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Should Investors Avoid These 3 Stocks Ahead of Earnings?

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From Amazon (AMZN - Free Report) to Google parent Alphabet (GOOGL - Free Report) , many heavyweights have already reported strong quarterly earnings results. With that said, Q1 earnings season has proved somewhat difficult to navigate as bottom line beats haven’t always led to surging stock prices.

Earnings season is a time when investors look to find companies that are set to top quarterly earnings estimates, often with the expectation that better-than-expected earnings results will lift the stock both in the near-term and propel positive momentum going forward. Conversely, investors should also actively avoid stocks that could disappoint investors with lower-than-anticipated 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 a few high-risk companies ahead of their upcoming earnings reports.

Let’s check them out now:

1.     Alibaba (BABA - Free Report)

Shares of this Chinese e-commerce giant have soared 53% over the last year as investors remain enamored with its top and bottom line growth. Alibaba is projected to keep on expanding at an impressive rate going forward. Our current Zacks Consensus Estimates are calling for Alibaba’s quarterly revenues to skyrocket 64% to reach $9.2 billion. Meanwhile, the company’s adjusted earnings are projected to pop by nearly 43% to hit $0.90 per share.

However, Alibaba Most Accurate Estimate—the representation of the most recent analyst sentiment—calls for earnings of $0.87 per share, which is 3 cents below our current consensus estimate. Alibaba is also currently a Zacks Rank #3 (Hold) and sports an Earnings ESP of -2.89%. This means Alibaba is a stock that could fall short of earnings estimates when the company reports its March quarter and full fiscal year 2018 financial results before the market opens on Friday.

2.       MetLife (MET - Free Report)

MetLife is scheduled to report its first quarter earnings results after market close on Wednesday. Shares of MetLife, which operates in the financial services and insurance sectors, are down 8.3% over the last year. Investors will be more pleased to note that MetLife’s stock price has climbed nearly 6% over the last month.

However, they are sure to be less excited that MetLife’s Q1 revenues are projected to dip by 7.2% to hit $15.67 billion. MetLife’s quarterly earnings are expected to suffer an even larger drop. The company’s adjusted Q1 earnings are projected to fall 19.9% from the year-ago period to $1.17 per share. MetLife is also currently a Zacks Rank #3 (Hold) and holds an Earnings ESP of -0.06%. Therefore, investors might want to avoid MetLife ahead of its Q1 earnings report as the company is expected to suffer substantial top and bottom line declines and could also fall short of its earnings estimates.

3.       GoPro (GPRO - Free Report)

Shares of GoPro have climbed 11.7% over the last four weeks, in a sign that investors might expect the struggling action camera company to turn things around. Unfortunately for investors, GoPro is projected to report yet another rough quarter. The company’s Q1 revenues are expected to tumble by nearly 20% to reach $175.4 million.

Meanwhile, GoPro is expected to see its quarterly earnings climb by 9% from the year-ago period, but the company is still projected to report an overall adjusted loss of $0.40 per share. Worst still, GoPro’s Most Accurate Estimate calls for a loss of $0.51 per share. The company is also currently a Zacks Rank #3 (Hold) that rocks an Earnings ESP of -28.88%, which means GoPro is a stock that could fall short of earnings estimates when it reports after market close on Thursday.

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