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Buy 5 Beaten-Down Stocks Set to Beat on Earnings Next Week
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We are in the initial stage of the second-quarter 2024 earnings period. So far, the results exceeded expectations. As of Jul 24, 134 companies of the S&P 500 Index — popularly known as Wall Street’s broad-market index — reported their quarterly financial numbers.
Total earnings for these index members increased 7.6% from the same period last year on 4.7% higher revenues, with 81.3% beating EPS estimates and 57.5% beating revenue estimates. At present, total earnings of the S&P 500 Index in the second quarter 2 are expected to be up 9.6% on 4.9% higher revenues. If this expectation materializes, this will be the highest earnings growth pace since the 10% earnings growth in the first quarter of 2022.
Meanwhile, Wall Street witnessed an impressive bull run in the past 19 months barring some minor fluctuations. The rally was predominantly driven by big technology stocks buoyed by the astonishing adoption of generative artificial intelligence (AI) globally. However, most of the stocks, especially those within the rate-sensitive cyclical sectors, did not participate in this rally.
A long list of stocks that have provided either negative or just a mere positive return is available. Investing in such stocks with a favorable Zacks Rank combined with a possible earnings beat should be prudent for investors. Since these stocks were beaten down in the first half, an earnings beat could set these stocks moving on a in positive trajectory.
Our research shows that for stocks with the combination of a Zacks Rank #3 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 release. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
PayPal Holdings Inc. (PYPL - Free Report) is likely to benefit from robust growth in total payments volume. Strengthening customer engagement on PYPL’s platform is a major positive. Venmo’s improving monetization efforts and rising adoption rate across various platforms are aiding the total active accounts growth.
Additionally, the solid momentum of core peer-to-peer and PayPal Checkout experiences is a tailwind. Well-performing merchant services are also positive. Also, strong momentum in both the United States and international markets is contributing well. Accelerating transaction revenues of PYPL are likely to continue driving revenues.
PYPL operates digital wallets and allows users to buy, transfer and sell cryptocurrencies, including Bitcoin, Ethereum, Bitcoin Cash and Litecoin. PYPL’s users can check out and pay using crypto to online merchants. Venmo also allows users to buy and sell cryptocurrency. PYPL has become the first major U.S. fintech company to offer its own crypto token with a dollar-pegged stablecoin known as PayPal USD.
PayPal Holdings reported positive earnings surprises in three out of the last four reported quarters with an average beat of 8%. The stock price has fallen 5.4% year to date. The stock has shown positive earnings estimate revisions in the last 30 days. For second-quarter 2024, it has an Earnings ESP of +2.96%. The company will report on Jul 30, before the opening bell.
Image Source: Zacks Investment Research
American Tower Corp. (AMT - Free Report) boasts an extensive and geographically diversified communication real estate portfolio. With wireless carriers increasing capital expenditure due to rising wireless penetration, accelerated 5G network deployment efforts and spectrum auctions, demand is expected to stay strong, poising AMT well to ride the growth curve.
The long-term leases with its tenants assure stable cash flows. Moreover, AMT’s continued efforts toward macro-tower investments to expand its global footprint and address the demand in these markets bode well for long-term growth. A decent financial position also supports AMT’s growth endeavors.
American Tower reported positive earnings surprises in the last four reported quarters with an average beat of 7.1%. The stock price has fallen 2.3% year to date. The stock has shown positive earnings estimate revisions in the last 30 days. For second-quarter 2024, it has an Earnings ESP of +0.71%. The company will report on Jul 30, before the opening bell.
Image Source: Zacks Investment Research
Xcel Energy Inc. (XEL - Free Report) is poised to benefit from its solid capital investment plan for infrastructure strengthening and clean power generation. XEL is reducing coal usage and targets lowering emissions by at least 80% by 2030 and achieve carbon neutrality within 2050. XEL’s expanding customer base and rising demand act as tailwinds. Our model predicts operating revenues to increase in the 2024-2026 period.
Electric power utility is emerging as an industry promising gain in the long term. This space is set to see a massive acceleration in demand from AI-driven data center growth, widespread adoption of electric vehicles (EV), and an increase in residential demand. Investors should closely watch the players in this industry with a long-term investment perspective.
Xcel Energy has an expected revenue and earnings growth rate of 2.3% and 6%, respectively, for the current year. The stock price has tumbled 7.5% year to date. For second-quarter 2024, it has an Earnings ESP of +6.12%. The company will report on Aug 1, before the opening bell.
