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6 Must-Buy Mid-Cap Stocks Ahead of Earnings Results Next Week

Nalak Das
·6 min read

Second-quarter earnings results so far are rather disappointing as expected. The pathetic performance can be blamed solely on the global outbreak of coronavirus and the consequent lockdowns.

Despite this gloomy scenario, several mid-cap (market capital > $1 billion < $6 billion) stocks are expected to beat earnings estimates. Notably, a few mid-cap stocks with top Zacks Rank are likely to beat earnings estimates next week.

Disappointing Expectations for Second-Quarter Earnings  

As of Jul 22, 113 S&P 500 members reported second-quarter 2020 earnings results. Total earnings of these companies are down 45.4% from the same period last year on 5.5% lower revenues. Of the total, 71.7% surpassed EPS estimates and 66.4% outpaced revenue estimates.

Overall, second-quarter  earnings for the S&P 500 Index are projected to be down 44.3% year over year on 10.3% lower revenues. Notably, first-quarter earnings of companies on the S&P 500 Index were down 13.5% on 1.4% higher revenues.

Mid-Cap Stocks in Q2

In the second quarter, economic activities were way below last year since lockdowns continued till the third week of May. Moreover, a second wave of COVID-19 in some states since the second half of June has forced them to delay reopening of the economy. Nevertheless, the mid-sized companies were benefitted by massive fiscal and monetary stimulus injected by the U.S. government and the Fed.

Aside from three large-cap centric indexes, the S&P 400 Mid Cap Index (SP400) also rallied 23.5% in the second quarter on reopening of the U.S. economy. In fact, investment in mid-cap stocks is recognized as a good portfolio diversification strategy. These stocks combine attractive attributes of both small and large-cap stocks.

6 Top-Ranked Mid-Caps Set to Beat Earnings Estimates

We have narrowed down our search to six Zacks Rank #1 mid-cap stocks slated to release earrings results next week with a positive Earnings ESP. 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%. These stocks are expected to soar after earnings release. 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 six picks in the last quarter.

 

Legg Mason Inc. LM provides investment management and related services to company-sponsored mutual funds and other investment vehicles including pension funds, foundations, endowments, sovereign wealth funds, insurance companies, private banks, family offices and individuals. The company has an Earnings ESP of +1.18% for the first quarter of fiscal 2021 (ended June 2020).

The Zacks Consensus Estimate for Legg Mason's current-year earnings has improved 6.2% over the last 30 days. It has a trailing four-quarter earnings surprise of 10.4%, on average. The company is set to release earnings results on Jul 27, before the opening bell.

Flagstar Bancorp Inc. FBC operates as a savings and loan holding company for Flagstar Bank that provides commercial and consumer banking services to individuals and businesses in the United States. The company has an Earnings ESP of +12.74%.

The company has an expected earnings growth rate of 5.5% for the current year. The Zacks Consensus Estimate for the current year has improved by 3.4% over the last 30 days. It has a trailing four-quarter earnings surprise of 17.6%, on average. The company is set to release earnings results on Jul 28, before the opening bell.

Sprouts Farmers Market Inc. SFM is a healthy grocery store that provides fresh, natural and organic food products in the United States. It has a unique model that features fresh produce at the center of the store, an expansive bulk food section and a vitamin department focused on overall wellness. The company has an Earnings ESP of +2.63%.

The company has an expected earnings growth rate of 35.2% for the current year. The Zacks Consensus Estimate for the current year has improved by 1.2% over the last 30 days. It has a trailing four-quarter earnings surprise of 37.2%, on average. The company is set to release earnings results on Jul 29, after the closing bell.

Brunswick Corp. BC designs, manufactures and markets recreation products worldwide. It primarily offers marine engine products. The company has an Earnings ESP of +20.93%.

The Zacks Consensus Estimate for Brunswick's current-year earnings has improved 2.4% over the last 30 days. It has a trailing four-quarter earnings surprise of 8.4%, on average. The company is set to release earnings results on Jul 30, before the opening bell.

Hanesbrands Inc. HBI designs, manufactures, sources, and sells a range of basic apparel for men, women, and children in the United States. It operates through three segments: Innerwear, Activewear and International. The company has an Earnings ESP of +170.01%.

The Zacks Consensus Estimate for Hanesbrands' current-year earnings has improved 6.9% over the last 7 days. The company is set to release earnings results on Jul 30, before the opening bell.

Patrick Industries Inc. PATK manufactures and distributes building products and materials for the recreational vehicle, marine, manufactured housing, and industrial markets in the United States and Canada. The company has an Earnings ESP of +12.50%.

The Zacks Consensus Estimate for Hanesbrands' current-year earnings has improved 5.5% over the last 7 days. The company is set to release earnings results on Jul 30, before the opening bell.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Legg Mason, Inc. (LM) : Free Stock Analysis Report
 
Hanesbrands Inc. (HBI) : Free Stock Analysis Report
 
Flagstar Bancorp, Inc. (FBC) : Free Stock Analysis Report
 
Brunswick Corporation (BC) : Free Stock Analysis Report
 
Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report
 
Patrick Industries, Inc. (PATK) : Free Stock Analysis Report
 
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