5 choices to grow midcaps before earnings for long-term gain

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The third quarter 2021 earnings season is in full swing. Market players have high expectations for this release cycle as overall U.S. corporate profits are expected to remain strong after soaring in the second quarter.

The results are quite encouraging so far despite prolonged supply chain disruptions, a labor shortage, higher inflationary pressure and the resurgence of the Delta variant of the coronavirus. The earnings scenario improves as we go deep into the reporting cycle.

The third quarter of 2021 was not good for mid-cap stocks. The S&P 400 index specific to mid-caps fell 2.1%, mainly due to a market collapse in September.

Nonetheless, five mid-cap growth stocks with favorable Zacks rankings are set to beat earnings over the next week. The combination of a likely decline in earnings, a favorable Zacks ranking, and strong growth potential bodes well for how these stocks will move over the long term.

Impressive third quarter results to date

As of October 27, 192 S&P 500 companies have released their third quarter results. Total profits for these companies are up 37.6% year-over-year with revenues 15.3% higher, 82.3% exceeding EPS estimates and 74% exceeding revenue estimates. The proportion of those 192 index members exceeding both EPS and income estimates is 64.1%.

Right now, third quarter total earnings of the market’s benchmark – the S&P 500 Index – are expected to jump 35.9% from the same period last year with earnings 14% higher. , 5%. This suggests a steady improvement from 26.1% profit growth on 14% higher revenues, estimated at the start of the reporting cycle.

The results of the first two quarters of this year were favorably affected, as the corresponding quarters of last year were affected by lockdowns and restrictions linked to the pandemic. This is clear from 95% year-on-year profit growth on 25.3% higher revenues in the second quarter and 49.3% year-on-year profit growth on 10.3% higher revenues. % in the first quarter of 2021.

Nonetheless, the US economy has started to partially reopen, albeit at a sluggish pace since Q3 2020. Despite favorable comparisons to last year, Q3 2021 earnings estimates reflect real growth, rising by more than 23% compared to the third quarter before the pandemic. from 2019.

Our top picks

We’ve narrowed down our search to five mid-cap growth stocks (market capital> $ 2 billion The full list of today’s Zacks # 1 Rank stocks here.

Our research shows that for stocks with the combination of Zacks Rank # 3 (Hold) or better and positive ESP on earnings, the probability of beating earnings can be as high as 70%. These actions should appreciate after the publication of the results. You can discover the best stocks to buy or sell before they are flagged with our ESP Earnings Filter.

The chart below shows the price performance of our five picks over the past quarter.

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Image source: Zacks Investment Research

Carter’s Inc. CRI designs, researches and markets branded children’s clothing under the Carter’s, OshKosh, Skip Hop, Child of Mine, Just One You, Simple Joys, Carter’s little baby basics and other brands in the United States and around the world . It operates through three segments: US Retail, US Wholesale and International.

Better marketing, improved pricing and a strong product portfolio have benefited the company. The company lifted its 2021 view and released a bullish third quarter view. Continued momentum in online demand, driven by expanded products, and a new mobile application bode well.

This Zacks Rank # 2 company has a revenue ESP of + 0.71%. It has an expected profit growth rate of 76.4% for the current year. Zacks’ consensus estimate for current year earnings has improved 0.7% in the past 30 days.

It posted surprise profits in three of the last four published quarters, with an average beat of 191.7%. The company is expected to release its third quarter 2021 results on October 29, ahead of the opening bell.

Ralph Lauren Corp. RL designs, markets and distributes lifestyle products in North America, Europe, Asia and internationally. The company is progressing well with its “Next Great Chapter” plan which was announced in June 2018. This strategic growth plan focuses on long-term sustainable growth and value creation.

The company benefited from strong performances in the Europe and North America regions and from the strength of its brand. The rapid recovery in North America and Europe due to the easing of restrictions has helped its businesses. Based on digital strength with higher AURs and the ability to translate revenue growth into expanding operating margin, the company has revised its outlook upward for fiscal 2022 .

This Zacks Rank # 1 company has a revenue ESP of + 5.58%. It has an expected profit growth rate of over 100% for the current year (ending March 2022). Zacks’ consensus estimate for current year earnings has improved 0.6% in the past 7 days.

It posted surprise profits in the last four published quarters, with an average beat of 91.4%. The company is expected to release its results for the second quarter of fiscal 2022 on November 2, before the opening bell.

Synaptique Inc. SYNA develops and supplies semiconductor products and solutions around the world. The company is a leader in the design and marketing of human interface solutions such as touchpads for laptops, capacitive touchscreen controllers for handsets and biometric fingerprint sensors for mobile devices.

This Zacks Rank # 2 company has a revenue ESP of + 0.38%. It has an expected profit growth rate of 21.1% for the current year (end of June 2022). Zacks’ consensus estimate for current year earnings has improved 1.2% in the past 30 days.

It recorded profit surprises in the last four published quarters, with an average beat of 8.1%. The company is expected to release its results for the first quarter of fiscal 2022 on November 4, after the closing bell.

The Compagnie des Chemours. CC is a leading supplier of performance chemicals that are key ingredients in end products and processes in a multitude of industries. The company should benefit from the strong adoption of the Opteon platform and its cost control actions.

The company sees increased demand for Opteon in mobile and stationery apps and is taking steps to drive adoption. The ramp-up of the Corpus Christi plant will allow the company to meet future demand. Chemours is also taking steps to reduce costs. Its actions to improve productivity and operations in its businesses should also support its margins in 2021.

This Zacks Rank # 2 company has a revenue ESP of + 1.26%. It has an expected profit growth rate of 86.9% for the current year. Zacks’ consensus estimate for current year earnings has improved 0.4% in the past 7 days.

It posted surprise profits in the last four published quarters, with an average pace of 238.9%. The company is expected to release its third quarter 2021 results on November 4, after the closing bell.

Cushman & Wakefield plc CWK is a real estate services company. It acquires and develops commercial properties and provides real estate rental, facilities management, tenant representation and appraisal services.

The company provides commercial real estate services under the Cushman & Wakefield brand in the US, Australia, UK and internationally. The company operates in the Americas, Europe, Middle East, Africa and Asia-Pacific segments.

This Zacks Rank # 1 company has a revenue ESP of + 14.09%. It has an expected profit growth rate of 79% for the current year. Zacks’ consensus estimate for current year earnings has improved 0.7% in the past 7 days.

It posted surprise profits in three of the last four published quarters, with an average beat of 92.6%. The company is expected to release its third quarter 2021 results on November 4, after the closing bell.

Want the latest recommendations from Zacks Investment Research? Today you can download 7 best stocks for the next 30 days. Click to get this free report

Ralph Lauren Corporation (RL): Free Stock Analysis Report

Synaptics Incorporated (SYNA): Free Stock Analysis Report

Carter’s, Inc. (CRI): Free Stock Analysis Report

The Chemours Company (CC): Free Stock Analysis Report

Cushman & Wakefield PLC (CWK): Free Stock Analysis Report

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