President Obama was elected to a second term and equity
markets are responding negatively as expected. Although the
knee-jerk selloff may have been partially motivated by politics,
earnings growth trends may be the hidden fly in the market's
ointment along with fiscal cliff and Euro jitters.
Q3 earnings season is about 75% complete and the results have
been decidedly weak on average.
Total earnings for the S&P 500 companies reported so far
are down roughly 2.7% from the same period last year, with 60% of
the companies beating already low earnings expectations.
The revenue side of the equation looks a bit grimmer, with
total revenues down 2% and only 35% of the corporations reported
so far able to beat revenue expectations. Excluding
Finance, total earnings and revenues are down 4.5% and 2.5% from
the same period last year, respectively.
Expectations for growth are some of the lowest we have seen in
years.
While all this seems like a recipe for lower stock prices, the
low expectations may leave more room for positive surprise and
upside rallies in stocks that still remain relatively inexpensive
from a price to earnings perspective. The recent price
corrections in many stocks may also help.
Finding stocks with the best chances of winning could be the
best path to finding rising stock prices on earnings and the
Zacks Earnings Surprise Prediction or ESP helps target those
stocks.
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
Molycorp (
MCP
) is a Zacks Rank 3 stock with a positive earnings ESP of
1983% for the current quarter (no that's not a typo); This is due
to the Zacks Consensus seeing a profit of just 1 cent in Q3 with
the most accurate estimate looking for 25 cents.
Molycorp has had a tough year; their stock dropping to just
$9.00 per share from an earlier high near $36. The drop can
be attributed to flat demand for rare earths and China
monopolizing prices.
The pentagon and several companies are also putting pressure
on China to help stabilize the market and rare earth prices,
which would help rare earth miners. Another boost is that
Obama has pledged to support and push for green energy sources,
many of which are dependent upon rare earths.
With MCP now below its IPO price, there may be upside for the
shares.
- Molycorp reports earnings on November 8th
Beazer Homes (
BZH
) is a Zacks Rank 2 stock with a positive earnings ESP of
13.7% for the current quarter; the Zacks Consensus is for a loss
of $1.11.
While this quarter may register a loss for the company,
analysts are expecting relative strength in the quarter and a
major reduction in losses for 2013.
Homebuilders have been strong and the low-interest rate
environment combined with the strength in sales and stability in
home prices should help Beazer going into their report.
- Beazer reports earnings on November 12th
Five Below Inc. (
FIVE
) is a Zacks Rank 2 stock with a positive earnings ESP of
114.3% for the current quarter. The Zacks consensus
estimate is for Q3 EPS of $0.014, with the most accurate estimate
at $0.03. Five Below is a teen and pre-teen retailer
offering products all priced at $5 and below.
Retail is one of the sectors that many believe will fare well
no matter who took the White House. The fact that FIVE
offers less expensive products may position them well for the
still recovering consumer.
The fact that the stock is 25% off its highs for the year
makes it a bit more attractive.
- Five Below reports earnings on December 11th
Take Earnings a Step Further
If the ESP method sounds intriguing to you for improving your
portfolio performance, especially in uncertain times, 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 better than 80%
accuracy in identifying positive earnings surprises… before
they're reported.
Senior Equities Strategist, Jared A Levy, is featured on Fox
Business regularly and is the editor of Whisper Trader. He
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
BEAZER HOMES (BZH): Free Stock Analysis
Report
BEAZER HOMES (BZH): Free Stock Analysis
Report
BEAZER HOMES (BZH): Free Stock Analysis
Report
FIVE BELOW INC (FIVE): Free Stock Analysis
Report
FIVE BELOW INC (FIVE): Free Stock Analysis
Report
FIVE BELOW INC (FIVE): Free Stock Analysis
Report
MOLYCORP INC (MCP): Free Stock Analysis
Report
MOLYCORP INC (MCP): Free Stock Analysis
Report
MOLYCORP INC (MCP): Free Stock Analysis
Report
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