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5 Stocks From the Favorite Sectors of This Earnings Season
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The fourth-quarter 2023 earnings season is set to begin this week, with the banking sector gearing up to report numbers. There has been a deceleration in the earnings outlook in recent months, with negative revisions for several key sectors since the start of the fourth quarter.
While most of the stocks are expected to outperform this earnings season, we have zeroed in on the best stocks of the sectors that have a high chance of surprising in their upcoming releases. These stocks — Meta Platforms (META - Free Report) , Deckers Outdoor Corporation (DECK - Free Report) , Netflix (NFLX - Free Report) , Atmos Energy Corporation (ATO - Free Report) and CME Group (CME - Free Report) — could make great plays as the earnings season unfolds and will likely move higher in the days to come.
Q4 Earnings Trend
Total S&P 500 earnings are expected to be down 0.2% from the same period last year despite 2.3% higher revenues, per the latest Earnings Trends. This would follow 3.8% earnings growth in the third quarter on 2% higher revenues. Estimates have steadily come down from 5.5% growth projected in early October, representing a significant decline in earnings estimates compared to the first three quarters of 2023. The negative revisions are more pronounced in 11 of the 16 Zacks sectors.
Of the 16 Zacks sectors, eight are expected to post earnings growth in the fourth quarter, with the strongest gains in the Technology sector (18.8%). This would be followed by Retail (18.3%), Consumer Discretionary (14.8%%), Utilities (14.7%) and Finance (4.7%).
Per Factset, the S&P 500 is expected to post 1.3% earnings growth for the fourth quarter. If this growth is attained, then it would mark the second straight quarter of year-over-year earnings growth for the index.
How to Choose Stocks?
Earnings beat will definitely inspire investors’ confidence and propel the price of these stocks higher. Picking the star performers would be easy if we go by our proprietary methodology that selects stocks with a combination of a positive Earnings ESP and a favorable Zacks Rank – Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst revisions. This is done because if an analyst reevaluates their estimate right before an earnings release, it means that they have fresh information that could potentially be more accurate than what analysts thought about a company two or three months ago.
Stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 or better produced an earnings surprise 70% of the time. Best of all, by using these parameters, investors have seen 28.3% annual returns on average, according to our 10-year backtest. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Technology
Meta Platforms is the world’s largest social media platform. The company’s portfolio evolved from a single app Facebook to multiple apps like photo and video sharing app Instagram and messaging app WhatsApp owing to acquisitions. It has an Earnings ESP of +4.58% and a Zacks Rank #2. The Zacks Consensus Estimate for the yet-to-be-reported quarter has been revised upward by a couple of cents to $4.79 over the past seven days, implying growth of 59.7%.
Meta Platforms delivered an earnings surprise of 27.50%. on average, in the last four quarters. It is scheduled to report earnings on Feb 7.
Retail
Deckers Outdoor is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports and other lifestyle-related activities. It has an Earnings ESP of +4.88% and a Zacks Rank #2. Deckers Outdoor saw a positive earnings estimate revision of 19 cents over the past 30 days for the yet-to-be-reported quarter, indicating growth of 5.4%.
Deckers Outdoor delivered an average earnings surprise of 26.32% in the past four quarters. The company is slated to release earnings on Feb 1.
Consumer Discretionary
Netflix is considered a pioneer in the streaming space. The company evolved from a small DVD rental provider to a dominant streaming service provider, courtesy of its wide-ranging content portfolio and a fortified international footprint. Netflix has an Earnings ESP of +5.75% and a Zacks Rank #2.
In the past month, the stock has seen a positive earnings estimate revision of a penny for the yet-to-be-reported quarter and has an expected growth rate of more than 1700%. Netflix delivered a negative earnings surprise of 12.16% for the past four quarters on average and is slated to release earnings on Jan 23.
Utilities
Atmos Energy, along with its subsidiaries, is engaged in regulated natural gas distribution and storage business. The company serves nearly 3.3 million customers in more than 1,400 communities in eight states, from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energy has an Earnings ESP of +1.98% and a Zacks Rank #2. The stock has seen an upward earnings estimate revision of 4 cents over the past month for the to-be-reported quarter and has an expected earnings growth rate of 9.95%.
Atmos Energy delivered an average earnings surprise of 1.10% for the last four quarters. The company is slated to release earnings on Feb 6.
Finance
CME Group is the largest futures exchange in the world in terms of trading volume as well as notional value traded. The company offers a broad range of products covering major asset classes based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities and metals. CME has an Earnings ESP of +4.49% and a Zacks Rank #2.
CME Group saw a positive earnings estimate revision of 3 cents for the yet-to-be-reported quarter in the past month and has an expected growth rate of 14.58%. It delivered an earnings surprise of 2.73%, on average, for the past four quarters. CME Group is slated to release earnings on Feb 14.
