5 Stocks to Buy Ahead of Q1 Earnings Results This Week
The first-quarter 2022 earnings season is in full swing. So far, overall earnings results are good. However, market participants are highly concerned about the weak guidance provided by some major U.S. corporates.
Most U.S. corporates expressed their severe concerns regarding the prolonged devastation of the global supply-chain system. As a result, skyrocketing inflation significantly raising the input costs of businesses.
In this scenario, five stocks with a favorable Zacks Rank are slated to release first-quarter financial numbers this week. The combination of a favorable Zacks Rank and expected earnings beat are likely to push up the share prices of these companies going forward. These stocks are, namely, Antero Resources Corp. AR, Arthur J. Gallagher & Co. AJG, Teladoc Health Inc. TDOC, W. P. Carey Inc. WPC and Weyerhaeuser Co. WY.
Q1 2022 At a Glance
The last quarter was not a good one for Wall Street. The year started with the resurgence of the Omicron variant of coronavirus, which was highly infectious but less deadly. Normal economic activities suffered to some extent in January due to Omicron.
However, the major concern for the U.S. economy was galloping inflation. Several measures of inflation like consumer price index, producer price index and personal consumption expenditure price index stayed at a 40-year high during the first quarter.
Moreover, the Russian military invasion of Ukraine, which started on Feb 24 and is continuing, has made the situation worse. The United States and the European Union have imposed several stringent financial sanctions on Russia including import restriction on crude oil and natural gas.
Russia is a major supplier of oil and gas and several basic materials in Europe. As a result, prices of crude oil, natural gas, platinum, palladium, coal, nickel and steel soared globally. These materials are a vital input to several finished products.
Finally, in order to combat skyrocketing inflation, the Fed systematically terminated the $120 billion bond-buy program in March and raised the benchmark by 25 basis points in its March FOMC. This was the first hike in interest rate in more than three years.
The March FOMC minutes also revealed that Fed officials almost unanimously agreed that the central bank must reduce the size of its $9 trillion balance sheet by around $95 per month starting May. Moreover, the minutes revealed that most officials have agreed that the Fed must raise the interest rate by 50 basis points in the next two FOMC’s in May and June.
Our Top Picks
Five companies with a favorable Zacks Rank will report first-quarter earnings results this week. Each of these stocks carries either Zacks Rank #1 (Strong Buy) or 2 (Buy) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our research shows that for stocks with the combination of a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after their earnings releases. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The chart below shows the price performance of our five picks in the last quarter.
Image Source: Zacks Investment Research
Antero Resources has positioned itself among the fast-growing natural gas producers in the United States. AR’s strategic acreage position in the low-risk and long reserve-life properties of the Appalachian Basin is a major positive. Its core acreage position allows for major long lateral drilling opportunities and capital efficiencies.
Antero Resources expects to generate $1.5-$1.7 billion of free cash flow in 2022, suggesting a significant improvement from $849 million reported in 2021. AR is targeting a capital return program of 25%-50% of free cash flows annually, beginning with the implementation of the share repurchase program of up to $1 billion. Also, Antero Resources is well-positioned to capitalize on the rising natural gas price.
Zacks Rank #1 AR has an Earnings ESP of +3.86%. It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 20.7% over the last 30 days. Antero Resources is set to release earnings results on Apr 27, after the closing bell.
Teladoc pursues acquisitions to boost its capabilities and global footprint. TDOC’s vast platform and global network give it an edge over its peers to advance international business, which gives it necessary diversification benefits amid high competition. Teladoc’s top line is likely to witness a 25-30% CAGR in the next three years. TDOC projects 2022 total visits in the band of 18.5-20 million, up from the 2021 level of 15.4 million.
Zacks Rank #2 Teladoc has an Earnings ESP of +7.97%. The Zacks Consensus Estimate for current-year earnings improved 4.9% over the last 7 days. TDOC recorded earnings surprises in three out of the last four reported quarters, with an average beat of 47.4%. The company is set to release earnings results on Apr 27, after the closing bell.
Arthur J. Gallagher is likely to continue benefiting from solid organic growth, which has been driving revenues. Sturdy performance across its Brokerage and Risk Management segments also bode well. AJG expects organic revenues in the Risk Management and Brokerage segment to be better than the 2021 level.
Arthur J. Gallagher’s focus on tapping opportunities across the globe bodes well for growth. AJG’s inorganic growth story seems impressive with strategic buyouts. Arthur J. Gallagher’s solid performance is driving cash flow, helping to deploy capital in shareholder-friendly moves.
Zacks Rank #1 AJG has an Earnings ESP of +0.63%. It has an expected earnings growth rate of 42.2% for the current year. The Zacks Consensus Estimate for current-year earnings improved 16.8% over the last 30 days.
Arthur J. Gallagher recorded earnings surprises in the last four reported quarters, with an average beat of 8.8%. The company is set to release earnings results on Apr 28, after the closing bell.
W. P. Carey is a real estate investment trust that provided long-term sale-leaseback and build-to-suit financing for companies. WPC primarily invests in commercial properties that are generally triple-net leased to single corporate tenants including office, warehouse, industrial, logistics, retail, hotel, R&D, and self-storage properties.
Zacks Rank #2 W. P. Carey has an Earnings ESP of +0.78%. It has an expected earnings growth rate of 3.6% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.6% over the last 30 days.
WPC recorded earnings surprises in three out of the last four reported quarters, with an average beat of 8.8%. The company is set to release earnings results on Apr 29, before the opening bell.
Weyerhaeuser performed exceptionally well in 2021. Demand for housing and wood products has been improving significantly, given solid housing market momentum. Given the various macroeconomic tailwinds, WY continues to have a bullish outlook on U.S. housing activity, despite persistent supply-chain issues, the recent uptick in mortgage rates and the ongoing affordability concerns.
The tailwinds include favorable demographics, and a decade of underbuilding and historically low inventory for new and existing homes. Weyerhaeuser continues to have a favorable long-term outlook for repair and remodel activity, supported by numerous demand drivers including an aging housing stock, rising home equity as well as healthy household balance sheets.
Zacks Rank #2 WY has an Earnings ESP of +9.65%. The Zacks Consensus Estimate for current-year earnings improved 6.5% over the last 30 days. Weyerhaeuser recorded earnings surprises in two out of the last four reported quarters, with an average beat of 1.6%. The company is set to release earnings results on Apr 29, before the opening bell.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Weyerhaeuser Company (WY) : Free Stock Analysis Report
Arthur J. Gallagher & Co. (AJG) : Free Stock Analysis Report
W.P. Carey Inc. (WPC) : Free Stock Analysis Report
Antero Resources Corporation (AR) : Free Stock Analysis Report
Teladoc Health, Inc. (TDOC) : Free Stock Analysis Report
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