Wall Street is reeling under volatility since mid-June, following the second wave of coronavirus in more than 20 U.S. states. New cases of COVID-19 jumped as all 50 states started reopening after nearly two months of lockdowns. The resurgence of the deadly virus has raised several questions about the much-hyped, V-shaped recovery of the U.S. economy.
Major stock indexes like the Dow, the S&P 500 and the Nasdaq Composite remained range bound between 25,500 and 27,000, 3,000 and 3,250, and 9,500 and 10,800 respectively, in the past month. The market is likely to remain volatile in the near term until concerns about the resurgence of coronavirus infections pass and the economy regains momentum systematically.
Despite the concerns, a handful of large-cap stocks (market capital > $10 billion) skyrocketed more than 15% in the past month. Some of them carry a favorable Zacks Rank with robust earnings estimate revisions in the last 7-30 days.
Resurgence of Coronavirus Cases
According to Johns Hopkins University, the 7-day moving average of daily cases in the United States on Jul 13 was 63,307. Per a study by Wall Street Journal, the seven-day average for cases is higher than the 14-day average, reflecting the faster spread of COVID-19 in the country.
The states where the new coronavirus cases spiked include Florida, Texas, California, Arizona, North Carolina, South Carolina, Georgia, Tennessee, Alabama and Louisiana. At present, the United States has more than 3.53 million confirmed coronavirus cases and more than 138,000 deaths. Notably, the number of cases crossed 3 million from 2 million in less than a month time.
Meanwhile, the resurgence of coronavirus has jeopardized several economists’ expectations of a short recession and a jump more than 30% in third-quarter GDP that would facilitate a V-shaped recovery in second-half 2020.
As of now, lack of vaccine or a proper line of treatment for COVID-19 is the most serious problem facing the global economy and the root cause of market fluctuations. In the absence of these, social distancing and lockdowns are the only options to curb the spread of the pandemic.
Although, a second round of lockdown in the United States is a remote possibility, some states were forced to close some parts of the economy that they reopened in less than a month. This will create a major hurdle in sustaining economic recovery.
Revision of EPS Estimates - A Crucial Indicator
An upward earnings per share (EPS) estimate revision for 2020 of any stock simply means the market is expecting these companies to do good business this year. However, in the past 30 days most stocks witnessed either negative EPS revisions or remained flat due to the resurgence of coronavirus.
Meanwhile, a positive EPS estimate revision during last 7 to 30 days highlights solid business model and robust growth potential of these companies. Investors can certainly take a look at these stocks currently as these have strong earnings momentum.
Our Top Picks
We have narrowed down our search to five large-cap stocks that have popped in the past month with strong growth potential and robust earnings estimates revisions. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past month.
Freeport-McMoRan Inc. FCX is engaged in the mining of mineral properties in North America, South America and Indonesia. It primarily explores for copper, gold, molybdenum, silver, and other metals as well as oil and gas.
The Zacks Rank #2 company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by more than 100% over the last 30 days. The stock has rallied 24.9% in the past month.
eBay Inc. EBAY is one of the largest online retailers in the world. It operates the marketplace and classifieds platforms that connect buyers and sellers worldwide enabling users to list, buy, sell and pay for items through various online, mobile and offline channels.
The Zacks Rank #1 company has expected earnings growth of 23% for the current year. The Zacks Consensus Estimate for the current year has improved by 0.9% over the past 30 days. The stock has jumped 21.4% in the past month.
Etsy Inc. ETSY operates online market places for buyers and sellers primarily in the United States, the U.K., Canada, Australia, France and Germany. Its online market places include Etsy.com and Reverb.com.
The Zacks Rank #2 company has an expected earnings growth rate of 46.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 5.7% over the last 30 days. The stock has climbed 19.2% in the past month.
FactSet Research Systems Inc. FDS provides integrated financial information and analytical applications to the investment and corporate communities in the United States, Europe and the Asia Pacific.
The Zacks Rank #1 company has an expected earnings growth rate of 5.2% for the current year (ending August 2020). The Zacks Consensus Estimate for current-year earnings has improved by 5.2% over the last 30 days. The stock has appreciated 17.9% in the past month.
Maxim Integrated Products Inc. MXIM designs, develops, manufactures, and markets a range of linear and mixed-signal integrated circuits in the United States, China, the rest of Asia, Europe and internationally.
The Zacks Rank #1 company has an expected earnings growth rate of 7.7% for the current year (ending June 2021). The Zacks Consensus Estimate for current-year earnings has improved by 9% over the last 7 days. The stock has advanced 16.1% in the past month.
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