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7 Dirt-Cheap Stocks Likely to Beat in Q2 Earnings

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Uncertain trade policies have been weighing heavily on the stock market with tensions between the United States and China escalating right before the Q2 earnings season. This is especially true as Trump threatened to impose 10% tariff on further $200 billion Chinese goods and China warned of retaliatory moves.

The latest round of tariff threats came following caution by Trump to impose additional tariffs on $500 billion in Chinese goods should Beijing retaliate against the U.S. tariffs on $34 billion in Chinese goods implemented on Jul 5.

However, the optimism of double-digit growth has lifted investors’ sentiment amid intensifying fears of a full-scale global trade war. In particular, earnings for the S&P 500 index are expected to grow 19.1% from the same period last year on 8.12% higher revenues. This would represent the third consecutive quarter of double-digit earnings growth, a trend that is currently expected to continue in the second half of the year. Of the 16 Zacks sectors, 11 are expected to post double-digit earnings growth.

Further, a strengthening economy, historic tax cuts, record employment, surging corporate profits and rising oil price bode well for the stock market.

Given the bullish fundamentals, the selloffs resulting from trade war fears might charge up investors to snap up stocks on the cheap for outsized gains as Q2 earnings season unfolds. Below we have highlighted a few cheap stocks that have a high chance of surprising in their upcoming release with solid fundamentals.

How to Pick Winning Stocks?

Earnings beat will definitely inspire investors’ confidence and propel the price of the stocks higher. Picking the star performers would be easy if we go by our proprietary methodology that selects stocks with a combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy) or 2 (Buy) – and a positive Zacks Earnings ESP.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Our research shows that for stocks with this combination, the chance of positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Further, we screened for stocks having average trading volume of at least 1 million shares, lower P/E than the industry average, and a top-ranked Zacks industry (top 40%).

Finally, we arrived at seven stocks that are cheap and will likely deliver an earnings beat when their earnings are released in the coming weeks, resulting in above-market returns:

Cleveland-Cliffs Inc. (CLF - Free Report)

This iron ore mining company is a supplier of iron ore pellets to the North American steel industry from our mines and pellet plants located in Michigan and Minnesota.

Zacks Rank: #2
Earnings ESP: +8.24%
Industry Rank: Top 23%
Average Volume (in shares): 8.02 million
Market Cap: $2.53 Billion
P/E: 5.59 vs industry average of 10.91

ConocoPhillips (COP - Free Report)

This is a major global exploration and production (E&P) company with operations all over the world.

Zacks Rank: #1
Earnings ESP: +6.44%
Industry Rank: Top 7%
Average Volume (in shares): 6.3 million
Market Cap: $83.94 Billion
P/E: 17.20 vs industry average of 18.36

Knight-Swift Transportation Holdings Inc. (KNX - Free Report)

This is the largest provider of truckload services in North America.

Zacks Rank: #2
Earnings ESP: +0.99%
Industry Rank: Top 5%
Average Volume (in shares): 3.2 million
Market Cap: $6.91 Billion
P/E: 16.83 vs industry average of 19.49

HollyFrontier Corporation (HFC - Free Report)

This is engaged in refining petroleum, and produces and markets gasoline, diesel, jet fuel, asphalt, heavy products and specialty lubricant products.

Zacks Rank: #1
Earnings ESP: +3.24%
Industry Rank: Top 18%
Average Volume (in shares): 5.1 million
Market Cap: $12.17 Billion
P/E: 11.33 vs industry average of 15.09

Athene Holding Ltd. (ATH - Free Report)

This is a retirement services company, issues, reinsures, and acquires retirement savings products in the United States, the District of Columbia and Germany.

Zacks Rank: #2
Earnings ESP: +1.38%
Industry Rank: Top 11%
Average Volume (in shares): 1.3 million
Market Cap: $9.09 Billion
P/E: 8.43 vs industry average of 9.85

Navient Corporation (NAVI - Free Report)

This offers a variety of loan management, servicing and asset recovery services to clients in higher education, and federal, state and local governments.

Zacks Rank: #1
Earnings ESP: +4.71%
Industry Rank: Top 18%
Average Volume (in shares): 3.2 million
Market Cap: $3.67 Billion
P/E: 7.34 vs industry average of 10.49

Wildhorse Resource Development Corporation (WRD - Free Report)

This oil and natural gas company is focused on the acquisition, exploration, development and production of oil, natural gas and NGL.

Zacks Rank: #2
Earnings ESP: +9.38%
Industry Rank: Top 23%
Average Volume (in shares): 1.6 million
Market Cap: $2.46 Billion
P/E: 12.31 vs industry average of 19.35

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