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Top 5 Corporate Giants Up More Than 15% Since Last Earnings

Nalak Das
·9 min read

Wall Street has maintained its dream run and is likely to complete five months of northbound journey in August. Month to date, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have rallied 5.7%, 3.9% and 5.3%, despite the fact that the market has remained rather soft historically this month.

Meanwhile, second-quarter 2020 earnings results have not come in as bad as they were expected at the start of the reporting cycle. The stock prices of several companies have popped since they declared their last earnings results. Here we have selected five large-cap companies with a favorable Zacks Rank.

In order to understand the reasons of stock price rally, we perform a three-step analysis, namely economic and market specific, sector and industry specific, and company specific. While economic and market specific analysis is common to all, sector and industry-specific analysis is included in company-specific analysis.

Economic and Market Analysis

Wall Street has witnessed an astonishing rally in the past five months. The Dow, the S&P 500 and the Nasdaq Composite have soared 53.3%, 55% and 70.6%, respectively, since their recent lows posted on Mar 23. The rally is not without logic. Unprecedented fiscal and monetary stimulus injected by the government and the Fed, and the central bank's decision to keep benchmark interest rate at 0-0.25% helped in reviving consumer and business confidence levels.  

Moreover, systematic reopening of the U.S. economy after nearly two months of lockdowns helped in reviving aggregate demand. This is evident in a series of better-than-expected economic data from April to August. Although, second-quarter U.S. GDP plunged 32.9%, it was better than the consensus estimate of a decline of 34.7%.

Likewise, corporate earnings in the second quarter have come in better than expected too. As of Aug 21, 476 companies from the S&P 500 stable had reported. Total earnings of these companies are down 33.4% from the same period last year on 9.7% lower revenues. This is an improvement compared with a year-over-year decline of 44.8% in earnings on 10.7% lower revenues, estimated initially. As much as 56.5% companies have reported both earnings and revenue beat.

Furthermore, since the beginning of July, overall earnings projections for second-quarter, third-quarter and full-year 2020 are improving. All these positives have bolstered Wall Street's new bull market.

Our Top Picks

We have narrowed down our search to five large-cap (market capital > $20 billion) stocks that have popped more than 15% since their latest earnings release. These companies have strong growth potential and have witnessed robust earnings estimate revisions in the last 30 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Apple Inc. AAPL designs, manufactures and sells iPhone, iPad, iPod, Apple TV, Mac personal computers, Apple Watch, HomePod and AirPods. These devices are powered by the iOS, macOS, watchOS and tvOS operating systems.

Sector and Industry Analysis

Apple is a member of the Zacks defined Computer and Technology sector, which is within the top 25% of the Zacks defined 16 broad sectors. Year to date, this sector has rallied 24.5% and the mini computer industry in which Apple belongs has soared 69.7%. The overwhelming performance of this sector validates its inherent strength and growth potential. This is particularly true as these companies have defied coronavirus-induced global economic devastations and have given stellar performances, when most other sectors are struggling to stay afloat.

Company Analysis

In third-quarter fiscal 2020 (reported Jul 30 after the closing bell), the company beat the Zacks Consensus Estimate for both the top and the bottom line. Apple’s Services and Wearables businesses are expected to drive top-line growth in fiscal 2020 and beyond. Although Apple’s business primarily runs around its flagship iPhone, the Services portfolio has emerged as its new cash cow.

The Zacks Rank #1 company has an expected earnings growth rate of 8.7% for the current year (ending September 2020). The Zacks Consensus Estimate for the current year has improved 4.6% over the last 30 days. The stock price has jumped 29.3% since the last earnings release.

 

United Parcel Service Inc. UPS provides letter and package delivery, specialized transportation, logistics, and financial services. It operates through three segments: U.S. Domestic Package, International Package, and Supply Chain & Freight.

Sector and Industry Analysis

United Parcel is a member of the Zacks defined Transportation sector, which is within the bottom 13% of the Zacks defined 16 broad sectors. However, the Air Freight and Cargo industry in which the company belongs has soared 47.8% year to date. The systematic reopening of the U.S. and global economy has restored its domestic and international demand to a great extent.

