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Buy 5 High-Flying Stocks Ahead of Q2 Earnings This Week

Nalak Das

Wall Street is on a dream run since the beginning of this year, resulting in a complete turnaround from a disappointing 2018. All three major stock indexes --- the Dow, S&P 500 and Nasdaq Composite --- recorded their fresh all-time highs. Wall Street still has something to offer irrespective of the fact that the bull run is in its 11th year.

Meanwhile, a strong signal given by the Fed for rate cut in July and some recent tweets by President Donald Trump hinting at pursuing a weak U.S. dollar stance in order to increase competitiveness of U.S. exports may act as near-term catalysts for stock markets.

Investors Speculating on Fed’s Rate Cut

Although Fed Chair Jerome Powell has already given a strong signal of rate cut in the upcoming Federal Open Market Committee (FOMC) meeting scheduled Jul 30-31, market participants are guessing up to how much percentage point the Fed can lower the benchmark lending rate, which is currently pegged at 2.25-2.5%.

Investors’ hope for a 50 basis-point cut in interest rate gained momentum on Jul 18 after New York Federal Reserve President John Williams said, “It’s better to take preventative measures than to wait for disaster to unfold.” Later that day, Fed Vice Chair Richard Clarida said on Fox Business News that cutting interest rates quickly would be a good strategy.

However, a spokesperson for the New York Fed later clarified at CNBC that Williams was drawing from academic research, not hinting at potential policy actions at the upcoming FOMC meeting. As of Jul 22, CME FedWatch tool assigned 75.5% probability for a quarter percentage cut in benchmark interest rate in July while 24.5% respondents are optimistic of a half a percentage rate cut.

Will Trump Weaken U.S. Dollar?

Since the beginning of 2019, President Donald Trump is blaming the Fed for its aggressive monetary policy of hiking interest rate, which acted as a major hindrance to realize maximum benefits from fiscal initiatives taken by his administration.

On Jul 3, Trump tweeted that the European Union and China are adopting a dovish monetary stance and rate cut to make their currencies cheap in the international market. Moreover, on Jul 17, the IMF remarked that the U.S. dollar is currently overvalued by 6% to 12%, based on near-term economic fundamentals. IMF’s comment is in line with President Trump, who is frequently blaming dollar strength for the currency’s loss of competitiveness in the international market.

Several Wall Street analysts have said that there are some chances that the Trump administration might intervene like selling dollar and buying other currencies in order to reduce the U.S. dollar’s value. The sentiment was echoed by the National Economic Council Director Larry Kudlow as he said “we want a stable dollar,” not a stronger dollar.

Our Top Picks

At this stage, it will be prudent to invest in stocks that are likely to beat earnings estimates in the second quarter. We have narrowed down our search to five such stocks that have skyrocketed year to date despite volatility and still have upside left. Each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy) and has 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 climb after earnings release irrespective of already solid gains year to date.

Alexion Pharmaceuticals Inc. ALXN is a global biopharmaceutical company focused on serving patients and families affected by rare diseases through the innovation, development and commercialization of life-changing therapies. The stock sports a Zacks Rank #1.

Alexion Pharmaceuticals has an Earnings ESP of +3.10% for the current quarter. The company has an expected earnings growth rate of 14% and 20.1% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current quarter and year improved 0.4% and 0.1%, respectively, over the last 60 days.

The company delivered positive earnings surprise in the last four quarters with an average beat of 16%. The stock has surged 25.7% year to date. Alexion Pharmaceuticals is expected to release earnings results on Jul 24, before the opening bell.



Visa Inc. V is a global payment technology company that connects consumers, businesses, banks and governments enabling them to use digital currency instead of cash and checks. The stock carries a Zacks Rank #2.

Visa has an Earnings ESP of +0.58% for the current quarter. The company has an expected earnings growth rate of 10.8% and 16.5% for the current quarter and year, respectively. The company delivered positive earnings surprise in the last four quarters with an average beat of 5.4%. The stock has surged 36.8% year to date. Visa is expected to release earnings results on Jul 23, after the closing bell.



Chipotle Mexican Grill Inc. CMG is a Zacks Rank #2 company that operates Chipotle Mexican Grill restaurants, serving a focused menu of burritos, tacos and burrito bowls (a burrito without the tortilla) and salads, made using fresh ingredients.

Chipotle Mexican Grill has an Earnings ESP of +1.01% for the current quarter. The company has an expected earnings growth rate of 28.6% and 43.9% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current year improved 0.3% over the last 60 days.

The company delivered positive earnings surprise in the last four quarters with an average beat of 12%. The stock has jumped 72% year to date. Chipotle Mexican Grill is expected to release earnings results on Jul 23, after the closing bell.



PayPal Holdings Inc. PYPL is a technology platform company offering online payment solution that allows customers to pay and get paid, withdraw funds to their bank accounts and hold balances in their PayPal accounts in various currencies. The stock carries a Zacks Rank #2.

PayPal Holdings has an Earnings ESP of +11.19% for the current quarter. The company has an expected earnings growth rate of 29.3% and 25.2% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current quarter and year improved 8.7% and 1.7%, respectively, over the last 60 days.

The company delivered positive earnings surprise in the last four quarters with an average beat of 7.6%. The stock has jumped 41.1% year to date. PayPal Holdings is expected to release earnings results on Jul 24, after the closing bell.



Colgate-Palmolive Co. CL manufactures and sells consumer products worldwide. It operates through two segments, Oral, Personal and Home Care and Pet Nutrition. Its oral care products include toothpastes, toothbrushes and mouthwashes and pharmaceutical products for dentists and other oral health professionals. The stock carries a Zacks Rank #2.

Colgate-Palmolive has an Earnings ESP of +0.69% for the current quarter. The Zacks Consensus Estimate for the current quarter improved 1.4% over the last 60 days. The company delivered positive earnings surprise in the last four quarters with an average beat of 0.7%. The stock has soared 21.6% year to date. Colgate-Palmolive is expected to release earnings results on Jul 26, before the opening bell.



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