Image Source: Zacks Investment Research
The AES Corp. (AES - Free Report) is one of the leading companies in the utility industry's transition to clean energy by investing in sustainable growth. AES signed long-term contracts for 1.2 GW of renewables in the first quarter of 2024. AES has also been expanding its footprint in the liquified natural gas market. To promote clean energy adoption, AES is also retiring its coal-fired units and reducing carbon emissions from its portfolio.
The Electric Power Research Institute, in its “Powering Intelligence: Analyzing Artificial Intelligence and Data Center Energy Consumption” report, projected that data centers would consume 9.1% of total U.S. electricity generation by 2030 compared with 4.6% at present.
EVs will emerge as the second major catalyst for power demand growth in the United States. The expansion of battery EVs will raise the demand for electricity from 18.3 TWh in 2023 to 131 TWh in 2030. Rystad Energy estimates that total U.S. power demand across the residential, commercial, and industrial sectors will reach 4,500 TWh in 2030.
AES reported positive earnings surprises in three out of the last four reported quarters with an average beat of 13.8%. The stock price has tumbled 10% year to date. It has an expected revenue and earnings growth rate of 3.9% and 8.5%, respectively, for the current year. For second-quarter 2024, it has an Earnings ESP of +10.20%. The company will report on Aug 1, after the closing bell.
Image Source: Zacks Investment Research
American Homes 4 Rent (AMH - Free Report) is a leading large-scale integrated owner, operator and developer of single-family rental homes. AMH is an internally managed Maryland real estate investment trust focused on acquiring, developing, renovating, leasing and managing homes as rental properties. AMH’s goal is to simplify the experience of leasing a home and deliver peace of mind to households across the country.
American Homes 4 Rent reported positive earnings surprises in two out of the last four reported quarters with an average beat of 1.2%. The stock price has dropped 2.3% year to date. It has an expected revenue and earnings growth rate of 3.9% and 4.8%, respectively, for the current year. For second-quarter 2024, it has an Earnings ESP of +2.33%. The company will report on Aug 1, after the closing bell.
Image Source: Zacks Investment Research
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Buy 5 Beaten-Down Stocks Set to Beat on Earnings Next Week
We are in the initial stage of the second-quarter 2024 earnings period. So far, the results exceeded expectations. As of Jul 24, 134 companies of the S&P 500 Index — popularly known as Wall Street’s broad-market index — reported their quarterly financial numbers.
Total earnings for these index members increased 7.6% from the same period last year on 4.7% higher revenues, with 81.3% beating EPS estimates and 57.5% beating revenue estimates. At present, total earnings of the S&P 500 Index in the second quarter 2 are expected to be up 9.6% on 4.9% higher revenues. If this expectation materializes, this will be the highest earnings growth pace since the 10% earnings growth in the first quarter of 2022.
Meanwhile, Wall Street witnessed an impressive bull run in the past 19 months barring some minor fluctuations. The rally was predominantly driven by big technology stocks buoyed by the astonishing adoption of generative artificial intelligence (AI) globally. However, most of the stocks, especially those within the rate-sensitive cyclical sectors, did not participate in this rally.
A long list of stocks that have provided either negative or just a mere positive return is available. Investing in such stocks with a favorable Zacks Rank combined with a possible earnings beat should be prudent for investors. Since these stocks were beaten down in the first half, an earnings beat could set these stocks moving on a in positive trajectory.
Our Top Picks
We have narrowed our search to five beaten-down stocks that are poised to beat on earnings results next week. Each of these stocks carries a Zacks Rank # 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 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 release. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
PayPal Holdings Inc. (PYPL - Free Report) is likely to benefit from robust growth in total payments volume. Strengthening customer engagement on PYPL’s platform is a major positive. Venmo’s improving monetization efforts and rising adoption rate across various platforms are aiding the total active accounts growth.
Additionally, the solid momentum of core peer-to-peer and PayPal Checkout experiences is a tailwind. Well-performing merchant services are also positive. Also, strong momentum in both the United States and international markets is contributing well. Accelerating transaction revenues of PYPL are likely to continue driving revenues.
PYPL operates digital wallets and allows users to buy, transfer and sell cryptocurrencies, including Bitcoin, Ethereum, Bitcoin Cash and Litecoin. PYPL’s users can check out and pay using crypto to online merchants. Venmo also allows users to buy and sell cryptocurrency. PYPL has become the first major U.S. fintech company to offer its own crypto token with a dollar-pegged stablecoin known as PayPal USD.
