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5 Large-Cap Stocks Poised to Beat on Q4 Earnings This Week

Nalak Das

Wall Street had a dream run in 2019 wherein all three major stock indexes, predominantly consisting of large-cap stocks, witnessed best yearly performances in six years. In the fourth quarter of 2019, the Dow gained 6%, the S&P 500 rose 8.5% and the Nasdaq rose 12.2%.

The last three months of the year were quite promising for Wall Street as the U.S.-China trade war finally seemed to ease and strong economic data boosted investors’ sentiments.

Fourth-Quarter at a Glance

A series of impressive economic data shows strong economic activities in the fourth quarter of 2019. Retail sales grew 0.3% in December and November’s retail sales growth rate was revised upward to 0.3% from 0.2% reported earlier. A report from National Retail Federation (NRF) revealed that holiday retail sales increased 4.1% year over year. Strong retail sales shows higher consumer spending, which generates 70% of GDP.

U.S. housing starts jumped 16.9% in December to a seasonally adjusted annual rate of 1.608 million units, reflecting the highest percentage gain since October 2016. November’s data was revised upward from 1.365 million units to 1.375 million units. Recovery of the housing market in 2019 was a major positive for the U.S. economy as the sector constitutes nearly 3.1% of GDP.

U.S. manufacturing rose 0.2% in December. However, excluding motor vehicles and parts, manufacturing production grew 0.5%. Notably, the U.S. manufacturing sector, which suffered a severe setback in 2019 due to the lingering tariff war, contributed 12% to GDP.

Weak Expectations for Fourth-Quarter Earnings

Expectations for fourth-quarter 2019 earnings are far from encouraging at present. However, although corporate earnings growth was negative year over year in the first three quarters, results were far better than initially anticipated.

Total earnings of the S&P 500 Index are anticipated to be down 3.2% from the same period last year on 3.5% higher revenues. As of Jan 20, just 44 S&P 500 members reported fourth-quarter earnings results. Total earnings of these companies are down 3.8% from the same period last year on 3.9% higher revenues. Of the total, 75% surpassed EPS estimates while 70.5% outpaced revenue estimates. (Read More: Are Earnings Reports Just OK, or Better than Expected?)

5 Large-Cap Stocks Set to Beat Earnings Estimates

Below are five stocks set to beat on earnings this week. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases their chances of an earnings beat. Each of our picks carries a Zacks Rank # 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The chart below shows price performance of our five picks in the past three months.

Citrix Systems Inc. CTXS is a leading provider of virtualization, networking and cloud computing solutions to more than 400,000 organizations worldwide. The company has an Earnings ESP of +0.67%. Citrix Systems’ trailing four-quarter positive earnings surprise is 6.8%, on average. The company will release earnings results on Jan 22, after the closing bell.

Southwest Airlines Co. LUV is a passenger airline that provides scheduled air transportation in the United States and 'ten near-international' markets. The company has an Earnings ESP of +3.07%. Southwest Airlines has an expected earnings growth rate of 9.1% for the current year. Its trailing four-quarter positive earnings surprise is 9.9%, on average. The company will release earnings results on Jan 23, before the opening bell.

Comcast Corp. CMCSA is a global media and technology company with three primary businesses: Comcast Cable, NBCUniversal and Sky. The company has an Earnings ESP of +1.01%. Comcast has an expected earnings growth rate of 6.4% for the current year. Its positive earnings surprise for the trailing four quarters is 6.9%, on average. The company will release earnings results on Jan 23, before the opening bell.

The Travelers Companies Inc. TRV provides a range of commercial and personal property, and casualty insurance products and services to businesses, government units, associations, and individuals in the United States and internationally. The company has an Earnings ESP of +1.90%. The Travelers Companies has an expected earnings growth rate of 13.3% for the current year. The company will release earnings results on Jan 23, before the opening bell.

Intuitive Surgical Inc. ISRG designs, manufactures, and markets da Vinci surgical systems, and related instruments and accessories. Its da Vinci Surgical System transforms the surgeon's natural hand movements outside the body into corresponding micro-movements inside the patient's body. The company has an Earnings ESP of +12.63%. Intuitive Surgical has an expected earnings growth rate of 10.1% for the current year. Its last earnings results on Jan 23, after the closing bell.

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