatile elements that are not considered part of the "core" economy.
The core has instead been influenced by high shelter costs, some services and used car prices. These elements are proving to be stickier than expected.
At the same time, employment numbers remain strong, which leaves room for the Fed to consider more rate increases.
As a result, the consensus on the street is that the Fed will be raising the interest rate by another quarter of a percentage point to the 5.25%-5.50% range when it meets next week.
If it does go ahead with this, the chances of a recession increase further. This makes it all the more important to get management perspectives on the state of demand.
Therefore, when companies report strong results, easily beating estimates and providing encouraging commentary about what they’re hearing from their customers, it makes sense to get into these stocks. Especially so when the analyst community agrees by raising estimates.
So here are three companies that printed solid numbers this season, followed by analyst estimate revisions. Needless to say, they all have a #1 (Strong Buy) rating from Zacks.
Saratoga Investment Corp. ( SAR Quick Quote SAR - Free Report)
New York-based Saratoga is a business development company that focuses on providing financing solutions, usually in the $5 million to $50 million range. It targets lower middle-market companies mainly in the U.S. It invests in leveraged and management buyouts, growth financing and debt refinancing, among other transactions and favors the aerospace, automotive aftermarket, consumer products, healthcare, logistics and software services industries. The firm structures its investments as debt and equity.
Zacks #1 ranked Saratoga belongs to the Financial - SBIC & Commercial Industry, which is in the top 34% of Zacks-classified industries. Buy-ranked stocks in the top 50% of Zacks ranked industries generally outperform the bottom 50% by a factor of 2 to 1.
Saratoga is all the more attractive because of its recent earnings performance and estimate revisions history. The company beat the Zacks Consensus Estimate by 18.7% in the last quarter. As a result, all its estimates are up in the last seven days. August and November quarters are up 12.1% each, the 2024 estimate is up 18.3% and the 2025 estimate up 17.3%.
Kura Sushi USA, Inc. ( KRUS Quick Quote KRUS - Free Report)
Irvine, CA-based Kura Sushi operates Japanese sushi restaurants in the United States. It has a unique revolving sushi service model known as the ‘Kura Experience.'
Kura Sushi belongs to the Retail - Restaurants industry (top 12%). Its stock is ranked #1.
Zacks Consensus Estimates for 2023 (ending August) represent revenue and earnings growth of 33.4% and 200%. The 2024 estimates represent 28.7% revenue growth and 583.3% earnings growth.
In the May quarter, the company beat estimates by 220%. The earnings estimate for the August quarter is up 47.1% in the last 30 days. While it is expected to make a loss in the November quarter, there is a 4 cent (30.8%) reduction in the loss estimate during the period. The estimate for fiscal year 2023 is unchanged while the 2024 estimate is up 70.8% in the last 30 days.
Franklin Covey Co. ( FC Quick Quote FC - Free Report)
Salt Lake City-based Franklin Covey is a global provider of training and consulting services in the areas of execution, sales performance, productivity, customer loyalty and educational improvement to organizations and individuals. It also offers a suite of individual-effectiveness and leadership-development training products and services.
#1 ranked Franklin Covey belongs to the Consulting Services industry (top 28%).
In the May quarter, the company topped the Zacks Consensus Estimate by 88.2%, after which August and November quarter estimates increased a respective 4 cents and a penny while estimates for 2023 and 2024 (ending August) increased 16.0% and 11.6%, respectively.
At these levels, the Zacks Consensus Estimates represent 8.1% revenue growth and 3.2% earnings decline in 2023, followed by 10.5% revenue growth and 32.1% earnings growth in 2024.
One-Month Price Performance Image Source: Zacks Investment Research