The stock market rally, which was dulled by a trade-induced market rout in May, is continuing this month on Fed’s rate cut hope. Further, second-quarter 2019 earnings results are so far not as disappointing as expected initially although several corporates have adopted a cautious approach to guidance owing to the lingering trade conflict and global economic slowdown concerns.
Meanwhile, Wall Street’s benchmark index, the S&P 500, and tech-laden Nasdaq Composite achieved fresh all-time highs on Jul 24, buoyed by strong earnings results. Moreover, the blue-chip Dow 30 Index has also gained remarkably year to date. In line with better-than-expected earnings reports, five large corporates are set to beat earnings estimates today.
Second-Quarter Earnings at a Glance
As of Jul 24, 138 S&P 500 members reported second-quarter earnings results. Total earnings for these 138 index members are up 2.8% from the same period last year on 3.4% higher revenues. Notably, 79% companies surpassed EPS estimates while 59.4% beat revenue estimates.
At present, total second-quarter earnings for the S&P 500 Index are expected to be down 1.3% from the year-earlier period on 4% higher revenues. This is a significant improvement over an earnings decline of 3.4% on 3.9% higher revenues, expected on Jul 12.
However, if the current estimate actually materializes, it would follow the 0.2% earnings decline on 4.5% higher revenues in the first quarter. Notably, Wall Street had witnessed negative earnings in the first quarter for the first time since the second quarter of 2016. (Read More: Q2 Earnings Season & the Trade Issue)
5 Large Companies Set to Beat on Earnings in Q2
We have narrowed down our search to five large companies which will release their earnings results today (Jul 25) after the closing bell. 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 pop on their earnings release irrespective of already solid gains in the past six months.
Amazon.com Inc. AMZN: Seattle, WA-based Amazon.com is one of the largest online retailers, with extensive operations in North America, now spreading across the globe. Its division Amazon Web Services (AWS) has become a dominant name in the cloud-computing market.
Although the primary product line was books at first, the company rapidly diversified to include a host of other product categories. The current focus is on building video content, primarily for Prime subscribers because growth prospects in that market are ample.
The expanding customer base of AWS will continue to aid the company’s dominance in the global cloud space. Notably, AWS generates much stronger margins than the traditional retail business, which should continue to favor the company’s profitability with growth in its product mix.
Amazon has an Earnings ESP of +4.01% for the current quarter. The company has expected earnings growth of 4.3% and 31.8% for current quarter and year, respectively. The Zacks Consensus Estimate for the current quarter improved 0.2% over the last 60 days.
Amazon delivered positive earnings surprise in the last four quarters with an average beat of 60.3%. The stock has jumped 22.2% in the past six months and carries a Zacks Rank #2.
Starbucks Corp. SBUX: Seattle, WA-based Starbucks is the leading roaster and retailer of specialty coffee in the world. In addition to fresh, rich-brewed coffees, Starbucks’ offerings include many complementary food items and a selection of premium teas and other beverages, sold mainly through its retail stores.
From espresso to specialty roast and ground coffee to a premium single-serve market, Starbucks commands authority in all coffee segments. It is the number one premium packaged coffee brand in America.
Further, management focuses on increasing its global market share by judiciously opening stores in new and existing markets, remodeling existing stores, deploying technology, controlling costs, aggressively innovating products and building brand.
Starbucks has an Earnings ESP of +1.08% for the current quarter. The company has expected earnings growth of 16.1% and 14.9% for current quarter and year, respectively. The Zacks Consensus Estimate for the current year improved 0.4% over the last 60 days.
Starbucks delivered positive earnings surprise in the last four quarters with an average beat of 7.7%. The stock has jumped 35.5% in the past six months and carries a Zacks Rank #2.
Aflac Inc. AFL: Columbus, GA-based Aflac is a general business holding company. Its principal business is voluntary supplemental health and life insurance, which is marketed and administered through American Family Life Assurance Company of Columbus (Aflac) in the United States (Aflac U.S.) and through Aflac Life Insurance Japan Ltd. in Japan (Aflac Japan).
Aflac continues to maintain strong risk-adjusted capital at its operating subsidiaries supported by consistent earnings and good liquidity. It also has a strong capital management strategy in place providing financial protection to more than 50 million people worldwide.
Aflac has an Earnings ESP of +1.10% for the current quarter. The company has expected earnings growth of 3.6% for current year. The Zacks Consensus Estimate for the current year improved 0.2% over the last 60 days. Aflac delivered positive earnings surprise in the last four quarters, with an average beat of 0.1%. The stock has surged 13.9% in the past six months and carries a Zacks Rank #2.
Intel Corp. INTC: Santa Clara, CA-based Intel is the world’s largest manufacturer of semiconductor products. The company also offers computing, networking, data storage and communication solutions worldwide.
Intel’s primary focus area at the moment is the data center and cloud, where it is doing everything possible to maintain market share and profitability. Supporting this is continued investment in the IoT and nonvolatile memory/storage.
The company is the unquestioned leader in the microprocessor market, remaining number one in terms of market share and product performance. The company has focused on selling not just separate components but platforms optimized for specific markets, whether mobile, enterprise, or the digital home.
Intel has an Earnings ESP of +1.05% for the current quarter. It delivered positive earnings surprise in the last four quarters, with an average beat of 8.5%. The stock has surged 13.3% in the past six months and carries a Zacks Rank #3.
Stryker Corp. SYK: Kalamazoo, MI-based Stryker is one of the world’s largest medical device companies. The company has three business segments: Orthopaedics, MedSurg, and Neurotechnology & Spine.
Mako is Stryker’s robotic-arm assisted surgery platform. In recent times, Stryker launched the robotic-arm assisted total knee arthroplasty application for use with its Mako System. Notably, this is the first and only robotic technology, which can be used for total knee, hip and partial knee replacement procedures. The system also allows for intra-operative planning and assists in bone resectioning procedures.
Stryker has an Earnings ESP of +0.32% for the current quarter. The company has expected earnings growth of 9.7% and 11.5% for current quarter and year, respectively. It delivered positive earnings surprise in three out of the last four quarters, with an average beat of 0.6%. The stock has jumped 31.8% in the past six months and carries a Zacks Rank #3.
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