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Forget the Bad CPI News, Buy the Dip in These 3 Runaway Earnings Winners

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The start of a new earnings season is a good time to look back at the earnings season that recently ended. When you do, you can find some earnings winners that are likely to beat expectations in the coming quarter as well.  

But before you do, it’s worthwhile to look at the recent economic data. If anyone was starting to believe inflation was going to go quietly, the March reading of the Consumer Price Index (CPI) dispelled that notion. Remember, even at the Federal Reserve’s preferred target of 2% (which is arbitrary by the way), it means that prices are always increasing. However, the thinking is that at a 2% rate, wage increases can outpace inflation and the economy can hum along.  

That’s not what’s happening now. And millions of Americans notice it in the essentials they buy every week. Some corporations are feeling it on their bottom lines as well.  

However, as this past earnings season showed, many companies had solid earnings beats. And several of these earnings winners are in sectors that are likely to outperform in the coming quarter. Here are three stocks for investors to consider for the coming earnings season.  

Costco (COST) 

A Costco Wholesale (COST) warehouse in Auburn Hills, Michigan.

Source: ilzesgimene / Shutterstock.com

In a move that delighted many investors, Costco (NASDAQ:COST) announced a 14-cent dividend increase on April 10, 2024. The increase itself wasn’t surprising. Costco has now increased its dividend in 20 consecutive years. However, the size of the increase was an indication that Costco not only has plenty of cash, but it’s not concerned about continuing to add cash in the future.  

Costco did have a slight miss on revenue in its last quarter, but it beat solidly on earnings. And the company’s subscription-based business model has proven itself to be a key differentiator despite all the turbulence in the retail sector in the past few years. 

And if investors are looking for another reason to consider getting involved with COST stock, the company is overdue for an increase in its membership fee. Costco has not given an indication that they will increase the fee. And even Costco acknowledges that consumers are cutting back on discretionary purchases. Still, it’s a possibility that shouldn’t be overlooked.  

Dollar General (DG) 

The front of a Dollar General (DG Stock) store on a sunny day.

Source: Jonathan Weiss / Shutterstock.com

In the first two quarters of 2023, Dollar General (NYSE:DG) surprisingly missed on revenue and earnings. It was surprising because it would have seemed that the dollar store model would have done well with higher inflation. But even Dollar General noticed a pullback in discretionary spending.  

But in the last two quarters, Dollar General was one of the earnings winners and the stock is moving higher. On the one hand, the company’s core customers could benefit from lower interest rates. On the other hand, Dollar General puts a premium on store location. Specifically, the company targets rural areas that may not be serviced by big-box retailers.

Analysts are beginning to bid DG stock higher and even at 20x forward earnings, the stock is a good value for investors. 

Exxon Mobil (XOM) 

Exxon Mobil logo outside of a corporate building

Source: Harry Green / Shutterstock.com

The core of rising inflation is found in energy prices and that’s a good reason to consider investing in Exxon Mobil (NYSE:XOM). The oil giant is one of the most widely held funds in any oil and gas ETF. And that’s due to the company’s rock-solid financials.  

However, for much of 2023, oil prices remained lower than expected. And you can see that in the price of XOM stock that’s up just about 3% in the last 12 months. But that’s changing in 2024. Exxon Mobil stock is up more than 20% in 2024 and it’s not just due to inflation. Tensions in the Middle East continue to rise and the price of oil is rising along with it.  

Even if the conflict between Israel and Iran doesn’t escalate into a full-scale war, $80 will likely be a floor for oil. And if geopolitical tensions get worse, oil could surge to $100 or even higher.  

Exxon Mobil is expected to be one of this year’s earnings winners, projecting earnings growth of around 8% in the next 12 months and is trading at a forward P/E ratio of around 12x.  

On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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