The first-quarter 2020 earnings season has kicked off this week. Corporate earnings are expected to suffer significantly on account of the coronavirus outbreak that spread like wildfire across the United States and the world in the second half of the first quarter.
Despite the economic disaster, a few stocks are likely to report better-than expected earnings results when they report their financial numbers. Investment in these stocks with a favorable Zacks Rank may be prudent decision at the moment.
First Quarter at a Glance
Wall Street completed a fabulous 2019 wherein all three major stock indexes witnessed the best yearly performance in six years. The U.S. stock markets commenced 2020 from where it left off last year. The bull run continued till mid-February with three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — surpassing several key technical barriers recording fresh highs almost everyday. Global economy was showing signs of recovery buoyed by the interim trade deal between the United States and China.
However, the situation took a drastic turn once the coronavirus, which was first detected in China, started spreading across the world. The Dow posted its all-time high on Feb 12 and both the S&P 500 and Nasdaq Composite recorded the same on Feb 19. Thereafter, Wall Street started spiraling downward, which continued till Mar 23. Following that the stocks received a little relief.
Both U.S. corporate and investors are almost completely in the dark regarding global economic outlook and future business prospects. This can primarily be attributed to the government imposed full or partial lockdown across the world in a bid to curb the spread of the coronavirus.
As a result of the lockdowns, economic activities across the world have come to a standstill. The 11-year long historic bull run of Wall Street came to end on early March with all three major stock indexes entering the bear market territory. In fact, several corporate giants warned about stiff business decline and withdrew the rosy outlook for 2020 issued previously.
As of Apr 9, 21 S&P 500 members reported first-quarter 2020 earnings results. Total earnings of these companies are down 10% from the same period last year on 5.1% higher revenues. Of the total, 76.2% surpassed EPS estimates while 71.4% outpaced revenue estimates. Overall, first-quarter earnings for the S&P 500 Index were projected to be down 9% year over year on 1.6% higher revenues. (Read More: What to Expect from Big Bank Earnings Amid the Coronavirus?)
Our Top Picks
We have narrowed down our search to five companies that are gearing up to release their earnings results this month. Each of these stocks has either a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our research shows that for stocks with the combination of a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are expected to soar after earnings release. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The chart below shows the price performance of our five picks in the first-quarter 2020.
Murphy USA Inc. (MUSA - Free Report) is a leading independent retailer of motor fuel and convenience merchandise in the United States. The company has an Earnings ESP of +44.49%.
Murphy USA has an expected earnings growth rate of 14.7% for the current year. The Zacks Consensus Estimate for the current year has improved 4% over the last 60 days. The Zacks Rank #2 company is set to release earnings results on Apr 17, before the opening bell.
Eli Lilly and Co. (LLY - Free Report) discovers, develops, manufactures, and markets pharmaceutical products worldwide. It offers endocrinology products for diabetes; osteoporosis in postmenopausal women and men and human growth hormone deficiency and paediatric growth conditions. The company has an Earnings ESP of +1.67%.
Eli Lilly has an expected earnings growth rate of 12.1% for the current year. The Zacks Consensus Estimate for the current year has improved 25% over the last 60 days. The Zacks Rank #2 company is set to release earnings results on Apr 23, before the opening bell.
Limelight Networks Inc. (LLNW - Free Report) provides content delivery and related services in the Americas, Europe, the Middle East, Africa and the Asia Pacific. The company has an Earnings ESP of +100%.
Limelight Networks has an expected earnings growth rate of 350% for the current year. The Zacks Consensus Estimate for the current year has improved 25% over the last 60 days. The Zacks Rank #2 company is set to release earnings results on Apr 23, after the closing bell.
DexCom Inc. (DXCM - Free Report) is a medical device company, focused on design, development, and commercialization of continuous glucose monitoring systems in the United States and internationally. The company has an Earnings ESP of +143.9%.
DexCom has an expected earnings growth rate of 19.6% for the current year. The Zacks Consensus Estimate for the current year has improved 0.9% over the last 60 days. The Zacks Rank #2 company is set to release earnings results on Apr 28, after the closing bell.
Casa Systems Inc. (CASA - Free Report) provides software-centric broadband products in North America, Latin America, the Asia-Pacific, Europe, the Middle East, and Africa. The company has an Earnings ESP of +36%.
Casa Systems has an expected earnings growth rate of 50% for the current year. The Zacks Consensus Estimate for the current year has improved 250% over the last 60 days. The Zacks Rank #1 company is set to release earnings results on Apr 30, after the closing bell.
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