5 Top Stocks Set to Beat Q2 Earnings Estimates This Month
The second-quarter 2023 earnings season started officially last week with the financial results of major banks. The motion is gradually gathering pace as around 150 companies are slated to report earnings results this week. This reporting cycle is beginning with tepid expectations as the market’s benchmark — the S&P 500 Index — is likely to witness the third consecutive quarter of earnings decline.
Despite a tepid outlook, a handful of stocks with a favorable Zacks Rank are set to beat on second-quarter earnings this month. The combination of a possible earnings beat and a favorable Zacks Rank should drive their stocks in the near future.
Q2 Earnings at Initial Stage
As of Jul 14, 30 S&P 500 companies reported earnings results. Total earnings of these companies are up 5.9% year-over-year on 8.5% higher revenues. Of these 30 companies, 83.35 surpassed EPS estimates while 66.7% outpaced revenue estimates.
At present, our estimate has shown that total earnings of the S&P 500 Index will likely drop 9.8% year-over-year on 0.4% lower revenues. The second-quarter earnings decline would follow the 3.4% decline in the first quarter and a 5.4% drop in fourth-quarter 2022.
Our Top Picks
We have narrowed our search to five companies that are set to declare second-quarter earnings results this month. Each of our picks carries a Zacks Rank #2 (Buy) and has a positive Earnings ESP. 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 (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 their 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.
Image Source: Zacks Investment Research
Marsh & McLennan Companies Inc. MMC is well-poised to grow on the back of acquisitions made within its operating units, the launch of new products and branching out into new businesses. MMC’s increased stake in Marsh India will further buoy growth. MMC’s revenues have been increasing thanks to a wide geographic presence and strong client retention.
Marsh & McLennan has an Earnings ESP of +0.67%. It has an expected earnings growth rate of 11.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 30 days.
MMC recorded earnings surprises in the last four reported quarters, with an average beat of 2.9%. The company is set to release earnings results on Jul 20, before the opening bell.
Kinsale Capital Group Inc. KNSL continues to benefit from dislocation within the broader property/casualty insurance industry, rate increases and premium growth. Across the E&S market, KNSL’s products are exposed to those business lines, which have relatively lower risks.
KNSL boasts the lowest combined ratio among its specialty insurer peers while achieving the highest growth and targets the same in the mid-80s range over the long term. KNSL has various reinsurance contracts to limit exposure to potential losses apart from arranging for additional capacity for growth.
Kinsale Capital has an Earnings ESP of +2.70%. It has an expected earnings growth rate of 36.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.7% over the last 30 days.
KNSL recorded earnings surprises in the last four reported quarters, with an average beat of 14.8%. The company is set to release earnings results on Jul 27, after the closing bell.
RLI Corp. RLI is one of the industry’s most profitable property and casualty writers with an impressive track record of underwriting profits. A strong local branch-office network, broad range of product offerings, and a focus on specialty insurance lines contribute to RLI’s profits.
Maintaining the combined ratio at favorable levels even in the toughest operating environment reflects superior underwriting discipline. RLI’s decision to drop the underperforming products from its property business also bodes well.
RLI has an Earnings ESP of +8.33%. It has an expected earnings growth rate of 7.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.7% over the last 30 days.
RLI recorded earnings surprises in the last four reported quarters, with an average beat of 43.5%. The company is set to release earnings results on Jul 24, after the closing bell.
Badger Meter Inc.’s BMI performance benefited from robust customer demand and strong order trends across the majority of end-market applications globally. Continued strength in E-Series, ultrasonic meters, cellular AMI solution, ORION Cellular endpoint sales and higher BEACON Software-as-a-Service revenues acted as major tailwinds.
BMI is likely to benefit from increasing customer backlogs and improving operating environment. Also, effective spending controls and higher sales are likely to help BMI to improve SG&A expenses leverage.
Badger Meter has an Earnings ESP of +2.99%. It has an expected earnings growth rate of 20.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 30 days.
BMI recorded earnings surprises in the last four reported quarters, with an average beat of 5.3%. The company is set to release earnings results on Jul 20, before the opening bell.
Crown Castle Inc. CCI is well-poised to benefit from the high capital spending by wireless carriers to deploy 4G and 5G networks amid incremental customer demand, rise in mobile data usage and higher spectrum availability. CCI’s efforts to double small-cell deployments in 2023 to meet this growing demand bode well.
Also, a solid and creditworthy tenant base adds resiliency to CCI’s business and assures steady revenues. We expect net revenues and adjusted funds from operations for 2023 to improve 2.8% and 3.1% year over year, respectively.
Crown Castle has an Earnings ESP of +1.07%. It has an expected earnings growth rate of 3.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 30 days.
CCI recorded earnings surprises in the last four reported quarters, with an average beat of 0.3%. The company is set to release earnings results on Jul 19, after the closing bell.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Badger Meter, Inc. (BMI) : Free Stock Analysis Report
RLI Corp. (RLI) : Free Stock Analysis Report
Crown Castle Inc. (CCI) : Free Stock Analysis Report
Marsh & McLennan Companies, Inc. (MMC) : Free Stock Analysis Report
Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report
