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5 Stocks to Buy Ahead of Q4 Earnings Next Week

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Nalak Das
·6 min read
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We are in the middle of the fourth-quarter 2020 earnings season, which has so far delivered well above expectations. Market participants are watching the results closely as the last quarter was a mixed one both in terms of economic data and stock market performance.

Corporates' profits in the fourth quarter and their guidance will be thoroughly scrutinized by financial experts and economists to gauge whether the U.S. economy will return to the pre-pandemic level by mid-2021.

Meanwhile, five stocks with a favorable Zacks Rank are set to beat on fourth-quarter earnings next week. Investment in these stocks should provide good returns to investors going forward.

Impressive Fourth-Quarter Earnings Results So Far

As of Feb 10, 333 S&P 500 companies reported their quarterly results. Total earnings of these companies were up 5.6% from the same period last year on 3.2% higher revenues, with 80.8% beating EPS estimates and 78.1% beating revenue estimates.

Overall, the fourth-quarter earnings for the S&P 500 Index are projected to be up 2.4% year over year on 2.6% higher revenues. This is in contrast to the projection of a 7.8% decline in earnings on 0.3% higher revenues at the beginning of the reporting cycle.

Notably, first-quarter earnings were down 12.8% year over year on 1.6% higher revenues. Second-quarter earnings plunged 32.2% on 9.3% lower revenues. Third-quarter earnings dropped 7% year over year on 0.7% lower revenues. The fourth-quarter earnings estimates were improving steadily since July 2020 .(Read More: A Very Strong Earnings Picture)

Our Top Picks

We have narrowed down our search to five stocks slated to release fourth-quarter earnings results next week. Each of these stocks carries either a 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 the 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.

Black Knight Inc. BKI is engaged in the provision of integrated technology, workflow automation, and data and analytics to the mortgage and real estate industries. It operates through the Technology and Data and Analytics business segments. The Zacks Rank #2 company has an Earnings ESP of +6.31%.

Black Knight has an expected earnings growth rate of 15.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 30 days. It has a trailing four-quarter earnings surprise of 7.9%, on average. The company is set to release earnings results on Feb 16, before the opening bell.

Owens Corning OC produces and sells glass fiber reinforcements and other materials for composites and residential, commercial, and industrial building materials worldwide. It operates in three segments: Composites, Insulation, and Roofing. The Zacks Rank #2 company has an Earnings ESP of +3.24%.

Owens Corning has an expected earnings growth rate of 24.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.2% over the last 30 days. It has a trailing four-quarter earnings surprise of 69.1%, on average. The company is set to release earnings results on Feb 17, before the opening bell.

Pioneer Natural Resources Co. PXD operates as an independent oil and gas exploration and production company in the United States. The company explores, develops and produces oil, natural gas liquids and gas. The Zacks Rank #1 company has an Earnings ESP of +3.65%.

Pioneer Natural Resources has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.3% over the last 7 days. It has a trailing four-quarter earnings surprise of 6.5%, on average. The company is set to release earnings results on Feb 17, after the closing bell.

Sleep Number Corp. SNBR provides sleep solutions and services in the United States. It designs, manufactures, markets, retails and services beds, pillows, sheets, and other bedding products under the Sleep Number name. The Zacks Rank #1 company has an Earnings ESP of +4.96%.

Sleep Number has an expected earnings growth rate of 7.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.1% over the last 7 days. It has a trailing four-quarter earnings surprise of 55.9%, on average. The company is set to release earnings results on Feb 17, after the closing bell.

Dana Inc. DAN provides power-conveyance and energy-management solutions for vehicles and machinery in North America, Europe, South America, and the Asia Pacific. It operates in four segments: Light Vehicle Drive Systems, Commercial Vehicle Drive and Motion Systems, Off-Highway Drive and Motion Systems, and Power Technologies. The Zacks Rank #1 company has an Earnings ESP of +6.48%.

Dana has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 7.6% over the last 30 days. It has a trailing four-quarter earnings surprise of 34.6%, on average. The company is set to release earnings results on Feb 18, before the opening bell.

+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities

In addition to the stocks you read about above, would you like to see Zacks’ top picks to capitalize on the Internet of Things (IoT)? It is one of the fastest-growing technologies in history, with an estimated 77 billion devices to be connected by 2025. That works out to 127 new devices per second.

Zacks has released a special report to help you capitalize on the Internet of Things’s exponential growth. It reveals 4 under-the-radar stocks that could be some of the most profitable holdings in your portfolio in 2021 and beyond.

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Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report

Dana Incorporated (DAN) : Free Stock Analysis Report

Owens Corning Inc (OC) : Free Stock Analysis Report

Black Knight Financial Services, Inc. (BKI) : Free Stock Analysis Report

Sleep Number Corporation (SNBR) : Free Stock Analysis Report

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Zacks Investment Research