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5 Top S&P 500 Stocks to Tap Q1 Earnings Growth

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·5 min read
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The Q1 earnings season is set to kick off this week, with the banking sector slated to report numbers. Although earnings growth is expected to decelerate significantly from the recent quarters due to rising cost pressures and supply chain disruptions, the earnings picture remains strong.

While most of the stocks are expected to outperform this earnings season, we have zeroed in on the best stocks of those sectors that have a high chance of surprising in their upcoming releases. These stocks — J.B. Hunt Transport Services JBHT, General Dynamics GD, Chevron CVX, CF Industries CF and Weyerhaeuser WY — could make great plays as the Q1 earnings season unfolds and will likely tread higher in the days to come.

Q1 Earnings Trend

Total S&P 500 earnings are expected to be up 3.2% from the same period last year on 10% higher revenues. This would follow the 32.5% rise in earnings in Q4 and 41.4% growth in Q3.

The earnings estimates have come down by 0.3% since the start of the period, with revisions to the energy and finance sectors moving in opposite directions to each other. Of the 16 Zacks sectors, 10 are expected to earn more than a year ago.

Transportation & aerospace will likely see huge earnings growth as both incurred losses in the year-ago quarter. The other eight sectors are expected to witness positive year-over-year earnings growth. Energy is expected to be the biggest contributor to S&P 500 earnings with 199.7% growth. This is likely to be followed by basic materials (44.2%) and construction (15.8%).

How to Choose Stocks?

Earnings beat will definitely inspire investors’ confidence and propel the price of these sector stocks higher. Picking the star performers would be easy if we go by our proprietary methodology that selects S&P 500 stocks with a combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) – and a positive Zacks Earnings ESP.

You can see the complete list of today’s Zacks #1 Rank  stocks here.

Earnings ESP is our proprietary methodology to identify stocks that have the maximum chance to surprise with their upcoming earnings announcements. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Our research shows that for stocks with this combination, the chance of positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Let’s delve deeper into the sectors of the five stocks chosen above:

Transportation

J.B. Hunt is a provider of a broad range of transportation services to a diverse group of customers through the United States, Canada and Mexico. It has a Zacks Rank #2 and an Earnings ESP of +1.86%. J.B. Hunt saw positive earnings estimate revision of a penny over the past 30 days for the first quarter, indicating substantial growth of 37.2%.

J.B. Hunt delivered a positive earnings surprise of 10.19% in the past four quarters. The company is slated to release earnings results on Apr 18.

Aerospace

General Dynamics is engaged in mission-critical information systems and technologies; land and expeditionary combat vehicles, armaments and munitions; shipbuilding and marine systems; and business aviation. It has a Zacks Rank #3 and an Earnings ESP of +0.54%.

In the past month, the stock saw no earnings estimate revision for the yet-to-be-reported quarter and has a flat earnings growth rate. General Dynamics has delivered a positive earnings surprise of 3.7% in the past four quarters and is slated to release earnings results on Apr 27 before the market opens.

Energy

Chevron from the energy space is one of the largest publicly traded oil and gas companies in the world, with operations in almost every corner of the globe. It has a Zacks Rank #2 and an Earnings ESP of +2.58%. The Zacks Consensus Estimate for the yet-to-be reported quarter has been revised upward by 23 cents to $3.23 over the past 30 days, representing growth of 258.9%.

Chevron delivered an earnings surprise of 6.28% in the last four quarters. It is scheduled to report earnings on Apr 29 before market open.

Basic Materials

CF Industries is one of the largest manufacturers and distributors of nitrogenous fertilizer and other nitrogen products globally. It is a leading nitrogen fertilizer producer in North America. CF Industries has a Zacks Rank #2 and an Earnings ESP of +3.72%. The stock has seen a solid earnings estimate revision of 15 cents over the past month for the to-be-reported quarter and has an expected earnings growth rate of 502.9%.

CF Industries delivered an average earnings surprise of 0.02% in the last four quarters. The company is slated to release earnings results on May 4.

Construction

Weyerhaeuser is one of the leading U.S. forest product companies with operations primarily concentrated in Southern California, Nevada, Washington, Texas, Maryland and Virginia. It has a Zacks Rank #2 and an Earnings ESP of +3.95%.

Weyerhaeuser saw a positive earnings estimate revision of 17 cents for the yet-to-be-reported quarter in the past month and has an expected growth rate of 25.3%. It has delivered a positive earnings surprise of 1.59% in the past four quarters. Weyerhaeuser is slated to release earnings results on Apr 29.


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General Dynamics Corporation (GD) : Free Stock Analysis Report
 
Chevron Corporation (CVX) : Free Stock Analysis Report
 
J.B. Hunt Transport Services, Inc. (JBHT) : Free Stock Analysis Report
 
Weyerhaeuser Company (WY) : Free Stock Analysis Report
 
CF Industries Holdings, Inc. (CF) : Free Stock Analysis Report
 
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