Wall Street kicked off the first-quarter 2022 earnings season last week, with reports from major banks. Earnings results of corporate America are likely to return to normalcy after last year’s astonishing growth. Earnings results of 2021 was favorably impacted in comparison to the pandemic-led lockdowns in 2020.
The first-quarter earnings season will gather pace from this week as a little over 250 companies are slated to report their quarterly numbers. Five large-cap U.S. companies are likely to beat earnings estimates this week. Investment in these stocks should bear fruit in the near term. These are J.B. Hunt Transport Services Inc. JBHT, Halliburton Co. HAL, Tractor Supply Co. TSCO, Pool Corp. POOL and Watsco Inc. WSO.
Q1 2022 At a Glance
Last quarter was not a good one for Wall Street. The year started with the resurgence of the Omicron variant of coronavirus, which was highly infectious but less deadly. Normal economic activities suffered to some extent in January due to Omicron.
However, the major concern for the U.S. economy was galloping inflation. Several measures of inflation like consumer price index, producer price index and personal consumption expenditure price index stayed at a 40-year high during the first quarter.
Moreover, the Russian military invasion over Ukraine, which started on Feb 24 and is continuing, has made the situation worse. The United States and the European Union have imposed several stringent financial sanctions on Russia including import restriction on crude oil and natural gas.
Russia is a major supplier of oil and gas and several basic materials in Europe. As a result, prices of crude oil, natural gas, platinum, palladium, coal, nickel and steel soared globally. These materials are a vital input to several finished products.
Finally, in order to combat skyrocketing inflation, the Fed systematically terminated the $120 billion bond-buy program in March and raised the benchmark by 25 basis points in its March FOMC. This was the first hike in interest rate in more than three years.
Q1 Earnings Results at Early Stage
As of Apr 14, 35 S&P 500 companies reported earnings results. Year over year, total earnings of these companies were down 17.6% on 8.8% higher revenues. Moreover, 80% of these companies beat both earnings and revenue estimates. For the first quarter as a whole, total earnings of the S&P 500 Index are expected to be up 4.3% year over year on 10% higher revenues.
Our Top Picks
Five large-cap companies will report first-quarter 2022 earnings results this week. Each of these stocks carries either Zacks Rank #2 (Buy) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) 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 anticipated to appreciate after their earnings releases. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The chart below shows the priceperformance of our five picks in the last quarter.
Image Source: Zacks Investment Research
J.B. Hunt Transport Services is benefiting from strong performances across all its segments. The Dedicated Contract Services unit of JBHT is being aided by fleet productivity improvement and a rise in average revenue producing trucks.
The Integrated Capacity Solutions unit J.B. Hunt of is gaining from a favorable customer freight mix, as well as higher contractual and spot rates. Additionally, an increase in load count and revenue per load is supporting growth of the Truck segment.
JBHT has an Earnings ESP of +1.75%. It has an expected earnings growth rate of 21.9% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.6% over the last 7 days.
J.B. Hunt recorded earnings surprises in the last four reported quarters, with an average beat of 10.2%. The company is set to release earnings results on Apr 18, after the closing bell.
Halliburton provides products and services to the energy industry worldwide. Halliburton’s healthy relationship with national oil companies and digitization efforts also bode well. The successful use of digital technologies has helped Halliburton to enhance performance and lower operational risk — especially amid the COVID-19 pandemic. It has allowed HAL to remove equipment and crew from site, substituting with software solutions.
With fewer personnel on location, jobs being monitored offsite using remote data center management tools, and the replacement of expensive hardware by software solutions, HAL is able to reduce costs and capital investment. The increasing cloud-based data flow between site and the back office translates into expanded margins for Halliburton.
HAL has an Earnings ESP of +3.40%. It has an expected earnings growth rate of 69.4% for the current year. The Zacks Consensus Estimate for current-year earnings improved 1.1% over the last 7 days.
Halliburton recorded earnings surprises in the last four reported quarters, with an average beat of 9%. The company is set to release earnings results on Apr 19, before the opening bell.
Tractor Supply is the largest retail farm and ranch store chain in the United States. The focus of Tractor Supply is on recreational farmers and ranchers as well as tradesmen and small businesses. Given the changing consumer trends, TSCO aims to integrate its physical and digital operations to offer consumers a seamless shopping experience.
Tractor Supply is on track to build up on its Out Here lifestyle assortment and convenient shopping format to gain new customers and market share. The strategy is essentially based on five key pillars which are customers, digitization, execution, team members and total shareholder return.
TSCO has an Earnings ESP of +3.60%. It has an expected earnings growth rate of 8.9% for the current year. The Zacks Consensus Estimate for current-year earnings improved 1.7% over the last 30 days.
Tractor Supply recorded earnings surprises in the last four reported quarters, with an average beat of 22%. The company is set to release earnings results on Apr 21, before the opening bell.
Pool is the world's largest wholesale distributor of swimming pool supplies, equipment and related products. POOL is benefitting from the solid performance of base business, large market presence and strategic expansions through acquisitions.
Solid demand across heaters, pumps, filters, lighting, automation and pool remodeling also benefitted it. POOL remains optimistic on the back of products (such as automation and the connected pool), the continuation of the de-urbanization trends and the strengthening of the southern migration.
POOL has an Earnings ESP of +2.53%. It has an expected earnings growth rate of 15.6% for the current year. The Zacks Consensus Estimate for current-year earnings improved 5.9% over the last 60 days.
POOL recorded earnings surprises in the last four reported quarters, with an average beat of 38.4%. The company is set to release earnings results on Apr 21, before the opening bell.
Watsco is the largest distributor of heating, ventilation and air conditioning equipment, as well as related parts and supplies in the United States, Canada, Mexico, and Puerto Rico. WSO has been witnessing solid demand for HVAC/R products and pricing despite seasonality.
Also, operating efficiencies and strategic acquisitions added to the positives of Watsco. It is to be noted that Watsco is investing heavily to enhance customer experience through e-commerce and deploying technology that improves order fill rates with speed and accuracy. In addition, WSO is focused on enhancing shareholder value.
Watsco has an Earnings ESP of +0.74%. It has an expected earnings growth rate of 12.5% for the current year. The Zacks Consensus Estimate for current-year earnings improved 1.8% over the last 30 days.
WSO recorded earnings surprises in the last four reported quarters, with an average beat of 22.7%. The company is set to release earnings results on Apr 21, before the opening bell.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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