PayPal Holdings reported positive earnings surprises in three out of the last four reported quarters with an average beat of 8%. The stock price has fallen 5.4% year to date. The stock has shown positive earnings estimate revisions in the last 30 days. For second-quarter 2024, it has an Earnings ESP of +2.96%. The company will report on Jul 30, before the opening bell.
Image Source: Zacks Investment Research
American Tower Corp. (AMT - Free Report) boasts an extensive and geographically diversified communication real estate portfolio. With wireless carriers increasing capital expenditure due to rising wireless penetration, accelerated 5G network deployment efforts and spectrum auctions, demand is expected to stay strong, poising AMT well to ride the growth curve.
The long-term leases with its tenants assure stable cash flows. Moreover, AMT’s continued efforts toward macro-tower investments to expand its global footprint and address the demand in these markets bode well for long-term growth. A decent financial position also supports AMT’s growth endeavors.
American Tower reported positive earnings surprises in the last four reported quarters with an average beat of 7.1%. The stock price has fallen 2.3% year to date. The stock has shown positive earnings estimate revisions in the last 30 days. For second-quarter 2024, it has an Earnings ESP of +0.71%. The company will report on Jul 30, before the opening bell.
Image Source: Zacks Investment Research
Xcel Energy Inc. (XEL - Free Report) is poised to benefit from its solid capital investment plan for infrastructure strengthening and clean power generation. XEL is reducing coal usage and targets lowering emissions by at least 80% by 2030 and achieve carbon neutrality within 2050. XEL’s expanding customer base and rising demand act as tailwinds. Our model predicts operating revenues to increase in the 2024-2026 period.
Electric power utility is emerging as an industry promising gain in the long term. This space is set to see a massive acceleration in demand from AI-driven data center growth, widespread adoption of electric vehicles (EV), and an increase in residential demand. Investors should closely watch the players in this industry with a long-term investment perspective.
Xcel Energy has an expected revenue and earnings growth rate of 2.3% and 6%, respectively, for the current year. The stock price has tumbled 7.5% year to date. For second-quarter 2024, it has an Earnings ESP of +6.12%. The company will report on Aug 1, before the opening bell.
Image Source: Zacks Investment Research
The AES Corp. (AES - Free Report) is one of the leading companies in the utility industry's transition to clean energy by investing in sustainable growth. AES signed long-term contracts for 1.2 GW of renewables in the first quarter of 2024. AES has also been expanding its footprint in the liquified natural gas market. To promote clean energy adoption, AES is also retiring its coal-fired units and reducing carbon emissions from its portfolio.
The Electric Power Research Institute, in its “Powering Intelligence: Analyzing Artificial Intelligence and Data Center Energy Consumption” report, projected that data centers would consume 9.1% of total U.S. electricity generation by 2030 compared with 4.6% at present.
EVs will emerge as the second major catalyst for power demand growth in the United States. The expansion of battery EVs will raise the demand for electricity from 18.3 TWh in 2023 to 131 TWh in 2030. Rystad Energy estimates that total U.S. power demand across the residential, commercial, and industrial sectors will reach 4,500 TWh in 2030.
AES reported positive earnings surprises in three out of the last four reported quarters with an average beat of 13.8%. The stock price has tumbled 10% year to date. It has an expected revenue and earnings growth rate of 3.9% and 8.5%, respectively, for the current year. For second-quarter 2024, it has an Earnings ESP of +10.20%. The company will report on Aug 1, after the closing bell.
Image Source: Zacks Investment Research
American Homes 4 Rent (AMH - Free Report) is a leading large-scale integrated owner, operator and developer of single-family rental homes. AMH is an internally managed Maryland real estate investment trust focused on acquiring, developing, renovating, leasing and managing homes as rental properties. AMH’s goal is to simplify the experience of leasing a home and deliver peace of mind to households across the country.
American Homes 4 Rent reported positive earnings surprises in two out of the last four reported quarters with an average beat of 1.2%. The stock price has dropped 2.3% year to date. It has an expected revenue and earnings growth rate of 3.9% and 4.8%, respectively, for the current year. For second-quarter 2024, it has an Earnings ESP of +2.33%. The company will report on Aug 1, after the closing bell.
Image Source: Zacks Investment Research