5 Top-Ranked Stocks Set To Gain This Week On Q2 Earnings

U.S. stock markets finished a disappointing week ended Jul 19 on mixed second-quarter earnings results and speculation over how much rate cut will be implemented by the Fed. All the three major stock indexes --- the Dow, S&P 500 and Nasdaq Composite --- posted biggest weekly losses since May 31. Meanwhile, no meaningful development has taken place so far related to the year-long trade dispute with China.

Second-Quarter Earnings Mixed So Far

At present, the market is anticipating a negative earnings session for the second quarter of 2019. As of Jul 19, total Q2 earnings for the S&P 500 Index are expected to be down 1.7% from the year-earlier period on 4% higher revenues. This is a significant improvement over an earnings decline of 3.4% on 3.9% higher revenues, expected on Jul 12.

As of Jul 19, 79 S&P 500 members reported second-quarter earnings results. Total earnings for these 79 index members are up 2.6% from the same period last year on 2.9% higher revenues. Notably, 79.7% companies surpassed EPS estimates while 60.8% beat revenue estimates.

Although trade-related issues, especially tariff conflict, took a toll on several companies which have already reported, it is important to note that these issues did not lead to the board-based negative guidance by those companies. However, negative earnings expectation is still prevailing for the second quarter and if that actually materializes, it would follow the 0.2% earnings decline on 4.5% higher revenues in the first quarter. (Read More: 3 Takeaways from Q2 Earnings Results Thus Far)

Investors Guessing on Fed’s Rate Cut

Although Fed chair has already given a strong signal of rate cut in the upcoming Federal Open Market Committee (FOMC) meeting scheduled Jul 30-31, market participants are guessing up to how much percentage point the Fed can lower the benchmark lending rate, which is currently pegged at 2.25-2.5%.

Investors’ hope for a 50 basis-point cut in interest rate gained momentum on Jul 18 after New York Federal Reserve President John Williams (NYSE:WMB) said, “It’s better to take preventative measures than to wait for disaster to unfold.” Later that day, Fed Vice Chair Richard Clarida said on Fox Business News that cutting interest rates quickly would be a good strategy.

However, a spokesperson for the New York Fed later clarified at CNBC that Williams was drawing from academic research, not hinting at potential policy actions at the upcoming FOMC meeting.

Our Top Picks

At this stage, it will be prudent to invest in stocks that are likely to beat earnings estimates in the second quarter. We have narrowed down our search to five such stocks which surged in the past three months despite volatility and still have upside left. Each of these stocks carries a Zacks Rank #1 (Strong Buy) and has 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 or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are expected to climb after earnings release irrespective of already solid gains year to date.

Lockheed Martin Corp. (NYSE:LMT) is a security and aerospace company that engages in the research, design, development, manufacture, integration and sustainment of technology systems, products and services worldwide. It operates in four segments: Aeronautics, Missiles and Fire Control, Rotary and Mission Systems and Space.

Lockheed Martin has an Earnings ESP of +0.14% for the current quarter. The company has an expected earnings growth rate of 10% and 16.7% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current quarter and year improved 0.2% and 1.2%, respectively, over the last 60 days.

The company delivered positive earnings surprise in the last four quarters with an average beat of 17.4%. The stock has surged 7.2% in the past three months. Lockheed Martin is expected to release earnings results on Jul 23, before the opening bell.

JetBlue Airways Corp. (NASDAQ:JBLU) is a low-fare, low-cost passenger airline, which provides high-quality customer service primarily on point-to-point routes and is based in New York's John F. Kennedy International Airport.

JetBlue Airways has an Earnings ESP of +3.97% for the current quarter. The company has an expected earnings growth rate of 50% and 26.5% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current quarter and year improved 7.5% and 6.5%, respectively, over the last 60 days.

The company delivered positive earnings surprise in the last four quarters with an average beat of 15.1%. The stock has surged 7.8% in the past three months. JetBlue Airways is expected to release earnings results on Jul 23, before the opening bell.

Navient Corp. (NASDAQ:NAVI) provides education loan management and business processing solutions for education, healthcare, and government clients at the federal, state and local levels in the United States. It operates in three segments: Federal Education Loans, Consumer Lending and Business Processing.

Navient has an Earnings ESP of +2.33% for the current quarter. The company has an expected earnings growth rate of 10.2% and 2.9% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current quarter and year improved 5.9% and 2.4%, respectively, over the last 60 days.

The company delivered positive earnings surprise in the last four quarters with an average beat of 12.1%. The stock has surged 9% in the past three months. Navient is expected to release earnings results on Jul 23, after the closing bell.

RenaissanceRe Holdings Ltd. (NYSE:RNR) is a global provider of reinsurance and insurance that specializes in matching well-structured risks with efficient sources of capital. It operates through Property & Casualty and Specialty segments.

RenaissanceRe Holdings has an Earnings ESP of +2.16% for the current quarter. The company has an expected earnings growth rate of 45.8% for the current year. The Zacks Consensus Estimate for the current quarter and year improved 10.5% and 6.8%, respectively, over the last 60 days.

The company delivered positive earnings surprise in the last four quarters with an average beat of 151.8%. The stock has jumped 18.8% in the past three months. RenaissanceRe Holdings is expected to release earnings results on Jul 23, after the closing bell.

NorthWestern Corp. (NYSE:NWE) provides electricity and natural gas to residential, commercial, and industrial customers in Montana, South Dakota and Nebraska. It operates through Electric Operations and Natural Gas Operations segments.

NorthWestern has an Earnings ESP of +0.79% for the current quarter. The company has an expected earnings growth rate of 5.9% for the current year. The Zacks Consensus Estimate for the current improved 0.8% over the last 60 days.

The company delivered positive earnings surprise in three of the last four quarters with an average beat of 18.7%. The stock has soared 5.2% in the past three months. NorthWestern is expected to release earnings results on Jul 23, after the closing bell.

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