Performance of finance sector depends on the health of the nation’s economy. During the first quarter, major factors influencing the U.S. and global economy included the Fed’s dovish stance on future rate hikes, uncertainty over Brexit, expectations of economic slowdown, the unsolved U.S.-China trade deal negotiations and the U.S. government shutdown.
All these factors impacted the performance of the banksand other lenders, while overall lending scenario remained decent with higher interest rates providing some support. Also, the insurance industry seems to have benefited from a not-so-active catastrophe environment, while asset inflows will likely offer support to asset managers.
On the cost front, expenses are likely to increase as finance sector companies continued with investments in franchise and technological upgrades. Business restructuring activities are also expected to keep such expenses high.
Performance So Far
The quarterly numbers from approximately 53% of the finance sector’s market capitalization in the S&P 500 index already out.
Like always, major banks (accounting for roughly 45% of total finance sector earnings) – JPMorgan JPM, PNC Financial and Wells Fargo – kicked started the reporting cycle with decent performance on the back of steady loan growth, strong asset quality and relatively high interest rates. Nonetheless, weakness in trading and investment banking performance hurt the financials of these some of these banks and those of Morgan Stanley and Goldman Sachs – two big investment banks – as well.
Now coming to investment managers such as BlackRock, the quarter witnessed decent asset inflows driven by strong equity market performance. Further, insurance providers like Torchmark Corporation, Progressive Corporation PGR and Travelers Companies benefited from lower cat losses and higher premiums.
Overall Earnings Growth Expectations
In the S&P 500 universe, the Zacks Finance sector’s total earnings are projected to grow5.6% year over year in the quarter to be reported. This is lower than 12.4% growth recorded in the prior quarter.
(For detailed look at the earnings outlook for this industry and others, please read our Earnings Outlook article.)
Choosing the Winners
Therefore, based on the above-mentioned factors, it seems to a good idea to bet on a few finance sector stocks that are well positioned to beat earnings estimates in their upcoming releases.
Choosing stocks with earnings beat potential might be a difficult task unless one knows the process to shortlist. One way to do it is by picking stocks that have the combination of a favorable Zacks Rank — Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — and a positive Earnings ESP.
Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising in their upcoming earnings announcement. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
5 Finance Sector Stocks Poised for Earnings Surprises
Here are five finance sector stocks that have the right combination of elements to deliver positive earnings surprises in their upcoming announcements:
The First of Long Island Corporation FLIC is slated to release results on Apr 29. This bank has an Earnings ESP of +2.33% and carries a Zacks Rank of 3.You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for Credit Acceptance Corporation CACC is +0.08% and it carries a Zacks Rank of 2, currently. This consumer loan providing company is scheduled to report earnings on Apr 29.
Affiliated Managers Group, Inc. AMG has an Earnings ESP of +0.46% and at present, carries a Zacks Rank of 2. This asset manager is set to report on Apr 29.
The Earnings ESP for Janus Capital Group, Inc JHG is +3.51% and it carries a Zacks Rank of 2, currently. This investment management company is scheduled to report earnings on May 2.
Cigna Corporation CI has an Earnings ESP of +5.14% and at present, sports a Zacks Rank of 1. This insurance company is slated to report quarterly figures on May 2.
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JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
The First of Long Island Corporation (FLIC) : Free Stock Analysis Report
Credit Acceptance Corporation (CACC) : Free Stock Analysis Report
Affiliated Managers Group, Inc. (AMG) : Free Stock Analysis Report
Cigna Corporation (CI) : Free Stock Analysis Report
The Progressive Corporation (PGR) : Free Stock Analysis Report
Janus Capital Group, Inc (JHG) : Free Stock Analysis Report
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