As the Q2 earnings season kicks in, investors are on the look out for stocks that are poised to beat estimates.
Per the latest Earnings Trends, total earnings for the 25 S&P 500 members that have reported results (as of Jul 12) are up 23.6% from the year-ago period, courtesy of a 7.7% rise in revenues. In fact, 84% of the companies that have posted their quarterly numbers have surpassed earnings estimates, while 88% have exceeded top-line expectations.
Leisure Stocks in Focus
The leisure stocks belong to the broader Consumer Discretionary sector and the space is expected to deliver mixed performance this earnings season. Overall Q2 earnings for the sector are expected to be down 1.6% year over year, though revenues are expected to rise 7.8%.
Notably, consumer spending uncertainty continues in the U.S. as customers are restraining their non-essential purchases. A strong dollar is also acting as a spoiler for the sector.
Nevertheless, rising employment, higher real income, and increased household net worth has reinforced consumer confidence and sentiment. In fact, the Consumer Confidence Index climbed from May’s reading of 117.6 to 118.9 in June. We anticipate this positive sentiment to somewhat translate into higher consumer spending, which, in turn, should drive growth.
Two leisure stocks from the sector are set to report their second-quarter 2017 results on Jul 20. Will these companies manage to put up a decent performance? Let’s take a look at what might be in store for them:
Polaris Industries Inc. (PII - Free Report) delivered a 7.14% positive earnings surprise in the previous quarter. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 5.68%.
Notably, our proven model shows that an earnings beat is likely for Polaris Industries in the quarter. This is because, according to our quantitative model, a company needs the right combination of the two key ingredients – a positive Earnings ESP and a Zacks Rank #3 (Hold) or better – to increase its odds of an earnings surprise.
For the quarter, Polaris has an Earnings ESP of +4.63% and a Zacks Rank #2 (Buy). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The Zacks Consensus Estimate for the quarter’s bottom line is pegged at $1.08.
Pool Corp. (POOL - Free Report) , the world's largest wholesale distributor of swimming pool supplies, equipment and related products, pulled off a 2.56% positive earnings surprise in the last quarter. Notably, Pool’s earnings beat/met the Zacks Consensus Estimate consistently over the past 11 consecutive quarters, with an average beat of 7.57% in the trailing four quarters.
For the quarter, the company has an Earnings ESP of 0.00%, which makes surprise prediction difficult even though the company carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for the quarter’s bottom line is pegged at $2.24. Base business sales growth and favorable trends in the housing market should boost Pool’s top- and bottom-line performance in the to-be-reported quarter. Moreover, continuous strong growth in the remodel and replacement sectors of its business is a major positive. However, unfavorable seasonality and macroeconomic headwinds owing to large global presence may somewhat hamper Q2 results.
Stay tuned! Check back on our full write-up on earnings releases of these stocks.
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