Wall Street is reeling under volatility for the past six months owing to trade-related conflicts, global growth slowdown and geopolitical concerns. However, positive comments by President Donald Trump on trade disputes with China and Fed Chair Jerome Powell’s hints of a possible third rate cut this month, bolstered investors’ sentiment in the last couple of days.
Meanwhile, the third-quarter 2019 earnings session has kicked off and will gather steam next week. Third-quarter earnings estimates are currently negative. Notably, the initial estimates of both first and second-quarter earnings were negative too. However, actual results fared far better. Below we will present five companies that are set to beat earnings estimates next week.
Positive Development on U.S.-China Trade War Front
On Oct 10, in a campaign rally in Minnesota, President Trump said that he will meet with Chinese vice premier Liu He on Oct 11. Trump tweeted “Big day of negotiations with China. They want to make a deal, but do I? I meet with the Vice Premier tomorrow at The White House.”
Earlier, South China Morning Post (SCMP) reported that Liu He will leave Washington a day before the scheduled date of Oct 11 after the Trump administration blacklisted 28 Chinese companies, including AI firms, over human rights concerns. However, CNBC reported that the White House denied SCMP news.
Per several financial experts and market watchers, even a temporary trade truce between the two largest trading nations of the world will be a big boost for investors. The meeting between Trump and Liu He is crucial because the U.S. government is scheduled to hike tariff rate from 25% to 30% on $250 billion Chinese goods effective Oct 15.
Powell Hints at Third Rate Cut
On Oct 8, Jerome Powell gave signals of a possible third rate cut this month. The FOMC is scheduled to meet on Oct 28-29. Powell cited slowdown in job growth rate and muted inflation along with global economic slowdown due to lingering U.S.-China trade war as the primary reasons for a likely third rate cut this year.
Notably, the central bank has already reduced the benchmark lending interest rate by 50 basis points in two equal tranches in July and September. The Fed lowered the benchmark interest rate for the first time in more than 11 years. Notably, President Trump is also a vocal supporter of further reduction in interest rate in order to realize the full effect of fiscal measures taken by his administration.
5 Stocks Set to Beat on Q3 Earnings
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 next week. Each of these stocks carries a Zacks Rank #3 (Hold). 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%.
Kinder Morgan Inc. KMI is engaged in energy transportation and storage in North America. It handles energy products like natural gas, refined petroleum products, crude oil, ethanol, coal and carbon dioxide. Kinder Morgan has an Earnings ESP of +11.46%.
The company has an expected earnings growth rate of 4.8% and 7.9% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current year improved 1.1% over the last 30 days. The company delivered positive earnings surprise in three of the last four quarters at an average of 0.2%. Kinder Morgan is expected to release earnings results on Oct 16.
Wells Fargo & Co. WFC is a diversified financial services company, which provides retail, commercial and corporate banking services to individuals, businesses and institutions. It operates through three segments: Community Banking, Wholesale Banking, and Wealth and Investment Management. Wells Fargo has an Earnings ESP of +5.79%.
The company has an expected earnings growth rate of 5.3% and 11.5% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current quarter improved 1.7% over the last 30 days. The company delivered positive earnings surprise in three of the last four quarters at an average of 5.8%. Wells Fargo is expected to release earnings results on Oct 15, before the opening bell.
NVR Inc. NVR operates in two business segments: homebuilding and mortgage banking. The homebuilding unit sells and constructs homes under the Ryan Homes, NVHomes and Heartland Homes brands. NVR Mortgage's primary focus is to serve the needs of NVR homebuyers. NVR has an Earnings ESP of +4.87%.
The company has an expected earnings growth rate of 7.3% and 7.2% for the current quarter and year, respectively. The company delivered positive earnings surprise in the last four quarters at an average of 20.4%. NVR is expected to release earnings results on Oct 17.
United Airlines Holdings Inc. UAL provides air transportation services in North America, Asia, Europe, the Middle East, and Latin America. It transports people and cargo through its mainline and regional operations. United Airlines has an Earnings ESP of +3.06%.
The company has an expected earnings growth rate of 28.4% and 29.1% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current year improved 1.1% over the last 30 days. The Zacks Consensus Estimate for the current quarter and year improved 0.3% and 0.9%, respectively, over the last 30 days. United Airlines is expected to release earnings results on Oct 15, after the closing bell.
Ally Financial Inc. ALLY provides various financial products and services to consumers, businesses, automotive dealers, and corporate customers primarily in the United States and Canada. It operates through the Automotive Finance Operations, Insurance Operations, Mortgage Finance Operations, and Corporate Finance Operations segments. Ally Financial has an Earnings ESP of +2.06%.
The company has an expected earnings growth rate of 6.6% and 12.6% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current year improved 2.1% over the last 30 days. The company delivered positive earnings surprise in the last four quarters at an average of 9.4%. Ally Financial is expected to release earnings results on Oct 16, before the opening bell.
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