Earnings releases create quite a stir in the investment space. While companies strive to gain investors confidence through various initiatives, what ultimately counts is the company’s earnings performance compared to market expectations. Even the market pundits are of the view that a company’s earnings performance is the most important factor influencing its stock price.With the third-quarter earnings season taking center stage, the picture gradually emerging is one of widespread weakness, with non-existent growth, and peculiarly less number of companies beating even the lowered revenue estimates.
Headwinds Galore
Weakness in the Energy sector, a strong U.S. dollar and lackluster global growth -- particularly in China and other emerging markets -- has been clouding the earnings picture in the last few trailing quarters and these headwinds continue to impact third-quarter results as well.
As of Oct 28, 253 S&P 500 members have reported results while 247 are yet to post their numbers. Notably, the overall depiction for the quarter is hinting at a decline of 2.7% on a 3.9% decrease in revenues, year over year.
Further, a dull outlook for the current period has prompted a steep slide in fourth-quarter estimates. Overall, earnings for the S&P 500 index are expected to be down 6.6% year over year in the fourth quarter of 2015, reflecting a wider decline from 4.7% that was forecasted around two weeks back. (Read more: Taking Stock of the Q3 Earnings Season)
Maximize Profits
We are in the thick of the third-quarter earnings season and investors should rightfully focus on tweaking their portfolios to capitalize on the market predictions instead of fretting over the issues plaguing this earnings season.
Moreover, with the uncertainties brewing large in the global markets, investors would do better off by turning to large-cap companies which offer greater stability and lower risk than small-cap and mid-cap stocks.
How to Screen the Outperformers?
While it is impossible to be sure about such outperformers, our proprietary methodology – Earnings ESP – makes it relatively simple.
It aids in identifying stocks that have high chances of posting positive surprises in the next earnings announcement. It also shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
5 Large-Cap Stocks to Bet On
With the help of the Zacks Stock Screener, we have zeroed-in on five stocks that sport a Zacks Rank #1 (Strong Buy) or 2 (Buy), market cap of over $10 billion and Earnings ESP of over 1%.
Below are the five stocks that have a high chance of beating market expectations with their quarterly releases:
Based in Birmingham, AL, Vulcan Materials Company (VMC - Analyst Report) is engaged in the production, distribution and sale of construction aggregates and other construction materials in the U.S. and Mexico. With the weather getting back to normal, the company expects accelerating pricing and demand momentum to result in improved profits through the rest of the year.
Vulcan Materials has a Zacks Rank #1, a market cap of $12.6 billion and an Earnings ESP of 3.16%. Moreover, the company’s earnings have surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 7.75%.
Vulcan Materials is slated to report its third-quarter 2015 financial numbers on Nov 3, before the opening bell.
Exelon Corporation (EXC - Analyst Report) is a utility services holding company engaged in energy generation and delivery businesses in the U.S. The warmer-than-expected temperature conditions in the third quarter will likely have a positive impact on utility demand. With no unplanned outages of Exelon’s well-maintained nuclear fleet in the quarter, the higher volume of electricity produced will drive the company’s performance.
Exelon has a Zacks Rank #2, market cap of $24.6 billion and Earnings ESP of 1.41%. To top it all, the company outpaced the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 6.02%.
Exelon is slated to release its third-quarter 2015 results before the opening bell on Oct 30.
Headquartered in Woonsocket, RI, CVS Health Corporation (CVS - Analyst Report) is a pharmacy innovation company. CVS Health is gaining considerably from the strong 2015 PBM selling season reflecting high levels of service and execution, competitive pricing along with unique integrated model that allows the company to provide differentiated products and services that generate savings, better health outcomes and convenience.
CVS Health boasts a Zacks Rank #2, a market cap of nearly $116 billion and an Earnings ESP of 1.55%. Adding to the positives, the company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, with the average being 2.03%.
CVS Health is scheduled to announce third-quarter 2015 results before the opening bell on Oct 30.
Based in Monroe, LA, CenturyLink, Inc. (CTL - Analyst Report) is a telecommunications company that provides broadband, voice and wireless services to consumers and businesses in the U.S. Notably, strength in products such as high-speed Internet, high bandwidth data services, Prism TV, and managed hosting and cloud services remain key growth drivers for the company. In addition, a realigned business structure is likely to reap beneficial results over the long term.
CenturyLink has a Zacks Rank #2, a market cap of nearly $16 billion and its current Earnings ESP is pegged at 1.45%. Moreover, the company outpaced the Zacks Consensus Estimate in two of the trailing four quarters, with an average beat of 0.14%.
CenturyLink is scheduled to report its third-quarter 2015 results on Nov 4, after market close.
Ameren Corporation (AEE - Analyst Report) operates as a public utility holding company in the U.S. The company is benefiting from higher transmission and delivery infrastructure investments that are expected to yield better results for the remainder of 2015. Also, systematic investments in growth projects, electric transmission and infrastructure upgrades will help improve its service reliability and also generate higher profits.
Ameren carries a Zacks Rank #2, market cap of nearly $11 billion and Earnings ESP of 1.53%. Notably, the company posted positive earnings surprises in two of the prior four quarters, with an average beat of 13.28%.
Ameren is slated to release third-quarter 2015 earnings on Nov 6, before the opening bell.
Aim Large
“High Returns with Low Risk is the key” to investing.
Keeping in mind the current economic fundamentals, large-cap stocks can turn out to be great and arguably safe investment opportunities that can help brave the chaotic conditions and maximize returns by hedging risks. - See more at: http://www.zacks.com/stock/news/195774/multiply-your-returns-5-largecap-stocks-set-to-top-earnings#sthash.BvfsJiLt.dpuf
Source: http://www.zacks.com/stock/news/195774/multiply-your-returns-5-largecap-stocks-set-to-top-earnings
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