The U.S. equity market has been gripped by extreme volatility of late, courtesy of the ongoing debt-ceiling crisis. The debate on increasing the U.S. debt ceiling has led to panic among investors. In fact, per United States Secretary of the Treasury Janet Yellen, the government may default on its obligations early next month, even as early as Jun 1, unless Congress gives the go-ahead to borrow further. Naturally, this has given rise to a great deal of volatility and uncertainty.
However, the ongoing turbulence does not mean that investors should shun equities. So, what’s the way forward. One way is to follow the action of brokers who are deemed to be experts in the field of investing. In this regard, stocks like American Airlines AAL, Bread Financial BFH, Avnet AVT, Commercial Vehicle Group CVGI and American Axle & Manufacturing Holdings AXL should be on an investor’s watchlist.
Brokers go through minute details of the publicly available financial documents apart from attending company conference calls and other presentations. Since brokers follow the stocks in their coverage in great detail, they revise their earnings estimates after carefully examining the pros and cons of an event for the concerned company. Estimate revisions serve as an important pointer regarding the price of a stock. Naturally, paying heed to such well-researched information is a prudent choice for individual investors as they want to generate handsome returns from their portfolio of stocks, irrespective of the surrounding market conditions.
To take care of the earnings performance, we have designed a screen based on improving analyst recommendation and upward estimate revisions over the last four weeks.
Revenues Performance Should Not be Overlooked
According to many market watchers, a revenue beat is more creditable for a company than a mere earnings outperformance. Therefore, one must take the top-line performance into consideration as well while formulating a winning strategy. We have included in our screen the price/sales ratio, which serves as a strong complementary valuation metric.
# (Up- Down Rating)/ Total (4 weeks) =Top #75: This gives the list of the top 75 companies that have witnessed net upgrades over the last 4 weeks.
% change in Q (1) est. (4 weeks) = Top #10: This gives the top 10 stocks that have witnessed earnings estimate revisions over the past 4 weeks for the upcoming quarter.
To ensure that the strategy is a winning one, covering all bases, we have added the following screening parameters:
Price-to-Sales = Bot%10: The lower the ratio the better, companies meeting this criteria are in bottom 10% of our universe of over 7,700 stocks with respect to this ratio.
Price greater than 5: A stock trading below $5 will not likely create significant interest for most investors.
Average Daily Volume greater than 100,000 shares over the last 20 trading days: Volume has to be significant to ensure that these are easily traded.
Market value ($ mil) = Top #3000: This gives us stocks that are the top 3000 if one judges by market capitalization.
Com/ADR/Canadian= Com: This eliminates the ADR and Canadian stocks.
American Airlines is based in Fort Worth, TX. The gradual increase in air-travel demand (particularly for leisure) is aiding AAL. However, high fuel costs are hurting the bottom line.
Over the past 60 days, the Zacks Consensus Estimate for AAL’s 2023 earnings has been revised 22.22% upward. American Airlines currently carries a Zacks Rank #3 (Hold).
Bread Financial, based in Columbus, OH, continues to benefit from data-driven marketing strategies. Solid receivables growth in Card Services should drive its top line. Acquisitions and divestitures will aid the company in growing inorganically and expanding its international footprint.
Over the past 60 days, the Zacks Consensus Estimate for BFH’s 2023 earnings has been revised 19.92% upward. Bread Financial currently carries a Zacks Rank #3.
Avnet is benefiting from robust demand for its products across Asia, Europe, the Middle East and Africa regions. Improvement in the Americas also served as a tailwind. Its continued focus on boosting IoT capabilities is helping it expand in the newer markets and win customers. Moreover, cost-saving efforts are aiding profitability.
Avnet, currently carrying a Zacks Rank of 3, has an impressive surprise history, with its earnings surpassing the Zacks Consensus Estimate in each of the last four quarters, the average being 7.99%.
Commercial Vehicle Group supplies interior systems, vision safety solutions and other cab-related products for the global commercial vehicle market, including the heavy-duty (Class 8) truck market, the construction market and other specialized transportation markets.
Over the past 60 days, the Zacks Consensus Estimate for CVGI’s 2023 earnings has been revised 41.79% upward. Commercial Vehicle Group currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
American Axle’s significant strides and collaborations in the electric drive space bode well for its top- and bottom- line growth. Efforts aimed at diversifying its business, products and customer base are generating impressive results for the company.
American Axle has an impressive surprise history, with its earnings surpassing the Zacks Consensus Estimate in three of the last four quarters (missing the mark on the other occasion). AXL currently carries a Zacks Rank #3.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and backtest them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
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