6 Must-Buy Large-Cap Stocks Ahead of Q4 Earnings Next Week
Wall Street is facing severe volatility in this week as market participants are keeping their fingers crossed for a hawkish Fed in the near term. However, the fourth-quarter 2021 earnings season is gathering pace with better-than-expected results so far. Earnings results are expected to stay strong this time around.
Six large-cap stocks are poised to beat on fourth-quarter earnings results next week. These stocks carry a favorable Zacks Rank and a possible earnings beat is likely to make them attractive to investors in the near future. These are - Tesla Inc. TSLA, Steel Dynamics Inc. STLD, Brown & Brown, Inc. BRO, United Rentals Inc. URI, Freeport-McMoRan Inc. FCX and Vertex Pharmaceuticals Inc. VRTX.
Solid Start to Fourth-Quarter Earnings
As of Jan 19, 43 S&P 500 companies have reported fourth-quarter 2021 results. Total earnings of these companies are up 18.3% year over year on 11.7% higher revenues with 86% beating EPS estimates and 79.1% surpassing revenue estimates.
Total fourth-quarter earnings of the market's benchmark — the S&P 500 Index — are projected to climb 21.5% from the same period last year on 12% higher revenues, following 41.4% year-over-year earnings growth on 17.4% higher revenues in the third quarter, 95% year-over-year earnings growth on 25.3% higher revenues in the second quarter and 49.3% year-over-year earnings growth on 10.3% higher revenues in first-quarter 2021.
The first three quarters of last year were favorably impacted since the preceding quarters of the year before that were affected by pandemic-induced lockdowns and restrictions. However, the U.S. economy started reopening at a very slow pace since the beginning of the fourth quarter of 2020.
Our Top Picks
Six large-cap (market capital > $10 billion) companies will report earnings next week. 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 (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 six picks in last quarter.
Image Source: Zacks Investment Research
Tesla has acquired a substantial market share within the electric car segment. Increasing Model 3 delivery, which forms a significant chunk of TSLA’s overall deliveries, is aiding its top line. Along with Model 3, Model Y is contributing to its revenues.
In addition to increasing automotive revenues, Tesla’s energy generation and storage revenues boost its earnings prospects. TSLA said that its overall deliveries surged 20% in the third quarter from its previous record in the second quarter, marking the sixth consecutive quarter-on-quarter gain.
The Zacks Rank #1 Tesla has an Earnings ESP of +6.30%. It has an expected earnings growth rate of 33.4% for the current year. The Zacks Consensus Estimate for current-year earnings improved 1.7% over the last 30 days.
TSLA recorded earnings surprises in three out of the last four reported quarters, with an average beat of 25.4%. Tesla is set to release earnings results on Jan 26, after the closing bell.
Steel Dynamics Inc. 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 will support its 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 will strengthen its steelmaking capacity and value-added product capability.
The Zacks Rank #2 STLD has an Earnings ESP of +6.38%. The Zacks Consensus Estimate for current-year earnings improved 1.2% over the last 30 days. Steel Dynamics recorded earnings surprises in the last four reported quarters, with an average beat of 5.1%. STLD is set to release earnings results on Jan 24, after the closing bell.
Brown & Brown has a compelling portfolio along with an impressive growth trajectory driven by organic and inorganic initiatives across all its segments. Buyouts and collaborations enhanced Brown & Brown's existing capabilities and extended its geographic foothold.
Strategic efforts continue to drive commission and fees. BRO’s sturdy performance has driven cash flow, enabling it to deploy capital in shareholder-friendly moves. BRO boasts a strong balance sheet backed by a solid cash position.
The Zacks Rank #1 Brown & Brown has an Earnings ESP of +1.56%. It has an expected earnings growth rate of 5.9% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.9% over the last 7 days.
BRO recorded earnings surprises in the last four reported quarters, with an average beat of 18.3%. Brown & Brown is set to release earnings results on Jan 24, 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 will boost production capacity. Freeport’s Lone Star project provides additional upside.
FCX is also well-positioned to benefit from automotive electrification, which is positive for copper as electrical vehicles are copper intensive. Higher copper prices are also expected to support its margins. Freeport’s efforts to reduce debt is also encouraging.
The Zacks Rank #2 Freeport has an Earnings ESP of +2.86%. It has an expected earnings growth rate of 32.2% for the current year. The Zacks Consensus Estimate for current-year earnings improved 1.2% over the last 7 days.
FCX recorded earnings surprises in three out of the last four reported quarters, with an average beat of 4.3%. Freeport is set to release earnings results on Jan 26, before the opening bell.
United Rentals is benefiting from higher rental revenues, fleet productivity and absorptions. Fleet productivity was up 13.5% in the third quarter from the prior-year quarter, depicting better fleet absorption. URI’s raised 2021 guidance exhibits broad-based growth across the company’s verticals, with persistent growth opportunities for certain non-residential verticals including datacenter, healthcare and warehouse projects.
The Zacks Rank #2 United Rentals has an Earnings ESP of +1.34%. It has an expected earnings growth rate of 22.4% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.1% over the last 30 days.
URI recorded earnings surprises in two out of the last four reported quarters, with an average beat of 5.7%. United Rentals is set to release earnings results on Jan 26, after the closing bell.
Vertex’s cystic franchise sales continue to grow despite the impact of the pandemic. Trikafta/Kaftrio’s early approval/launch were a significant milestone. New reimbursement agreements in ex-U.S. markets and label expansions to younger age groups in United States are driving VRTX’s Trikafta/Kaftrio sales higher.
Vertex’s non-CF pipeline is progressing rapidly with data from multiple programs expected in the next few months. Vertex faces only minimal competition in its core CF franchise. Vertex has collaborations with several companies.
The Zacks Rank #2 VRTX has an Earnings ESP of +10.77%. It has an expected earnings growth rate of 3.3% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.2% over the last 30 days.
Vertex recorded earnings surprises in three out of the last four reported quarters, with an average beat of 8%. VRTX is set to release earnings results on Jan 26, after the closing bell.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Steel Dynamics, Inc. (STLD) : Free Stock Analysis Report
FreeportMcMoRan Inc. (FCX) : Free Stock Analysis Report
Vertex Pharmaceuticals Incorporated (VRTX) : Free Stock Analysis Report
Brown & Brown, Inc. (BRO) : Free Stock Analysis Report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
United Rentals, Inc. (URI) : Free Stock Analysis Report
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