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5 Stocks From the Favorite Sectors of This Earnings Season
The fourth-quarter 2023 earnings season is set to begin this week, with the banking sector gearing up to report numbers. There has been a deceleration in the earnings outlook in recent months, with negative revisions for several key sectors since the start of the fourth quarter.
While most of the stocks are expected to outperform this earnings season, we have zeroed in on the best stocks of the sectors that have a high chance of surprising in their upcoming releases. These stocks — Meta Platforms (META - Free Report) , Deckers Outdoor Corporation (DECK - Free Report) , Netflix (NFLX - Free Report) , Atmos Energy Corporation (ATO - Free Report) and CME Group (CME - Free Report) — could make great plays as the earnings season unfolds and will likely move higher in the days to come.
Q4 Earnings Trend
Total S&P 500 earnings are expected to be down 0.2% from the same period last year despite 2.3% higher revenues, per the latest Earnings Trends. This would follow 3.8% earnings growth in the third quarter on 2% higher revenues. Estimates have steadily come down from 5.5% growth projected in early October, representing a significant decline in earnings estimates compared to the first three quarters of 2023. The negative revisions are more pronounced in 11 of the 16 Zacks sectors.
Of the 16 Zacks sectors, eight are expected to post earnings growth in the fourth quarter, with the strongest gains in the Technology sector (18.8%). This would be followed by Retail (18.3%), Consumer Discretionary (14.8%%), Utilities (14.7%) and Finance (4.7%).
Per Factset, the S&P 500 is expected to post 1.3% earnings growth for the fourth quarter. If this growth is attained, then it would mark the second straight quarter of year-over-year earnings growth for the index.
How to Choose Stocks?
Earnings beat will definitely inspire investors’ confidence and propel the price of these stocks higher. Picking the star performers would be easy if we go by our proprietary methodology that selects stocks with a combination of a positive Earnings ESP and a favorable Zacks Rank – Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst revisions. This is done because if an analyst reevaluates their estimate right before an earnings release, it means that they have fresh information that could potentially be more accurate than what analysts thought about a company two or three months ago.
Stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 or better produced an earnings surprise 70% of the time. Best of all, by using these parameters, investors have seen 28.3% annual returns on average, according to our 10-year backtest. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Technology
Meta Platforms is the world’s largest social media platform. The company’s portfolio evolved from a single app Facebook to multiple apps like photo and video sharing app Instagram and messaging app WhatsApp owing to acquisitions. It has an Earnings ESP of +4.58% and a Zacks Rank #2. The Zacks Consensus Estimate for the yet-to-be-reported quarter has been revised upward by a couple of cents to $4.79 over the past seven days, implying growth of 59.7%.
Meta Platforms delivered an earnings surprise of 27.50%. on average, in the last four quarters. It is scheduled to report earnings on Feb 7.
Retail
Deckers Outdoor is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports and other lifestyle-related activities. It has an Earnings ESP of +4.88% and a Zacks Rank #2. Deckers Outdoor saw a positive earnings estimate revision of 19 cents over the past 30 days for the yet-to-be-reported quarter, indicating growth of 5.4%.
Deckers Outdoor delivered an average earnings surprise of 26.32% in the past four quarters. The company is slated to release earnings on Feb 1.
Consumer Discretionary
Netflix is considered a pioneer in the streaming space. The company evolved from a small DVD rental provider to a dominant streaming service provider, courtesy of its wide-ranging content portfolio and a fortified international footprint. Netflix has an Earnings ESP of +5.75% and a Zacks Rank #2.
In the past month, the stock has seen a positive earnings estimate revision of a penny for the yet-to-be-reported quarter and has an expected growth rate of more than 1700%. Netflix delivered a negative earnings surprise of 12.16% for the past four quarters on average and is slated to release earnings on Jan 23.
Utilities
Atmos Energy, along with its subsidiaries, is engaged in regulated natural gas distribution and storage business. The company serves nearly 3.3 million customers in more than 1,400 communities in eight states, from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energy has an Earnings ESP of +1.98% and a Zacks Rank #2. The stock has seen an upward earnings estimate revision of 4 cents over the past month for the to-be-reported quarter and has an expected earnings growth rate of 9.95%.
Atmos Energy delivered an average earnings surprise of 1.10% for the last four quarters. The company is slated to release earnings on Feb 6.
Finance
CME Group is the largest futures exchange in the world in terms of trading volume as well as notional value traded. The company offers a broad range of products covering major asset classes based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities and metals. CME has an Earnings ESP of +4.49% and a Zacks Rank #2.
CME Group saw a positive earnings estimate revision of 3 cents for the yet-to-be-reported quarter in the past month and has an expected growth rate of 14.58%. It delivered an earnings surprise of 2.73%, on average, for the past four quarters. CME Group is slated to release earnings on Feb 14.