Company Analysis

In second-quarter 2020 (reported July 30 before the opening bell), the company beat the Zacks Consensus Estimate for both the top and the bottom line. The increase in e-commerce sales during the coronavirus pandemic is a huge positive for United Parcel. E-commerce, which is already part and parcel of daily lives, is now witnessing higher demand.

Although the company's growth rate for the current year is negative, it has an expected earnings growth rate of 13.6% for next year. The Zacks Consensus Estimate for the current year has improved 20% over the last 30 days. The stock price of the Zacks Rank #1 company has climbed 28.6% since last earnings.

 

D.R. Horton Inc. DHI operates as a homebuilding company in the East, Midwest, Southeast, South Central, Southwest and West United States.

Sector and Industry Analysis

D.R. Horton is a member of the Zacks defined Construction sector, which is within the top 7% of the Zacks defined 16 broad sectors. Year to date, this sector has gained 9.2% and the Home Builders industry in which it belongs has soared 31.5%. This overwhelming performance of this industry is primarily due to a historic low mortgage rate and strong pent-up demand for home building. Home builders' confidence has grown in past three months, defying the pandemic.  

Company Analysis

In third-quarter fiscal 2020 (reported Jul 28 before the opening bell), the company beat the Zacks Consensus Estimate for both the top and the bottom line. Higher building material costs, as well as land and labor shortages are prompting homebuilders to increase home prices. D.R. Horton’s strategic shift to more entry-level affordable homes has been paying off, with the segment experiencing strong demand and limited supply.

The Zacks Rank #1 company has an expected earnings growth rate of 35.7% for the current year (ending September 2020). The Zacks Consensus Estimate for the current year has improved 20% over the last 30 days. The stock price has advanced 15.6% since last earnings.

 

QUALCOMM Inc. QCOM designs, develops, manufactures and markets digital communication products worldwide. It operates through three segments: Qualcomm CDMA Technologies, Qualcomm Technology Licensing, and Qualcomm Strategic Initiatives.

Sector and Industry Analysis

QUALCOMM is a member of the Zacks defined Computer and Technology sector, which is within the top 25% of the Zacks defined 16 broad sectors. Year to date, this sector has rallied 24.5%.  Qualcomm is one of the largest manufacturers of wireless chipset based on baseband technology. Rapid growth of the 5G wireless industry is boosting the company's businesses.

Company Analysis

In third-quarter fiscal 2020 (reported July 29 after the closing bell), the company beat the Zacks Consensus Estimate for both the top and the bottom line. The company is focusing to retaining its leadership in 5G, chipset market and mobile connectivity with several technological achievements and innovative product launches. QUALCOMM has redefined the computing and mobile ecosystem across the globe with the launch of QCA6390 Connectivity SoC product.

The Zacks Rank #2 company has an expected earnings growth rate of 9.9% for the current year (ending September 2020). The Zacks Consensus Estimate for the current year has improved 6.6% over the last 30 days. The stock price has surged 21.5% since last earnings.

 

Wayfair Inc. W is one of the world's leading online sellers of home goods products, consisting of furniture and home decor.

Sector and Industry Analysis

Wayfair is a member of the Zacks defined Construction sector, which is within the top 19% of the Zacks defined 16 broad sectors. Year to date, this sector has rallied 32.3% and the Inter-Commerce industry in which it belongs has soared 61.1%. This overwhelming performance of this industry is primarily owing to massive growth in online orders as consumers were not allowed outside homes and stores were closed due to the imposition of social distancing.  Demand will remain buoyant as we are not completely out of coronavirus woes.  

Company Analysis

In second-quarter 2020 (reported Aug 5 before the opening bell), the company beat the Zacks Consensus Estimate for both the top and the bottom line. It is the second-largest participant in the U.S. online home goods market. Over the last few years, Wayfair has been taking steps to strengthen its position in international markets. It has been making efforts to expand its business in Canada, the United Kingdom and Germany.

The Zacks Rank #2 company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved more than 100% over the last 30 days. The stock price has appreciated 17.1% since last earnings.

 

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Apple Inc. (AAPL) : Free Stock Analysis Report
 
United Parcel Service, Inc. (UPS) : Free Stock Analysis Report
 
QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
 
D.R. Horton, Inc. (DHI) : Free Stock Analysis Report
 
Wayfair Inc. (W) : Free Stock Analysis Report
 
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