Rocket Stocks to Buy for Earnings Season Gains

These stocks have both short-term gain catalysts and longer-term growth potential.

Earnings season is in full swing this week, with 194 S&P 500 constituents scheduled to release earnings in the next seven days. That'll more than double the number of earnings calls we've already seen hit Wall Street this quarter.

And without a doubt, it will also mean some big market moves as investors react to one of the four fundamental snapshots they get each year. So far, this quarter has been solid from an earnings standpoint. 82% of the S&P components that have already released their quarterly results have beaten analysts' expectations. If that trend continues, it could help propel the big market indices to more new all-time highs as we head into August.

To find the stocks that look best-positioned to capitalize on that earnings-season-induced momentum, we're breaking the seal on a fresh set of Rocket Stocks worth buying this week.

For the uninitiated, Rocket Stocks are our list of companies with short-term gain catalysts and longer-term growth potential. To find them, I run a weekly quantitative screen that seeks out stocks with a combination of analyst upgrades and positive earnings surprises to identify rising analyst expectations, a bullish signal for stocks in any market. After all, where analysts' expectations are increasing, institutional cash often follows. In the last 359 weeks, our weekly list of five plays has outperformed the S&P 500's record run by 78.64%.

Without further ado, here's a look at this week's Rocket Stocks.

Intel

First off is semiconductor giant Intel  (INTC) . At a glance, it looks like Intel hasn't done much of anything this year. As I write, shares are only 0.61% higher than they started the year. But that stat misses the positive trend that kicked off in Intel back in mid-February. In that five-month stretch, this stock has managed to rally almost 23% higher -- and Intel's momentum isn't showing signs of slowing as we head towards the second half of 2016.

Intel is the biggest name in the semiconductor business. The firm owns about 80% of the global microprocessor market, a toehold that gives Intel huge cash generation capabilities that, in turn, mean it's able to push more cash over to R&D than the competition can. The downside of Intel's huge exposure to microprocessors has been the slow decline of the PC business. As more consumers turn to tablets and other portable devices over conventional computers, Intel has failed to capture a meaningful share of the mobile chip market.

To counter that, Intel has actually spent more energy moving upmarket, selling more high-end server processors to keep up with growing demand for IT infrastructure that's been driven in large part by an influx of new mobile traffic. Investors are finally feeling energized about Intel's strategy, and that's starting to play out in the price action this summer.

International Paper

$18.7 billion paper and packaging stock International Paper  (IP)  is one of the big earnings stocks to watch this week. The firm releases its second-quarter earnings numbers on Thursday morning. Not that International Paper needs much in the way of upside catalysts this year; shares are up 20% year-to-date, making their way higher after a long-term correction in 2015. Shares still have room to keep up their rebound this summer.

International Paper is one of the biggest names in the paper and packaging business. The firm's products make up approximately a third of the North American corrugated cardboard packaging market and another quarter of the market for printer paper sheets. In other words, even if you don't put a whole lot of thought into who supplies your paper and packaging products, there's a very good chance you've come into contact with some of IP's offerings recently. Today, approximately 75% of sales are earned in the North American market, but International Paper also has substantial operations in a handful of big emerging market economies.

IP is pursuing a growth-through-acquisition strategy this year, announcing in May that it had agreed to pay $2.2 billion for Weyerhaeuser's fluff pulp assets. That increased capacity should have a positive impact on International Paper's bottom line without overly burdening the balance sheet.

Without a doubt, paper isn't the most exciting business on our Rocket Stocks list, but International Paper's price action has been a lot more exciting in 2016 -- and with rising analyst sentiment in shares, we're adding this big industrial name to our Rocket Stocks list for the second time in 2016.

Equifax

Credit ratings agency Equifax  (EFX)  is another large-cap stock that's been rallying hard in 2016. Year-to-date, Equifax shareholders have seen their holdings rally nearly 22%, outpacing the rest of the broad market by a huge margin. And as Equifax hovers at lifetime highs this month, that bullish momentum isn't showing any signs of waning.

Equifax is one of the big credit database providers. Even if you're not familiar with the financial situation over at Equifax, there's a pretty good chance that they're familiar with yours. That's because Equifax collects and analyzes credit data on more than 800 million consumers and 88 million businesses around the world. Equifax is benefiting from new and novel uses of credit data. As non-lender customers such as insurance companies, employers, property management firms and others begin using credit-worthiness data more regularly for their own risk management, EFX opens up a big new market.

Equifax's business also scales well in emerging markets, where consumer debt is becoming an increasingly popular tool for burgeoning populations of middle class consumers. Even better, because most customers of Equifax credit data look at multiple bureaus' files for a given individual, Equifax has minimal risk of encroachment from competing firms. Instead, the company benefits from the increasing overall use of credit reports and credit scores as a proxy for risk -- and business is booming in 2016.

Meanwhile, investors should keep an eye out for second-quarter earnings to hit this Wednesday.

D.R. Horton

Home prices continue to track higher in the U.S. -- and that's translated into a similar trajectory for shares of homebuilder D.R. Horton  (DHI)  this summer. D.R. Horton is the biggest homebuilder in the country, with operations in 26 states. 90% of the firm's home sales dollars come from single-family detached homes, one of the hottest corners of the housing market right now. In the trailing 12 months, the firm has closed on 38,638 homes.

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D.R. Horton is arguably the most well-diversified publicly traded homebuilder. Besides a wide geographic reach, the firm also diversifies its product mix, with homes ranging from entry-level to luxury. And D.R. Horton also diversifies its income statement with additional services such as home financing and title services. That integrated business model gives customers a single company to deal with during the purchasing process, and it keeps more homebuyer dollars within the firm.

Demographics are a major tailwind for D.R. Horton long-term. As millennials, the biggest generation in U.S. history, start to reach family-forming ages en masse, demand for single-family homes (especially on the starter-home side of the spectrum) should continue to tick higher. D.R. Horton is well-positioned to capitalize on that trend, thanks to the second biggest reserve of undeveloped land among any public homebuilder.

Shares of D.R. Horton are pushing to new 52-week highs this summer, and they should keep on pushing higher as long as housing trends remain strong.

HD Supply Holdings

Last on our list of Rocket Stocks is mid-cap industrial distribution stock HD Supply Holdings  (HDS) . Sometimes bigger isn't always better -- HD Supply is the number-three operator in the industry, but it's outperformed both of its larger rivals by double-digits so far in 2016.

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HD Supply sells products to sells materials used for building and infrastructure construction and maintenance. The firm's hefty exposure to water infrastructure and specialty construction adds up to 55% of overall sales, giving it a somewhat unique base of customers vs. its larger competitors -- and one that's more insulated from economic ebbs and flows than the conventional facilities maintenance, repair and operations supply business. While HD Supply is the smallest of the big MROs, the industry itself is hugely fragmented, which means that the firm doesn't have huge disadvantages compared to its much larger competitors.

Second-quarter earnings numbers don't come out for HD Supply until September, but you don't need to wait to take advantage of the momentum that's been boiling over in this stock. With rising analyst sentiment in shares this week, HDS makes our Rocket Stocks list.

By Jonas Elmerraji

Source: https://www.thestreet.com/story/13649792/1/5-rocket-stocks-to-buy-for-earnings-season-gains.html