Wall Street is reeling under severe volatility since the beginning of August due to uncertainty related to trade-related conflict, which resulted in the inversion of the main treasury yield curve and global economic slowdown. The ongoing trade tussle between the United States and China aggravated on Aug 23.
Meanwhile, even amid a cut-throat tariff war with China, second-quarter 2019 earnings results have so far come in better than expected. In line with better-than-expected earnings reports, five companies are set to beat earnings estimates this week.
U.S.-China Trade Conflict Worsens
On Aug 23, China announced that it will impose 5% to 10% tariff on another $75 billion of U.S. goods in two tranches, on Sep 1 and Dec 15. Additionally, a 25% tariff on U.S. auto products and auto parts will be imposed effective Dec 15.
In retaliation, President Donald Trump decided to raise tariff to 30% from the existing 25% on $250 billion Chinese goods. Moreover, he also raised the tariff to be levied on an additional $300 billion of Chinese exports effective Sep 1 from 10% to 15%. Consequently, tariff on $550 billion Chinese goods will cover total U.S. imports from China per annum.
Furthermore, Trump tweeted by issuing an order to U.S. companies to look for an alternative to China for their operations including returning home. President Trump also hinted that prolonging the U.S.-China trade conflict can lead to the imposition of national emergency, though not immediately.
On Aug 26, President Trump said in the G-7 meeting at France that the two sides will sit for talks once again after the Chinese authority made a call to White House correspondents. However, the communist regime played down the significance of these talks.
Better than-Expected Second-Quarter 2019 Earnings So Far
As of Aug 22, 477 S&P 500 members have reported second-quarter earnings results. Total earnings for these 477 index members are up 0.5% from the same period last year on 4.7% higher revenues. Notably, 75.9% companies surpassed EPS estimates while 57.4% beat revenue estimates.
At present, total second-quarter earnings for the S&P 500 Index are expected to be up 0.3% from the prior-year period on 4.6% higher revenues. This is a massive improvement from an earnings decline of 3.4% on 3.9% higher revenues, expected in the beginning of the second-quarter earnings session.
Notably, Wall Street had witnessed negative earnings (0.2% earnings decline on 4.2% higher revenues) in the first quarter for the first time since the second quarter of 2016. (Read More: Q2 Earnings Season Scorecard)
5 Stocks Poise to Beat on Earnings This Week
At this stage, it will be prudent to invest in stocks with a favorable Zacks Rank and positive Earnings ESP. Strong earnings results will likely ensure a northbound move in stock prices of these companies in the near term despite market volatility.
We have narrowed down our search to five companies, which will release their earnings results this week. Each of these stocks carries either a Zacks Rank #2 (Buy) or 3 (Hold). 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 or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%.
The chart below shows price performance of our five picks in the past three months.
Burlington Stores Inc. BURL operates as a retailer of branded apparel products in the United States. It offers fashion-focused merchandise, including women's ready-to-wear apparel, accessories, footwear, menswear, youth apparel, coats, toys, and gifts, as well as baby, home and beauty products. Burlington Stores has an Earnings ESP of +0.17% for second-quarter 2019 and carries a Zacks Rank #2.
The company has an expected earnings growth rate of 8.9% for the current year. The Zacks Consensus Estimate for the current quarter improved 0.1% over the last 60 days.
The company delivered positive earnings surprise in the last four quarters at an average of 8.7%. Burlington Stores is expected to release earnings results on Aug 29, before the opening bell.
The Cooper Companies Inc. COO operates as a medical device company worldwide. It operates through CooperVision and CooperSurgical business units. The Cooper Companies has an Earnings ESP of +1.50% for third-quarter fiscal 2019 and carries a Zacks Rank #2.
The company has an expected earnings growth rate of 5.3% and 6.8% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current year improved 0.3% over the last 60 days.
The company delivered positive earnings surprise in two out of the last four quarters, with an average beat of 4%. The Cooper Companies is expected to release earnings results on Aug 20, after the closing bell.
Dollar General Corp. DG is a discount retailer in the United States. It separates its merchandise into four categories, which includes highly consumable, seasonal, home products and basic clothing. Dollar General has an Earnings ESP of +2.64% for second-quarter 2019 and a Zacks Rank #3.
The company has an expected earnings growth rate of 4% and 8.5% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current quarter and year improved 0.6% and 0.2%, respectively, over the last 60 days.
The company delivered positive earnings surprise in three out of the last four quarters, with an average beat of 1.6%. Dollar General is expected to release earnings results on Aug 29, before the opening bell.
Dollar Tree Inc. DLTR is a customer-oriented, value-driven variety store operating at a one dollar price point. It operates through two segments, Dollar Tree and Family Dollar. Dollar Tree has an Earnings ESP of +7.91% for second-quarter 2019 and has a Zacks Rank #3.
The company delivered positive earnings surprise in two out of the last four quarters, with an average beat of 0.4%. Dollar Tree is expected to release earnings results on Aug 29, before the opening bell.
Golar LNG Ltd. GLNG is a midstream liquefied natural gas (LNG) company, engaged in the transportation, regasification, and liquefaction of LNG. It operates through three segments: Vessel Operations, Floating Liquefaction Natural Gas Vessel and Power.
Golar LNG has an Earnings ESP of +22.06% for second-quarter 2019 and carries a Zacks Rank #3. The company has an expected earnings growth rate of 10.5% for the current quarter. Golar LNG is expected to release earnings results on Aug 29, before the opening bell.
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