As my good friend and Zacks Research Director Sheraz Mian noted
in his
comments
earlier this week, we have entered into the last "major" week of
earnings of the S&P 500.
So far, total earnings growth for the roughly 320 companies that
have already reported are up 5.3% year over year, about 2/3rds of
them beating expectations with a median surprise of 2.7%.
While that seems like a positive, there are some
"details" that we need to be aware of.
If you look back just one quarter (Q1) before the most recent
downward analyst revisions, this quarter's earnings results would
have actually been about 4% lower than expectations.
Top line revenue is also lower on average than it was in the
year ago period which is an indication that overall sales of goods
and services are down. That said, there are some companies
that are truly surprising the markets to the upside and offering
bullish outlooks for the coming year; those companies are being
rewarded with huge gains.
We saw this type of action in Netquite last week, which was one
of my selections for my Whisper Trading Service.
It's fair to say that the most recent earnings season is
mediocre at best, but being that expectations were ridiculously
low, the markets are at least remaining stable. It's also
safe to assume that the past week's bullish action can be partially
attributed to strong, supportive words from the likes of Mario
Dragi and Mr Juncker on the stability of the Euro Zone by any means
necessary.
The US markets are also looking to the Fed for additional QE
here, but I think that our European friends may have bought the Fed
another month or two until they enact any further stimulus.
We will see later today if that thesis holds true.
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 Zacks
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).
Let's check out a few bullish ESP candidates that report over
the next week or so:
Bullish ESP Stocks
Sunoco (
SUN
) - is a Zacks Rank 3 stock with an earnings ESP of 25% for
Q2. Their FY2013 ESP is 7%. Sunoco does have some
weakness in their Q3 and FY2012 ESPs, but hopefully a beat in this
quarter and longer term strength will support the shares.
The Zacks consensus estimate is for 47 cents of income this
quarter, with the most accurate estimate at 58 cents.
Expectations may be lower because they have missed analysts
expectations for 3 of the last 4 quarters.
Sunoco, Inc. is principally a petroleum refiner and marketer
with interests in cokemaking. Sunoco's petroleum refining and
marketing operations include the manufacturing and marketing of a
full range of petroleum products, including fuels, lubricants and
petrochemicals, and the transportation of crude oil and refined
products. These operations are conducted principally in the eastern
half of the United States
- Sunoco reports earnings on August 2nd AMC (after market
close).
Read Analyst Details Here
PHH Corp (
PHH
) - is a Zacks Rank 2 stock with a Q2 earnings ESP of 22%.
The Zacks consensus estimate is for Q2 earnings of $0.82, with the
most accurate estimate at $1.00. PHH Corp has exceeded
analysts' expectations by an average of 24% over the past four
quarters.
Analyst momentum also looks bullish for the current and next
quarters as well as FY2012 and FY2013
PHH Corp is a leading outsource provider of mortgage and vehicle
fleet management services. It is the sixth largest retail
originator of residential mortgages in the United States and the
second largest fleet management services provider in the United
States and Canada. - PHH reports earnings on August 7th AMC
Read Analyst Details Here
FreightCar America (
RAIL
) - is a Zacks Rank 2 stock with a Q2 earnings ESP of 23%.
The Zacks consensus estimate is for Q2 EPS of $0.57, with the most
accurate estimate at $0.70. FreightCar has reported two
strong earnings reports back to back, more than doubling estimates
both times. In Q32011, they did experience a major miss and
reported a 20 cent loss versus Zacks estimates for a 3 cent
profit.
Analyst momentum is mixed in FreightCar and Avondale partners
recently reduced their estimates for the stock in Q2 to 57
cents. In Q3 as well FY2012 and 2013, Avondale
dropped their estimates below the Zacks consensus. I think
it's safe to say that expectations are low. RAIL shares has
responded positively to the last 3 earnings reports.
FreightCar America, Inc. manufactures railroad freight cars,
with particular expertise in coal-carrying railcars. In addition to
coal cars, FreightCar America designs and builds flat cars, mill
gondola cars, intermodal cars, coil steel cars and motor vehicle
carriers. It is headquartered in Chicago, Illinois and has
manufacturing facilities in Danville, Illinois, Roanoke, Virginia
and Johnstown, Pennsylvania.
- FreightCar America reports earnings on August 6th BMO (before
market open).
Read Analyst Details Here
If this method sounds intriguing to you for improving your
portfolios, consider the
Zacks
Whisper Trader
service. Not only do I use Earnings ESP but I also include some
other critical factors to create the "secret sauce" I use to
achieve 77.96% accuracy in identifying positive earnings surprises
… before they're reported.
Learn more about
Whisper
Trader
now.
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.
PHH CORP (PHH): Free Stock Analysis Report
PHH CORP (PHH): Free Stock Analysis Report
FREIGHTCAR AMER (RAIL): Free Stock Analysis
Report
FREIGHTCAR AMER (RAIL): Free Stock Analysis
Report
SUNOCO INC (SUN): Free Stock Analysis Report
SUNOCO INC (SUN): Free Stock Analysis Report
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