The second-quarter earnings season is approaching its end. So far, results are highly impressive with all-round strength. Aggregate earnings of the market's benchmark — the S&P 500 Index — is on track to register a new all-time high with significant momentum on the revenue front.
In line with the robust earnings performance, five corporate bigwigs are poised to beat on earnings results this month. Investment in these stocks may be prudent as they currently have a combination of a Zacks Rank #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 positive Earnings ESP and a Zacks Rank #3 (Hold) or better, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after earnings releases. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Impressive Q2 Earnings
As of Aug 4, 378 companies of the S&P 500 Index reported results. Total earnings of these companies jumped 103.8% year over year on 28.2% higher revenues. Moreover, 87.3% of these companies beat their earnings per share (EPS) estimates and a record 86.5% surpassed revenue estimates.
For the second quarter as a whole, total earnings of the S&P 500 Index are expected to be up 89.7% year over year on 23.5% higher revenues. This indicates an improvement over the initial projection of EPS increasing 62.2% from the same period last year on 18.2% higher revenues.
These estimates are impressive primarily because second-quarter 2020 witnessed a lockdown owing to the global outbreak of the deadly coronavirus. Notwithstanding favorable comparisons with last year, second-quarter 2021 earnings estimates indicate more than 25% growth from the pre-pandemic second quarter of 2019. In fact, the earnings estimates for 2021 have been growing steadily since the beginning of this year.
More importantly, earnings expectations are increasing for the quarters yet to be reported. For example, expectations for aggregate earnings of the S&P 500 Index for third-quarter 2021 steadily increased from 13.5% on Jan 6 to 26.2% on Aug 4.
As of Aug 4, total 2021 earnings of the S&P 500 Index were projected to climb 41.7% on 12.4% higher revenues. For 2022 and 2023, S&P 500's total earnings like to grow 9.7% and 10.1% on 6.5% and 4.5% higher revenues, respectively. (Read More: What's Happening on the Earnings Front?)
Our Top Picks
The chart below shows the price performance of our five picks in the last quarter.
Image Source: Zacks Investment Research
Walmart (NYSE:WMT) Inc. WMT has been gaining from its sturdy comparable store sales (comps) record, which in turn is driven by its constant expansion efforts and splendid e-commerce performance. Walmart has been undertaking several efforts to enhance merchandise assortments. Also, the company has been focused on store remodeling stores, in an attempt to upgrade them with advanced in-store and digital innovations.
The company has an Earnings ESP of +0.05%. It has an expected earnings growth rate of 8.8% for the current year (ending January 2022). The Zacks Consensus Estimate for current-year earnings improved 0.2% over the last 30 days.
Walmart recorded earnings surprises in three out of the last four quarters, with an average beat of 17.8%. The company is set to release second-quarter fiscal 2022 earnings results on Aug 17, before the opening bell.
Agilent Technologies Inc (NYSE:A). A provides application-focused solutions to the life sciences, diagnostics and applied chemical markets worldwide. The company is benefiting from an expanding product portfolio and strength across end-markets.
Further, growth in the LSAG segment is contributing well. Strength in Cell Analysis, Liquid Chromatography and Mass Spectrometry platforms remains a tailwind. Furthermore, growth in the pharmaceutical market on the back of solid momentum across both small and large molecule applications is a major positive.
The company has an Earnings ESP of +1.16%. It has an expected earnings growth rate of 25.9% for the current year. The Zacks Consensus Estimate for the current year-earnings improved 1% over the last 60 days.
It recorded earnings surprises in the last four reported quarters, with an average beat of 15.8%. The company is set to release third-quarter fiscal 2021 earnings results on Aug 17, after the closing bell.
Target Corp. TGT operates as a general merchandise retailer in the United States. It has undertaken several strategic initiatives to boost its performance. The increase in sales was led by the Apparel, Home, Hardlines, Beauty, Essentials and Food & Beverage categories. Target continues to lay emphasis on developing flexible format stores to penetrate deeper into urban and suburban areas.
The company has an Earnings ESP of +0.62%. It has an expected earnings growth rate of 31.5% for the current year (ending January 2022). The Zacks Consensus Estimate for the current year-earnings improved 0.1% over the last 30 days.
It recorded earnings surprises in the last four reported quarters, with an average beat of 62.1%. The company is set to release second-quarter fiscal 2021 earnings results on Aug 18, before the opening bell.
Deere (NYSE:DE) & Co. DE manufactures and distributes various equipment worldwide. The company operates through three segments: Agriculture and Turf, Construction and Forestry, and Financial Services.
U.S customer sentiment has gone up over the last few quarters with elevated exports to China. Given the positive environmental backdrop, Deere has witnessed robust order activity, which poises it well for an improved performance this fiscal and in the next. The company has been witnessing improvement in the Construction & Forestry segment too.
The company has an Earnings ESP of +11.97%. It has an expected earnings growth rate of more than 100% for the current year (ending January 2022). The Zacks Consensus Estimate for the current year-earnings improved 0.5% over the last 30 days.
It recorded earnings surprises in the last four reported quarters, with an average beat of 67.9%. The company is set to release third-quarter fiscal 2021 earnings results on Aug 20, before the opening bell.
Ulta Beauty (NASDAQ:ULTA) Inc. ULTA operates as a retailer of beauty products in the United States. The company has been seeing market share gains in major beauty categories for a while now, with skincare standing out. Its foremost priority is to strengthen its omnichannel business and explore the potential of both physical and digital facets.
The company has an Earnings ESP of +7.01%. It has an expected earnings growth rate of more than 100% for the current year (ending January 2022). The Zacks Consensus Estimate for the current year-earnings improved 1.2% over the last 30 days.
It recorded earnings surprises in the last four reported quarters, with an average beat of 200.6%. The company is set to release third-quarter fiscal 2021 earnings results on Aug 25, after the closing bell.
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