These 3 Top-Ranked Companies Could Positively Surprise
It’s shaping up to be a busy week in the market, with earnings season taking center stage. The Q3 cycle will be vastly important, potentially sparking a rally that could last into year-end.
As usual, surprises are lurking beneath the hood, a few of which could come from onsemi ON, Stanley Black & Decker SWK, and e.l.f. Beauty ELF. All three sport a positive Zacks Earnings ESP Score.
Zacks Earnings ESP (Expected Surprise Prediction) finds companies that have recently seen positive earnings estimate revision activity.
The idea is that more recent information is generally more accurate and can better predict the future, giving investors an advantage in earnings season.
Let’s take a closer look at each.
Onsemi (ON Semiconductor)
Onsemi is an original equipment manufacturer of a broad range of discrete and embedded semiconductor components. The stock is a Zacks Rank #2 (Buy), with analysts positively revising their expectations across the board. Onsemi carries a Zacks Earnings ESP Score of 1%.
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The company is a highly consistent earnings performer, chaining together 13 consecutive quarters of exceeding Zacks Consensus EPS and Sales Estimates. Across its last four releases, the average EPS beat works out to be 9%.
Onsemi’s consistent nature is illustrated below, where the green arrows reflect beats relative to the Zacks Consensus EPS Estimate.
Image Source: Zacks Investment Research
The company’s latest better-than-expected results were aided by record automotive revenue, with both the EPS and revenue figures exceeding prior guidance. As shown below, ON’s revenue growth has been strong post-pandemic overall but has recently cooled.
For the quarter to be released, the Zacks Consensus Sales Estimate stands at $2.2 billion, with the estimate up 1% since August and reflecting a growth rate of -2% year-over-year.
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e.l.f. Beauty
e.l.f. Beauty is a cosmetics company, with its products primarily consisting of face makeup, eye makeup, lip products, nail products, and cosmetic kits. The stock has an Earnings ESP Score of 0.4%.
The stock is a Zacks Rank #1 (Strong Buy), with the $0.54 Zacks Consensus EPS Estimate up roughly 4% over the last several months and reflecting a climb of 50% year-over-year. Our consensus revenue estimate sits at $197 million, 61% higher than the year-ago figure.
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e.l.f. Beauty has been in full growth mode for some time now, as illustrated below in the quarterly revenues chart. And the top line performance has translated over to share performance, with ELF shares up nearly 100% on a year-to-date basis.
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Shares have regularly gotten a boost post-earnings in 2023 amid consistently robust quarterly results but have recently lost strength. Positive quarterly results could send shares on an uptrend again, particularly if the company speaks favorably about current business momentum and provides uplifting guidance.
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Stanley Black & Decker
Stanley Black & Decker, a Zacks Rank #2 (Buy), manufactures and provides tools and related accessories, engineered fastening systems, and other related items and services. The stock has an Earnings ESP Score of 1.8%.
The revisions trend has been notably bullish for the upcoming release, with the $0.84 Zacks Consensus EPS Estimate up 23% and reflecting year-over-year growth of 10%.
Image Source: Zacks Investment Research
Still, the market reactions post-earnings in 2023 have been negative despite the company regularly exceeding consensus EPS expectations, as shown below.
Image Source: Zacks Investment Research
The company has focused on lowering costs and reducing inventory, which helped it to deliver a sequential gross margin improvement in its latest quarter.
It’s reasonable to assume that shares could see buying pressure if SWK speaks favorably about its current operating environment, which has remained dynamic. Investors should know that SWK noted a stabilization across global supply chains in its latest release, undoubtedly a major positive.
Bottom Line
With earnings season kicking into high gear this week, there are sure to be plenty of surprises lurking beneath.
And when it comes to upcoming surprises, all three companies above – onsemi ON, Stanley Black & Decker SWK, and e.l.f. Beauty ELF – could deliver just that.
All three sport a positive Zacks Earnings ESP Score and carry a favorable Zacks Rank, with both reflecting near-term optimism among analysts.
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Stanley Black & Decker, Inc. (SWK) : Free Stock Analysis Report
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