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5 Momentum Stocks Set to Beat Earnings Estimates This Month

Nalak Das

Momentum investing calls for a continuous appraisal of stocks, which ensures that an investor does not pick a beaten-down name and overlook a thriving one. Momentum investors buy high on the anticipation that the stock will only ascend in the short to intermediate term.

We believe the recent stock market upsurge presents an ideal buying opportunity for momentum investors. The market is highly anticipated to continue its bullish run driven by a stable U.S. economy, an accommodative Fed and the signing of an interim trade deal between the United States and China.

Expectations for fourth-quarter 2019 earnings are far from encouraging at present. Total earnings of the S&P 500 Index are anticipated to be down 3.6% from the same period last year on 3.2% higher revenues. However, one thing must be noticed here. Although corporate earnings growth were negative year over year in the first three quarters, results were far better than initially anticipated.

Fourth Quarter at a Glance

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.

The U.S. economy is on a stable footing. Strong consumer spending, which constitutes 70% of the GDP, a firm labor market, a historically low-level of unemployment, steady growth in wage rate and a housing-market revival bolstered investors’ sentiments and are likely to reflect on earnings results. Notably, in the first three quarters of 2019, the GDP growth rate was more than 2%.

Moreover, after remaining quiet in the first half of 2019, the central bank reduced the benchmark interest rate by 75 basis points in three equal trenches in the second half of last year. Fed’s timey intervention not only boosted the economy and raised investors’ confidence, but also helped the sagging U.S. housing market to recover with a low mortgage rate.

5 Momentum Stocks Poised to Beat Earnings Estimates

We have narrowed down our search to five momentum stocks slated to release earnings reports this month that have a positive Earnings ESP. Each of our picks carries a Zacks Rank #2 (Buy) and a Momentum Score of A or B.  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%. 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.

SL Green Realty Corp. SLG is a fully integrated real estate investment trust, or REIT, that is focused primarily on acquiring, managing and maximizing value of Manhattan commercial properties. The company has an Earnings ESP of +0.46% for fourth-quarter 2019.

The company has an expected earnings growth of 2.2% for the current year. The Zacks Consensus Estimate for the current year has improved 0.8% over the last 30 days. SL Green Realty will release earnings results on Jan 22, after the closing bell.

American Express Co. AXP provides charge and credit payment card products, and travel-related services to consumers and businesses worldwide. It operates through three segments: Global Consumer Services Group, Global Commercial Services and Global Merchant. The company has an Earnings ESP of +0.41% for fourth-quarter 2019.

The company has an expected earnings growth of 10.9% for the current year. The Zacks Consensus Estimate for the current year has improved 0.2% over the last 30 days. American Express will release earnings results on Jan 24, before the opening bell.

Hill-Rom Holdings Inc. HRC operates as a medical technology company worldwide. It operates in Patient Support Systems, Front Line Care and Surgical Solutions segments. The company has an Earnings ESP of +1.54% for the first quarter of fiscal 2020.

Hill-Rom has an expected earnings growth of 8.9% for the current year (ending September 2020). The Zacks Consensus Estimate for the current year has improved 0.2% over the last 30 days. Hill-Rom will release earnings results on Jan 24, before the opening bell.

Invesco Ltd. IVZ provides its investment management services to retail clients, institutional clients, high-net worth clients, public entities, corporations, unions, non-profit organizations, endowments, foundations, pension funds, financial institutions and sovereign wealth funds. The company has an Earnings ESP of +3.40% for fourth-quarter 2019.

The company has an expected earnings growth of 4.6% for the current year. The Zacks Consensus Estimate for the current year has improved 2.6% over the last 30 days. Invesco will release earnings results on Jan 29, before the opening bell.

LPL Financial Holdings Inc. LPLA provides an integrated platform of brokerage and investment advisory services to independent financial advisors and financial advisors at financial institutions in the United States. The company has an Earnings ESP of +1.36% for fourth-quarter 2019.

The company has an expected earnings growth of 1.9% for the current year. The Zacks Consensus Estimate for the current year has improved 1.4% over the last 30 days. LPL Financial will release earnings results on Jan 30, after the closing bell.

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