The economy looks much more balanced now with consumer confidence moving north, job market conditions steadily improving and the bond-buying program nearing its end. Moreover, a gradual recovery in the housing market and the strengthening manufacturing sector are also helping the economy in shaping up. The cloud of obscurity that had spread over the economy in the first quarter when gross domestic product ("GDP") faltered 2.1% has now disappeared.
The third and final data for GDP is out and reveals that the U.S. economy is rebounding. According to Bureau of Economic Analysis, GDP jumped 4.6% in the second quarter faring better than the second estimate of 4.2% growth and the first estimate of 4% increase. This is the best performance since the final quarter of 2011 that signals a bullish atmosphere for the balance of the year. Higher business investment and export along with improved consumer spending primarily for health services laid the foundation for strong GDP.
Consumer confidence – a key determinant of the economy’s health – also improved significantly, reaching the pinnacle this September since July 2013. The data released by the University of Michigan and Thomson Reuters showed that the consumer sentiment index jumped to 84.6 in September from the August reading of 82.5, buoyed by improving fundamentals.
We expect this positive sentiment to encourage consumer spending, which accounts for over two-thirds of U.S. economic activity. The Commerce Department revealed that consumer spending inched up 0.5% sequentially in August, after remaining unchanged in July. This came on the back of a 0.3% increase in personal income that reflects an improvement from 0.2% growth registered in July. We believe that despite favorable economic numbers, the Fed will not be in a rush to increase the interest rate for fear of derailing the recovery with a sudden rise.
With the economy in high gear, it is time to enrich your portfolio with a favorably ranked stock powered by optimism on earnings beat before the earnings season kicks off. This increases your chance of getting higher returns.
Profitable Mix: Favorable Zacks Rank + Positive Earnings ESP
A favorable rank indicates positive estimate revisions by analysts who are optimistic on the future of companies. Then again, Earnings ESP is our proprietary methodology for identifying stocks that have the best chance to surprise with their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
Here, we have identified 3 stocks with an impressive Zacks Rank and positive Earnings ESP. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
Prominent Picks
Apple Inc. (AAPL) is a Zacks Rank #2 (Buy) stock having an earnings ESP of +1.56%. The current Zacks Consensus Estimate for fourth-quarter fiscal 2014 is $1.28 per share, portraying 8.1% growth from the prior-year period. This Cupertino, CA based designer, manufacturer and seller of personal computers (Mac), portable digital music players (iPod) and mobile communication devices (iPhone and iPad), registered an average positive earnings surprise of 6.5% over the trailing four quarters, and has a long-term earnings growth rate of 12.8%. The company is expected to report on Oct 27.
The Boeing Company (BA) is a Zacks Rank #2 (Buy) stock with an earnings ESP of +7.04%. The current Zacks Consensus Estimate for the third quarter of 2014 is pegged at $1.99 per share, reflecting an increase of 10.8% year over year. This Chicago-based manufacturer of commercial jetliners, military aircraft, satellites and missile defense registered an average positive earnings surprise of 17.3% over the trailing four quarters, and has a long-term earnings growth rate of 10.7%. The company is expected to report on Oct 22.
The Home Depot, Inc. (HD) is a Zacks Rank #2 (Buy) stock having an earnings ESP of +0.89%. The current Zacks Consensus Estimate for third-quarter fiscal 2014 is $1.13 per share, which indicates an increase of 18.4% year over year. This Atlanta, GA based home improvement retailer registered an average positive earnings surprise of 4.7% over the trailing four quarters, and has a long-term earnings growth rate of 14.7%. The company’s earnings are expected to be released on Nov 18.
Bottom Line
Who doesn’t want a portfolio of stocks that have the potential to outperform and beat earnings estimate? You can use Zacks Stock Screener to find other stocks with this winning combination.
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
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment