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Play Likely Earnings Beats with These 5 Top-Ranked Stocks
It is not surprising that before an earnings season, every investor looks for stocks that can beat market expectations. This is because investors always try to position themselves ahead of time and look to tap stocks that are of high quality.
In this regard, we ran a screener that yielded Amazon.com, NVIDIA, Zscaler,Alaska Air Group and DocuSign as the likely winners on the earnings beat potential.
Why Is a Positive Earnings Surprise So Important?
Historically, stocks of companies with solid quarterly earnings (on a nominal basis) tank if they miss or merely meet market expectations. After all, a 20% earnings rise (though it apparently looks good) doesn’t tell you if earnings growth has been exhibiting a decelerating trend.
Also, seasonal fluctuations come into play sometimes. If a company’s Q1 is seasonally weak and Q4 strong, then it is likely to report a sequential earnings decline. In such cases, growth rates are misleading while judging the true health of a company.
On the other hand, after much brainstorming and analysis of companies’ financials and initiatives, Wall Street analysts project earnings of companies. They, in fact, club their insights and a company’s guidance when deriving an earnings estimate.
Thus, outperforming that estimate is almost equivalent to beating the company’s own expectation as well as the market perception. And if the margin of earnings surprise is big, it typically drives the stock higher right after the release. Thus, more than anything else, an earnings surprise can push a stock higher.
How to Find Stocks That Can Beat
Now, finding stocks that have the potential to beat on the bottom line may be investors’ dream but not an easy job. One way to do this is to look at the earnings surprise history of the company.
An impressive track in this regard generally acts as a catalyst in sending a stock higher. It indicates the company’s ability to surpass estimates. And investors generally believe that the company will apply the same secret sauce to execute yet another earning beat in its next release.
A handful of criteria has narrowed down the universe from over 7,700 stocks to only nine.
Here are five out of nine stocks:
Amazon.com: The Zacks Rank #2 company is one of the largest e-commerce providers, with sprawling operations in North America, now spreading across the globe. You can see the complete list of today’s Zacks #1 Rank stocks here.
Amazon's online retail business revolves around the Prime program well-supported by its massive distribution network. Further, the Whole Foods Market acquisition helped Amazon establish its footprint in the physical grocery supermarket space. The average earnings surprise of AMZN for the past four quarters is 48.17%.
NVIDIA: The Zacks Rank #2 company is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU.
Over the years, NVIDIA’s focus has evolved from PC graphics to artificial intelligence (AI) based solutions that now support high-performance computing, gaming and virtual reality platforms. The average earnings surprise of NVDA for the past four quarters is 20.18%.
Zscaler: The company is one of the world’s leading providers of cloud-based security solutions. It currently carries a Zacks Rank #2.
Zscaler offers a full range of enterprise network security services, including web security, Internet security, antivirus, vulnerability management, firewalls, and control over user activity in mobile, cloud computing, and Internet of things environments. The average earnings surprise of ZS for the past four quarters is 28.17%.
Alaska Air Group: The Zacks Rank #2 airline company, together with its partner regional carriers, serves more than 120 cities across North America. Alaska Air Group also offers passenger and cargo services to/within Alaska.
The average earnings surprise of ALK for the past four quarters is 22.68%.
DocuSign: The Zacks Rank #2 company is a global provider of cloud-based software. DocuSign’s anchor product eSignature helps businesses prepare, sign, act on and manage agreements digitally. Contract Lifecycle Management automates workflows across the agreement process. Insight scouts and analyzes agreements by legal concepts and clauses using artificial intelligence, and Analyzer analyzes inbound agreements by detecting clauses by type, scoring their risk and extracting important terms.
The average earnings surprise of DOCU for the past four quarters is 23.72%.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
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.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
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Zacks.com featured highlights include Amazon, NVIDIA, Zscaler, Alaska Air and DocuSign
For Immediate Release
Chicago, IL – May 7, 2024 – Stocks in this week’s article are Amazon.com (AMZN - Free Report) , NVIDIA (NVDA - Free Report) , Zscaler (ZS - Free Report) , Alaska Air Group (ALK - Free Report) and DocuSign (DOCU - Free Report) .
Play Likely Earnings Beats with These 5 Top-Ranked Stocks
It is not surprising that before an earnings season, every investor looks for stocks that can beat market expectations. This is because investors always try to position themselves ahead of time and look to tap stocks that are of high quality.
In this regard, we ran a screener that yielded Amazon.com, NVIDIA, Zscaler,Alaska Air Group and DocuSign as the likely winners on the earnings beat potential.
Why Is a Positive Earnings Surprise So Important?
Historically, stocks of companies with solid quarterly earnings (on a nominal basis) tank if they miss or merely meet market expectations. After all, a 20% earnings rise (though it apparently looks good) doesn’t tell you if earnings growth has been exhibiting a decelerating trend.
Also, seasonal fluctuations come into play sometimes. If a company’s Q1 is seasonally weak and Q4 strong, then it is likely to report a sequential earnings decline. In such cases, growth rates are misleading while judging the true health of a company.
On the other hand, after much brainstorming and analysis of companies’ financials and initiatives, Wall Street analysts project earnings of companies. They, in fact, club their insights and a company’s guidance when deriving an earnings estimate.
Thus, outperforming that estimate is almost equivalent to beating the company’s own expectation as well as the market perception. And if the margin of earnings surprise is big, it typically drives the stock higher right after the release. Thus, more than anything else, an earnings surprise can push a stock higher.
How to Find Stocks That Can Beat
Now, finding stocks that have the potential to beat on the bottom line may be investors’ dream but not an easy job. One way to do this is to look at the earnings surprise history of the company.
An impressive track in this regard generally acts as a catalyst in sending a stock higher. It indicates the company’s ability to surpass estimates. And investors generally believe that the company will apply the same secret sauce to execute yet another earning beat in its next release.
A handful of criteria has narrowed down the universe from over 7,700 stocks to only nine.
Here are five out of nine stocks:
Amazon.com: The Zacks Rank #2 company is one of the largest e-commerce providers, with sprawling operations in North America, now spreading across the globe. You can see the complete list of today’s Zacks #1 Rank stocks here.
Amazon's online retail business revolves around the Prime program well-supported by its massive distribution network. Further, the Whole Foods Market acquisition helped Amazon establish its footprint in the physical grocery supermarket space. The average earnings surprise of AMZN for the past four quarters is 48.17%.
NVIDIA: The Zacks Rank #2 company is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU.
Over the years, NVIDIA’s focus has evolved from PC graphics to artificial intelligence (AI) based solutions that now support high-performance computing, gaming and virtual reality platforms. The average earnings surprise of NVDA for the past four quarters is 20.18%.
Zscaler: The company is one of the world’s leading providers of cloud-based security solutions. It currently carries a Zacks Rank #2.
Zscaler offers a full range of enterprise network security services, including web security, Internet security, antivirus, vulnerability management, firewalls, and control over user activity in mobile, cloud computing, and Internet of things environments. The average earnings surprise of ZS for the past four quarters is 28.17%.
Alaska Air Group: The Zacks Rank #2 airline company, together with its partner regional carriers, serves more than 120 cities across North America. Alaska Air Group also offers passenger and cargo services to/within Alaska.
The average earnings surprise of ALK for the past four quarters is 22.68%.
DocuSign: The Zacks Rank #2 company is a global provider of cloud-based software. DocuSign’s anchor product eSignature helps businesses prepare, sign, act on and manage agreements digitally. Contract Lifecycle Management automates workflows across the agreement process. Insight scouts and analyzes agreements by legal concepts and clauses using artificial intelligence, and Analyzer analyzes inbound agreements by detecting clauses by type, scoring their risk and extracting important terms.
The average earnings surprise of DOCU for the past four quarters is 23.72%.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
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.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/2268487/play-likely-earnings-beat-with-these-5-top-ranked-stocks
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Contact: Jim Giaquinto
Company: Zacks.com
Phone: 312-265-9268
Email: pr@zacks.com
Visit: https://www.zacks.com/
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.