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3 Stocks to Avoid Ahead of Earnings

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Stocks opened higher on Thursday as the market begins to show signs of a possible comeback, though there is hardly a guarantee the worst is over amid continued trade uncertainty. This means that many investors are eagerly awaiting first quarter earnings season to help avoid any further volatility.

Finding stocks that look poised to top quarterly earnings estimates is one of the best ways to try to beat market uncertainty. Conversely, investors should stay away from any companies that might disappoint by reporting soft or lower-than-expected earnings results.

Luckily, Zacks Premium customers can utilize the Earnings ESP Screener in order to search for stocks that are expected to surprise, in one way or the other.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

In contrast, a stock with a Zacks Rank #3 (Hold) or worse, coupled with a negative Earnings ESP, is one that we typically want to avoid during earnings season. Today, we are giving our readers a free look at three of these weak stocks in order to help them identify the high-risk companies ahead of their upcoming reports.

Check them out now:

1.     Bank of America (BAC - Free Report)

Although shares of BAC climbed on Thursday, the banking giant is currently a Zacks Rank #3 (Hold) and sports an Earnings ESP of -0.37%. Bank of America is scheduled to report its first quarter earnings results before the market opens on Monday, April 16.

Our current consensus estimates are calling for Bank of America to report earnings of $0.59 per share and revenues of $22.91 billion. Both of these would mark gains from the year-ago period, but BAC has witnessed three negative earnings estimate revisions within the past 30 days as well as one within the last seven days. This means Bank of America’s Most Accurate Estimate—the representation of the most recent analyst sentiment—calls for earnings of $0.58 per share. Therefore, BAC could fall short of earnings estimates.

2.       IBM (IBM - Free Report)

This historic computer power has turned much of its focus to the future with a big push into artificial intelligence and other new growth areas. IBM’s revenues are expected to climb 3% to reach $18.71 billion, while its earnings are projected to gain just 0.42% to hit $2.39 per share.

IBM is also currently a Zacks Rank #3 (Hold) and holds an Earnings ESP of -1.83%. IBM’s negative ESP figure stems from the fact that its Most Accurate Estimate falls 4 cents below our current consensus estimates. This means investors might want to avoid IBM ahead of the release of its Q1 earnings results on Tuesday, April 17. 

3.       Pier 1 Imports (PIR - Free Report)

Pier 1 is expected to report its earnings results after market close on Wednesday, April 18. The home furnishing and décor company’s top line is projected to climb by 1.88% to $538.3 million. Meanwhile, PIR’s Q1 earnings are expected to plummet by more than 44% to hit $0.19 per share.

With that said, Pier 1 is currently a Zacks Rank #3 (Hold) that rocks an Earnings ESP of -7.02%. Pier 1’s Most Accurate Estimate comes in 1 cent below our current consensus estimates, which means that Pier 1 could be poised to miss earnings estimates on top of possibly posting a substantial decline from the year-ago period.

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