We are nearing the end of Q2 earnings season; 95% of the S&P
500 has already reported and the report card looks like a C-.
Growth at the earnings per share level is a little better than 4%
compared to Q2 2011; if you were to back out the Finance sector,
overall earnings are down year over year.
Year over year revenue growth is non-existent, which normally
would stifle stock prices, but the market has shrugged off the
lackluster season and it currently hovering around multi-year
highs.
Many Wall Street pros are not buying this recent rally, but
perception is reality and the reality is that there is still money
to be made. The biggest winners have been those companies
exceeding current quarter estimates and at least maintaining their
forward guidance.
This week's three stocks are spread around different sectors,
but all those sectors have seen strength this past season.
About Zacks Earnings ESP
Earnings ESP is Zacks' proprietary methodology for determining
which stocks have the best chance to surprise with their next
earnings announcement. The Earnings ESP shows the percentage
difference between the Most Accurate Estimate and the
Consensus.
The Zacks ESP helps predict earnings surprises to the upside and
downside; the greater the ESP (positive or negative) the greater
the likelihood for a surprise.
I use ESP to help quantify the conviction of the analysts for a
surprise and stack the odds in my favor when I combine it with
other measurements and statistics.
This can work for bullish potential surprises (positive ESP) as
well as bearish surprises (negative ESP).
Bullish ESP Stocks
Toll Brothers (
TOL
) is a Zacks Rank 2 stock with a positive earnings ESP of 29.41%
for the current quarter; the Zacks Consensus is for a profit of 17
cents. Homebuilders have been strong recently and for good
reason; New Home Sales, Building Permits and Housing Starts have
been on the rise and home prices are stabilizing in many areas.
While the stock is up over 100% from its 2012 lows, there might
still be some upside in this east coast homebuilder and today's
homebuilder downgrade may provide a better entry.
- Toll Brothers report earnings on August 22nd
Ciena Corp (
CIEN
) is a Zacks Rank 3 stock with a positive earnings ESP of 15.39%
for the current quarter; the Zacks Consensus is for a loss of 13
cents. Cisco (
CSCO
) posted strong gains this quarter and offered some very bullish
guidance for the future.
The networking companies have fared relatively well in recent
months and Ciena did beat estimates last quarter. There is no
doubt that the company faces some challenges in the near term; but
if they can harness their cloud solutions potential upside and keep
their core strong, shares could see a boost.
Shares have recently exploded to the upside during the most
recent rally to over $17.
- Ciena report earnings on August 30th.
Royal Bank of Canada (
RY
) is a Zacks Rank 2 stock with a positive earnings ESP of 2.6% for
the current quarter. The Zacks consensus estimate is for Q2
EPS of $1.17, with the most accurate estimate at $1.20. As
stated earlier, financial stocks have been the big winners this
earnings season. While Royal Bank of Canada may have the bulk
of its exposure to our neighbors to the north, that may not be such
a bad thing.
Canada, unlike the U.S. has been experiencing more strength in
housing and in overall wealth driven mostly by their natural
resources. The Canadian Government along with banks like
Royal Bank of Canada have been taking steps to cool the housing
market to prevent a U.S. style bubble and it appears to be
working.
RY recently upped their short term mortgage rates and if the
Canadian Dollar is any sign of strength, they are looking better
off than the U.S. as the "Looney" is trading at two year highs
against the Greenback.
- Royal Bank of Canada reports earnings on August 30th.
Take Earnings a Step Further
If the ESP method sounds intriguing to you for improving your
portfolio performance, you should check out
Zacks
Whisper Trader
.
Not only do I utilize Earnings ESP but I also factor in several
critical data sets to create the "secret sauce" I use to achieve
almost 80% accuracy in identifying positive earnings surprises …
before they're reported.
Senior Equities Strategist, Jared Levy, is the editor of
Whisper
Trader
and can show you how to use the power of Zacks Earnings ESP and
earnings surprises for timely, steady gains.
Learn more about
Whisper
Trader
now
CIENA CORP (CIEN): Free Stock Analysis Report
CIENA CORP (CIEN): Free Stock Analysis Report
CISCO SYSTEMS (CSCO): Free Stock Analysis
Report
CISCO SYSTEMS (CSCO): Free Stock Analysis
Report
ROYAL BANK CDA (RY): Free Stock Analysis Report
ROYAL BANK CDA (RY): Free Stock Analysis Report
TOLL BROTHERS (TOL): Free Stock Analysis Report
TOLL BROTHERS (TOL): Free Stock Analysis Report
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