The fourth-quarter 2022 earnings season is gradually gaining momentum. Next week will be the first big one of this reporting cycle. This earnings season will be important as market participants will closely monitor any sign of earnings, revenues or margin decline.
A large section of economists and financial experts are concerned that the U.S. economy may face at least a mild recession in 2023 with a higher interest rate regime and tighter monetary control adopted by the Fed.
Nevertheless, five large-cap companies are set to beat Q4 2022 earnings results next week. These are - United Rentals Inc. URI, Freeport-McMoRan Inc. FCX, Halliburton Co. HAL, Steel Dynamics Inc. STLD and Ameriprise Financial Inc. AMP.
Q4 2022 Earnings Results So Far
As of Jan 18, 38 S&P 500 companies reported their earnings results. Total earnings of these companies are down 13.2% year over year on 7.3% higher revenues with 65.8% beating EPS estimates and 63.2% beating revenue estimates. Our current projection shows that for fourth-quarter 2022, total earnings of the S&P 500 Index as a whole are expected to decline 7.2% year over year on 4% higher revenues.
Our Top Picks
Five large-cap (market capital > $10 billion) companies are set to beat earnings estimates next week. Each of these stocks 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
United Rentals is benefiting from the U.S. administration’s increased focus on infrastructural improvement. URI has been gaining from better fleet productivity on broad-based rental demand in construction and industrial verticals.
Better fleet productivity on broad-based rental demand in non-residential construction and industrial verticals, higher total and rental revenues and stronger pricing aided United Rentals’ third-quarter 2022 results. During the period, rental revenues grew 20% from a year ago. Adjusted gross margin expanded 240 basis points.
United Rentals has an Earnings ESP of +7.91%. It has an expected earnings growth rate of 14.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last 30 days.
URI recorded earnings surprises in the last four reported quarters, with an average beat of 9.5%. The company is set to release earnings results on Jan 25, after the closing bell.
Freeport-McMoRan is conducting exploration activities near existing mines to expand reserves. FCX is expected to gain from the progress in exploration activities that should boost production capacity. Freeport’s Lone Star project provides an additional upside.
FCX is also well-positioned to benefit from automotive electrification, which is a positive for copper as electric vehicles are copper intensive. Higher copper prices are also expected to support its margins. Freeport’s efforts to reduce debt are also encouraging.
Freeport has an Earnings ESP of +6.96%. The Zacks Consensus Estimate for current-year earnings improved 1.3% over the last 30 days. FCX is set to release earnings results on Jan 25, before the opening bell.
Halliburton provides products and services to the energy industry worldwide. High commodity prices have increased demand for HAL’s services in North America, to which it is heavily exposed.
In particular, Halliburton’s key Completion & Production unit margins are likely to improve, with management expecting better pricing leverage going forward. Besides, Halliburton's strong free cash flow generating ability indicates its financial strength.
HAL’s healthy relationship with national oil companies and digitization efforts also bode well. The increasing cloud-based data flow between sites and back office translates into expanded margins for Halliburton.
Halliburton has an Earnings ESP of +0.30%. It has an expected earnings growth rate of 43.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.3% over the last 30 days.
HAL recorded earnings surprises in the last four reported quarters, with an average beat of 5.5%. The company is set to release earnings results on Jan 24, before the opening bell.
Steel Dynamics is expected to gain from acquisitions as well as strong liquidity and efforts to expand capacity. The acquisitions of Heartland and United Steel Supply have boosted Steel Dynamics' shipping capabilities. Moreover, the buyout of Zimmer should support the raw material procurement strategy at its new Texas flat roll steel mill.
STLD is also expected to gain from its investments to beef up capacity and upgrade facilities. Steel Dynamics is executing several projects that should add to capacity and boost profitability. The electric-arc-furnace flat roll steel mill should strengthen its steelmaking capacity and value-added product capability.
Steel Dynamics has an Earnings ESP of +4.82%. The Zacks Consensus Estimate for current-year earnings has improved 14% over the last 30 days. STLD recorded earnings surprises in the last four reported quarters, with an average beat of 6.2%. The company is set to release earnings results on Jan 25, after the closing bell.
Ameriprise Financial is a leading asset management company. AMP operates through five segments: Advice & Wealth Management, Asset Management, Annuities, Protection and Corporate & Other.
Ameriprise Financial remains well-positioned for impressive top-line growth on the back of its robust assets under management (AUM) balance and business restructuring initiatives. Our estimates for net revenues and total AUM suggest a CAGR of 4.1% and almost 1%, respectively, over the next three years. Given a solid balance sheet, AMP’s capital deployment activities seem sustainable and will enhance shareholder value.
Ameriprise Financial has an Earnings ESP of +1.72%. It has an expected earnings growth rate of 19.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the last 30 days.
AMP recorded earnings surprises in the last four reported quarters, with an average beat of 4.8%. The company is set to release earnings results on Jan 25, after the closing bell.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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