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5 Large-Cap Stocks Poised to Beat on Earnings in Q2

Nalak Das

Wall Street is on a dream run since the beginning of this year, resulting in a complete turnaround from a disappointing 2018. All three major stock indexes, predominantly consisting of large-cap stocks, witnessed the best first half of any year in more than two decades. Year to date, the Dow, S&P 500 and Nasdaq Composite have rallied 17.3%, 20.2% and 24.5%, respectively.

While the stock market rally in the first quarter was primarily driven by expectations of a U.S.-China trade deal, the Fed’s rate cut signal was the main driving force for U.S. stocks in the second quarter. The rally is continuing from the beginning of July, as major indexes are achieving fresh all-time highs every week. However, bleak expectation from the second-quarter earnings session raised questions on the sustainability of this rally.

Will Second-Quarter Earnings Mar Wall Street Rally?

At present, the market is anticipating a negative earnings session for the second quarter of 2019. As of Jul 12, total Q2 earnings for the S&P 500 Index are expected to be down 3.4% from the year-earlier period on 3.9% higher revenues.

This would follow the 0.2% earnings decline on 4.5% higher revenues in Q1. Notably, despite earnings decline, first-quarter performance was far better than what was initially expected. Nevertheless, if the current consensus estimate for the second-quarter proves itself true, it will be two consecutive quarters of earnings decline for the S&P 500.

As of Jul 12, 23 S&P 500 members have reported second-quarter results. For these companies, total earnings are down 12.8% from the same period last year on 3.1% higher revenues, with 83.3% beating EPS estimates and 62.5% beating revenue estimates. (Read More: What to Expect from Bank Earnings?)

5 Large-Cap Stocks Likely to Beat on Q2 Earnings

Despite investors’ concerns, a few large companies are likely to beat earnings estimates in the second quarter. We have narrowed down our search to five large companies, which will release their earnings results this week.

Each of these stocks carries either a Zacks Rank #2 (Buy) or 3 (Hold) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that for stocks with the combination of a Zacks Rank #3 or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are expected to climb after earnings release irrespective of already solid gains year to date.

Netflix Inc. NFLX is the world's leading Internet television network operating in three segments: Domestic streaming, International streaming and Domestic DVD. It offers TV series, documentaries, and feature films across various genres and languages. The stock carries a Zacks Rank #2.

Netflix has an Earnings ESP of +5.99% for the current quarter. The company has an expected earnings growth rate of 25% for the current year. The Zacks Consensus Estimate for the current year improved 0.6% over the last 60 days.

The company delivered positive earnings surprise in the last four quarters with an average beat of 23.9%. The stock has jumped 37% year to date. Netflix is expected to release earnings results on Jul 17, after the closing bell.



ASML Holding N.V. ASML develops, produces, markets, sells and services advanced semiconductor equipment systems consisting of lithography-related systems primarily in the Netherlands, the United States and Asia. The Zacks Rank #3 company sells Holistic Lithography solutions, which integrate its three categories of products, including DUV lithography, EUV lithography and Applications.

ASML Holding has an Earnings ESP of +1.84% for the current quarter. The Zacks Consensus Estimate for the current quarter improved 1.9% over the last 60 days. The company delivered positive earnings surprise in three out of the last four quarters with an average beat of 45.2%.

The stock has surged 32.9% year to date. ASML Holding is expected to release earnings results on Jul 17, before the opening bell.



The PNC Financial Services Group Inc. PNC is one of the largest diversified financial services institutions in the United States. The Zacks Rank #3 company offers local delivery of retail and business banking, including a full range of lending products, specialized services for corporations and government entities, wealth management and asset management.

The PNC Financial has an Earnings ESP of +0.88% for the current quarter. The company has an expected earnings growth rate of 4% and 5.7% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current quarter improved 0.4% over the last 60 days.

The company delivered positive earnings surprise in three out of the last four quarters with an average beat of 2.2%. The stock has surged 19.9% year to date. The PNC Financial is expected to release earnings results on Jul 17, before the opening bell.



Kinder Morgan Inc. KMI is engaged in energy transportation and storage in North America. The Zacks Rank #3 company handles energy products like natural gas, refined petroleum products, crude oil, ethanol, coal and carbon dioxide.

Kinder Morgan has an Earnings ESP of +5.00% for the current quarter. The company has an expected earnings growth rate of 9.5% and 11.2% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current year improved 1% over the last 60 days.

The company delivered positive earnings surprise in the last four quarters with an average beat of 3.9%. The stock has jumped 38.1% year to date. Kinder Morgan is expected to release earnings results on Jul 17, after the closing bell.



United Rentals Inc. URI operates as a rent equipment company to a diverse customer base including construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government entities in the United States and Canada. It holds a Zacks Rank #3.

United Rentals has an Earnings ESP of +0.34% for the current quarter. The company has an expected earnings growth rate of 16.4% and 20.5% for the current quarter and year, respectively.

The company delivered positive earnings surprise in the last four quarters with an average beat of 6.1%. The stock has jumped 31.4% year to date. United Rentals is expected to release earnings results on Jul 17, after the closing bell.



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