Sell-off in Chinese markets, weakness in the Eurozone, a strengthening dollar and steep fall in crude & commodities prices pretty well sum up the third quarter of 2015.
Not only have these factors thrashed the global equity markets, but also suppressed hopes for any improvement in corporate earnings this season.
Negative growth rates and top-line weakness, which were highlights of the dismal Q2 earnings season, will most likely be witnessed this time around as well. After all, the quarter lacked a strong positive catalyst to offset global headwinds.
The adverse impact of global headwinds has led many companies and analysts to cut their projections for revenues and earnings for the third quarter and beyond. As a result, total Q3 earnings for the S&P 500 index are anticipated to be down 5.9% from the year-ago period due to 4.6% lower revenues. This marks the second straight quarter of negative earnings growth for the index.
This has raised questions regarding if corporate America is entering into an “earnings recession.” According to a Reuters report “Wall Street is bracing for a grim earnings season, with little improvement expected anytime soon”. (For a detailed look at the earnings trend for different sectors, please read our latest Earnings Trends report.)
Yet no matter how weak and volatile the market is, it always has something to offer. One will always come across companies with standalone strength in their fundamentals as well as solid prospects for growth. As such, their earnings remain unabated by challenges that rock the industry they are part of.
4 Surging Stocks Poised to Beat on Q3 Earnings
With the earnings season just around the corner, investing in companies that are likely to beat earnings expectations can fetch handsome returns for investors. This is because a stock generally surges upon an earnings beat. In fact, it is likely to jump higher if the stock is already graphing an uptrend.
Notably, our recent 10-year backtest shows that stocks, with a positive Earnings ESP and a Zacks Rank #3 (Hold) or better, deliver a positive surprise nearly 70% of the time, and have returned over 28% annually on average.
However, for even better results, we have identified 4 stocks with the help of our Zacks stock screener, all of which carry a Zacks Rank #2 (Buy) or higher, and have Earnings ESP of more than one. In order to further strengthen our selection, we have picked stocks that have seen positive estimate revisions over the past 4 weeks and have rallied over 7% during the same time frame.
