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5 Stocks to Watch out for Post Recent Upgrade by Analysts

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Maharathi Basu
·5 min read
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The fourth-quarter earnings season is well past its halfway mark and the picture so far looks healthy and hints at the gradual recovery of the overall economic scenario from the crippling coronavirus woes. The latest earnings outlook article indicates that of the total 333 S&P 500 companies already reported results, 80.8% delivered better-than-expected earnings per share.

Generally, earnings beat by a company generally leads to an appreciation in its stock price. Against this backdrop, investors would like to add outperformers to their respective portfolios for healthy returns.

However, with a plethora of earnings reports flooding the market during this reporting cycle, pinpointing only the winners is by no means an easy task for individual investors. In absence of proper guidance, identifying a promising stock is akin to searching ‘a needle in a haystack’, for a prospective stakeholder. Handy tips or a piece of rewarding advice in this respect come from brokers who are deemed experts, equipped with vast knowledge on the field of investing.

Of the three types of brokers/analysts (sell-side, buy-side and independent) present in the investment world, sell-side analysts are most common. Brokers, irrespective of their type, attend company conference calls/presentations and scrutinize every detail available in the public domain before advising investors about their course of action (buy, sell or hold a stock). Considering their know-how and profound understanding of the stocks in the realm of investment, it is a no-brainer that investors should pay heed to broker advice to garner the maximum from their portfolios.

To take care of the earnings performance, we designed a screen based on bettering analyst recommendations and northbound estimate revisions over the last four weeks.

Value the Top line

To design a winning strategy, it is not wise to consider only the bottom line. In fact, according to some market watchers, a top-line outperformance is more creditable for a stock than a bottom-line beat under certain circumstances. Therefore, to make the earnings strategy full-proof, one needs to address the revenue concerns as well. We considered the price/sales ratio, which serves as a strong complementary valuation metric, for screening stocks. 

Screening Criteria

# (Up-Down Rating)/ Total (4 weeks) =Top #75:This gives the list of top 75 companies that have witnessed net upgrades over the last 4 weeks.

% change in Q (1) est. (4 weeks) = Top #10:This gives the top 10 stocks that have witnessed earnings estimate revisions over the past 4 weeks for the upcoming quarter.

Price-to-Sales = Bot%10:The lower the ratio the better, companies meeting this criteria are in the bottom 10% of our universe of over 7,700 stocks with respect to this ratio.

Price greater than 5:A stock trading below $5 will not likely be of significant interest to most investors.

Average Daily Volume greater than 100,000 shares over the last 20 trading days: Volume has to be significant to ensure that these are easily traded.

Market value ($ mil) = Top #3000:This gives us stocks that are in the top 3000 if one judges by market capitalization.

Com/ADR/Canadian= Com:This eliminates the ADR and Canadian stocks.

Here are five of the 10 stocks that made it through the screen:

ArcBest Corporation ARCB provides freight transportation services and solutions. The stock currently carrying a Zacks Rank #2 (Buy) has seen the Zacks Consensus Estimate for 2021 earnings being revised 10.7% upward over the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Chicago, IL-based Archer Daniels Midland Company ADM is a leading player in the field of agricultural products. The stock currently carries a Zacks Rank #3 (Hold). Its earnings outshined the Zacks Consensus Estimate in each of the last four quarters, the average being 32.3%.

Antero Resources AR, currently carrying a Zacks Rank of 2, is among the fastest-growing natural gas producers in the United States. The Zacks Consensus Estimate for the current-quarter earnings per share indicates a 200% increase from the year-ago period’s reported figure.

Beacon Roofing Supply BECN is the largest distributor of residential and non-residential roofing materials in the United States and Canada. The stock currently carries a Zacks Rank of 3. The company’s bottom line outpaced the Zacks Consensus Estimate in all the trailing four quarters, the average being 30.9%.

Beazer Homes USA BZH designs, builds and sells single family homes. The company is currently a Zacks #2 Ranked player. The Zacks Consensus Estimate for current-year earnings has climbed almost 14% over the past 60 days.

Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance


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Archer Daniels Midland Company (ADM) : Free Stock Analysis Report
 
Beacon Roofing Supply, Inc. (BECN) : Free Stock Analysis Report
 
Beazer Homes USA, Inc. (BZH) : Free Stock Analysis Report
 
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