It’s safe to say that buying shares in a company ahead of its quarterly earnings release is risky business. Not only do you have to predict whether or not the company will beat the consensus expectations, but you also have to get the market’s reaction to the report right. A savvier approach is to wait until after a company releases its report before you add shares of the stock that you’ve had your eye on.
We’ve already witnessed several companies get punished during earnings season for under-delivering on what the market was expecting, but there have also been some true standouts that could be worth adding. While one earnings report is just a drop in the ocean in terms of a company’s long-term success, investors can still use these reports to help identify businesses with positive momentum. Let’s take a look at 3 stocks to add after they delivered great earnings reports.
1. Crocs
Sometimes, a company comes out with an earnings report so strong that it completely catches investors off-guard and leads to a massive gap-up in the stock price the following trading session. This can often be the beginning of a strong move up for a stock, especially if it can hold its earnings gap. That’s a big reason why Crocs (NASDAQ:CROX) is a buy at this time. It’s a company that designs, develops, manufactures, markets, and distributes casual lifestyle footwear and accessories and has developed a brand that continues to stand out in the highly competitive retail market.
You are probably familiar with the company’s foam clogs, which are instantly recognizable when you see them. Regardless of whether or not you are a fan of Crocs shoes, it’s hard to overlook the company’s Q1 numbers which included record revenues and profitability with growth in all regions and all channels. Crocs reported Q1 revenues of $460.1 million, up 63.6% year-over-year, and saw its digital sales grow by 75.3% to represent 32.3% of its revenue. The company raised its outlook and the stock has broken out from months of consolidation, making it a very attractive option for investors looking for companies with momentum.
2. United Parcel Service
This stock was one of my top buys for April thanks to trends such as stimulus checks going out to consumers and the uptick in e-commerce shipping volumes. Fast forward to the end of the month and United Parcel Service (NYSE:UPS) is up over 13% and trading at record highs after the company delivered a first-class Q1 earnings report. Many of the trends that have been benefitting the company are still intact and it’s a smart buy even after the big move up for several reasons.
Handling deliveries for small and medium-sized businesses is a big part of what UPS does, and the fact that U.S. small and midsize businesses’ average daily volume growth hit an all-time high of 36% in Q1 tells us that a big rebound is occurring on that side of the company’s business. UPS is also helping to distribute the vaccine and has delivered about 196 million vaccine doses to about 50 countries and territories at this time. Both of those trends should continue driving profits for the company in 2021, and the e-commerce story is also a positive growth driver to consider over the long term. UPS reported Q1 consolidated revenue of $22.9 billion, up 27% year-over-year, and saw growth across all business segments in the quarter, which means investors can be confident in adding a company that is executing at a very high level.
3. DR Horton
Last on our list of stocks to consider adding after their latest earnings report is DR Horton (NYSE:DHI), one of the largest publicly traded U.S. homebuilders by market capitalization, number of homes delivered, and revenue. It’s a company that is benefitting from what could be the hottest period in the housing market ever. There simply aren’t enough homes for sale to keep up with the demand thanks to historically low interest rates and buyers moving away from high-rise rentals and into single-family homes in the wake of the pandemic, which is a big reason to consider adding shares of D.R. Horton at this time.
What’s attractive about D.R. Horton is that it is a company that can leverage its relationships with suppliers and contractors to achieve volume discounts and rebates. The company also builds tons of entry-level homes that are very appealing to first-time homebuyers like millennials. D.R. Horton reported Q2 consolidated revenues of $6.4 billion, up 43% year-over-year, and saw its net sales order increase by 35% to 27,059 homes. The company also reported a net income of $929.5 million, up 93% year-over-year. This might just be the best homebuilder stock to own going forward and is likely still undervalued should the boom in the housing market continue for the remainder of the year.