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How to Find 'Strong Buy' Stocks as Q2 Earnings Season Heats Up

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The big Wall Street banks got earnings season going. Investors have reacted somewhat positively to the likes of Citigroup, Goldman Sachs, and JPMorgan despite mixed messaging on the economic outlook in the U.S. and beyond.

The broader market popped on Tuesday, as Wall Street prepares for an onslaught of financial results from tech standouts and beyond over the next several weeks. The current reporting cycle will be critical for the market to assess updated corporate guidance that better reflects the Fed’s rate hike efforts, inflation, and economic slowdown fears.

Wall Street didn’t react in any meaningful way to the hot June CPI print. The lack of selling could mean that the Fed’s tightening efforts might be more baked into stock prices than some might assume.

Thankfully, the market won’t have to wait much longer to find out exactly what the Fed plans to do next on the inflation-fighting front, with its FOMC meeting scheduled for July 26 and 27.

Many might want to remain on the sidelines until more concrete data rolls in. But there are still opportunities out there to start positions in strong stocks and find names who have managed to climb amid all of the selling. And if history is any guide, the stock market could be in for a second-half rebound, following the worst first six months of the year since 1970.

Here’s how investors can utilize the Filtered Zacks Rank 5 Stock Screen to find potential winners as the second quarter earnings season revs up.

Zacks Rank #1 (Strong Buy) stocks outperform the market in both good and bad times. However, there are over 200 stocks that earn a Zacks Rank #1 at any given time. Therefore, it’s helpful to understand how to apply filters to the Zacks Rank in order to narrow the list down to a more manageable and tradable set of stocks.

Parameters

Clearly, there are only three items on this screen. But together, these three filters can result in some impressive returns.

• Zacks Rank equal to 1

Starting with a Zacks Rank #1 is often a strong jumping off point because it boasts an average annual return of roughly 24.4% per year since 1988.

• % Change (Q1) Est. over 4 Weeks greater than 0

Positive current quarter estimate revisions over the last four weeks.

• % Broker Rating Change over 4 Week equal to Top # 5

Top 5 stocks with the best average broker rating changes over the last four weeks.

This strategy comes loaded with the Research Wizard and is called bt_sow_filtered zacks rank5. It can be found in the SoW (Screen of the Week) folder.

Here are two of the five stocks that qualified for the Filtered Zacks Rank 5 strategy today…

Caleres CAL

Caleres (CAL) is a global footwear firm, with a portfolio that features roughly 1,000 Caleres-owned retail locations, 13-owned e-commerce sites, leading department and specialty stores, and its partner’s websites. Its brands include Famous Footwear, Allen Edmonds, Dr. Scholl’s Shoes, and others. Caleres’ Shoes and Retail Apparel space lands in the top 35% of over 250 Zacks industries at the moment. This is helpful during all times, but particularly during market and economic downturns.

Caleres stock is up 24% in 2022 vs. the market’s huge fall and the broader Consumer Discretionary Sector’s 34% downturn. CAL shares have now soared over 300% in the last two years. Some investors might also be attracted to its under $30 per share price tag and its 1% dividend yield. And its valuation is strong, with CAL trading at 6X forward earnings vs. its industry’s 21.5X and its sector’s 16.4X. Plus, Zacks estimates call for the company’s earnings and revenue to climb both this year and next.

The Chefs’ Warehouse, Inc. CHEF

The Chefs’ Warehouse is a top distributor of specialty food products in the U.S. and Canada, with a focus on the higher-end side of the dining scene. The firm aims to serve “chefs who own and/or operate some of the nation's leading menu-driven independent restaurants, fine dining establishments, country clubs, hotels…” and beyond. The Chefs' Warehouse carries and distributes over 50,000 products to more than 35,000 customer locations.

The Chefs' Warehouse on June 22 raised its 2022 guidance on the back of strong away-from-home dining, despite growing economic slowdown fears. CHEF stock is part of an industry that’s in the top 37%. Better still, Zacks estimates call for its revenue to soar 38% in 2022 and another 12% in 2023, with its bottom-line growth even more impressive. CHEF shares have popped over 16% in 2022 and are up 132% in the last 10 years to outclimb its sector’s 42% run.

See the rest of the stocks on this list and start trading the Filtered Zacks Rank 5 (or any of our other strategies) in your own account. Remember, the key to successful screening is finding screens that have produced profitable results in the past. And that's exactly what you get with the Research Wizard stock picking and backtesting program.

Get the rest of the stocks on this list and start looking for the newest companies that fit these criteria. It's easy to do. And it could help you find your next big winner. Start screening for these companies today with a free trial to the Research Wizard. You can do it.

Click here to sign up for a free trial to the Research Wizard today.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance/


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