Wall Street bulls are raging since the beginning of 2019 barring volatility in March due to inversion of the government bond yield curve and stock market mayhem in May from an abrupt breakdown of U.S.-China trade talks. However, Fed’s rate cut signal has steadied Wall Street since then.
While the Fed-induced rally set Wall Street to new all-time highs, market participants are highly concerned about a negative earnings session for the second quarter of 2019. Notably, second-quarter earnings will be set into motion from the beginning of this week. Despite investors’ concerns, a few companies are likely to handsomely beat earnings estimates this week.
At present, the market is anticipating a negative earnings session for the second quarter of 2019. As of Jul 12, total Q2 earnings for the S&P 500 Index are expected to be down 3.4% from the year-earlier period on 3.9% higher revenues.
This would follow the 0.2% earnings decline on 4.5% higher revenues in Q1. Imposing of tariff by the U.S. government on low-cost Chinese inputs, retaliatory tariffs imposed by China on U.S. exports, especially farm products, and global economic slowdown are primary reasons for tepid earnings expectations.
If the current consensus estimate for the second-quarter proves itself true, then it will be two consecutive quarters of earnings decline for the S&P 500. Technology, Aerospace, Basic Materials, Construction and Conglomerates sectors are likely to witness double-digit decline in second-quarter earnings. (Read More: What to Expect from Bank Earnings?)
Fed Signals an Impending Rate Cut
On Jul 10, in a testimony to the House Financial Services Committee, Powell said that the United States is suffering from a bout of uncertainty caused by trade tensions and weak global growth. He added “Crosscurrents have reemerged. Many FOMC participants saw that the case for a somewhat more accommodative monetary policy had strengthened.”
Per Powell, a series of recently released economic data and developments indicate that tensions related to world trade and global economy will continue to weigh on the U.S. economic outlook. The Fed chair noted that business investment, housing investment and manufacturing output has weakened considerably. Inflation is likely to stay below the Fed’s 2% target rate for the time being.
Powell reiterated Fed’s commitment to act as appropriate to sustain U.S. economic expansion, providing a clear message for a rate cut possibly in the upcoming FOMC meeting scheduled on Jul 30 - 31.
6 Top Stocks Likely to Soar This Week
We have narrowed down our search to six companies that will release their earnings results this week. Each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy) and has a positive Earnings ESP.
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%. You can see the complete list of today’s Zacks #1 Rank stocks here.
United Airlines Holdings Inc. UAL provides air transportation services in North America, Asia, Europe, the Middle East, and Latin America. It transports people and cargo through its mainline and regional operations and sports a Zacks Rank #1.
United Airlines has an Earnings ESP of +4.54% for the current quarter. The company has an expected earnings growth rate of 26% and 22.7% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current quarter and year improved 0.2% and 1.1%, respectively, over the last 60 days.
The company delivered positive earnings surprise in three out of the last four quarters with an average beat of 18.1%. The stock has gained 8.9% year to date. United Airlines is expected to release earnings results on Jul 16, after the closing bell.
Canadian Pacific Railway Ltd. CP is North America's first transcontinental freight railway between the United States and Canada. This is the only transcontinental railway carrier with direct service to the U.S. Eastern Seaboard. It carries a Zacks Rank #2.
Canadian Pacific has an Earnings ESP of +0.44% for the current quarter. The company has an expected earnings growth rate of 29.4% and 11.6% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current quarter and year improved 3.9% and 1.8%, respectively, over the last 60 days.
The company delivered positive earnings surprise in two out of the last four quarters with an average beat of 0.8%. The stock has surged 34.6% year to date. Canadian Pacific is expected to release earnings results on Jul 16, before the opening bell.
Omnicom Group Inc. OMC provides advertising, marketing and corporate communications services. The Zacks Rank #2 company also offers a range of services in customer relationship management and healthcare.
Omnicom Group has an Earnings ESP of +0.31% for the current quarter. The company has an expected earnings growth rate of 0.6% and 3.3% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current quarter improved 0.6% over the last 60 days.
The company delivered positive earnings surprise in in the last four quarters with an average beat of 5.3%. The stock has surged 15.7% year to date. Omnicom Group is expected to release earnings results on Jul 17, before the opening bell.
Chart Industries Inc. GTLS manufactures and sells engineered equipment and packaged solutions and provides value-add services for the energy and industrial gas industries worldwide. It operates through three segments: Energy & Chemicals, Distribution & Storage Western Hemisphere, and Distribution & Storage Eastern Hemisphere segments. It carries a Zacks Rank #2.
Chart Industries has an Earnings ESP of +3.28% for the current quarter. The company has expected earnings growth rate of 10.9% and 47.5% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current year improved 1% over the last 60 days.
The company delivered positive earnings surprise in three out of the last four quarters with an average beat of 16.6%. The stock has climbed 13.8% year to date. Chart Industries is expected to release earnings results on Jul 18, before the opening bell.
Skechers U.S.A. Inc. SKX designs, develops, markets and distributes footwear for men, women, and children as well as performance footwear for men and women under the Skechers GO brand worldwide. The Zacks Rank #2 company operates through three segments: Domestic Wholesale Sales, International Wholesale Sales, and Retail Sales.
Skechers U.S.A. has an Earnings ESP of +6.06% for the current quarter. The company has expected earnings growth of 13.8% and 5.2% for the current quarter and year, respectively. The company delivered positive earnings surprise in three out of the last four quarters with an average beat of 5.6%.
The stock has jumped 49% year to date. Skechers U.S.A. is expected to release earnings results on Jul 18, after the closing bell.
Cleveland-Cliffs Inc. CLF operates as an iron ore mining company in the United States, Canada and internationally. The Zacks Rank #2 company operates four iron ore mines, including the Tilden mine in Michigan, the Northshore, United Taconite and Hibbing mines in Minnesota.
Cleveland-Cliffs has an Earnings ESP of +6.77% for the current quarter. The Zacks Consensus Estimate for the current year improved 2.3% over the last 60 days. The company delivered positive earnings surprise in two out of the last four quarters with an average beat of 18%.
The stock has surged 36.7% year to date. Cleveland-Cliffs is expected to release earnings results on Jul 19, before the opening bell.
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