We are in the thick of the second-quarter earnings season with 265 index members having reported their numbers as of Jul 27. Around 1000 companies are expected to release quarterly results this week. This includes 139 members of the S&P 500 index.
Total earnings of the S&P 500 members that have reported results across all sectors are up 23.6% from the year-ago period while revenues increased 10.1%. Of the companies that have reported, 80.8% of the companies delivered an earnings beat, while 72.1% surpassed revenues estimates. Considering all the companies that are yet to report, the S&P 500 is anticipated to register 23.6% growth in the quarter. This follows the 24.6% growth in earnings recorded in the first quarter of 2017 — the highest growth in almost seven years. (Read more: Earnings Season Shows Strong Revenue Momentum)
Out of the 16 Zacks Sectors, 12 are expected to log double-digit growth in the quarter. The Zacks Basic Materials sector is one of these. It is expected to be one of the top gainers with a projected 55% growth in earnings for the quarter. Per the Zacks Industry classification, the mining industry is grouped under the broader Basic Materials sector.
The mining industry has recovered ground with the improvement in commodity prices, renewing investors’ interest. Metals such as iron, aluminum and copper are essential to regular technology and infrastructure. Growth in U.S. GDP and continued improvement in end-use sectors like automotive, aerospace and construction acted as tailwinds for metals. Consequently, mining companies’ earnings have increased significantly while leverage ratios have come down. Further, improvement was witnessed in their capital allocation plans.
Though the recent imposition of tariffs on steel and aluminum imports is a welcome relief to domestic players, the fear of a global trade war is creating a cloud of uncertainty. This has worked in favor of the safe haven metal — gold.
Let’s have a sneak peek into four mining companies that are slated to report second-quarter 2018 results on Jul 31.
Arconic Inc. ARNC, the global leader in multi-material, precision engineered products and solutions for a variety of industries, is scheduled to release second-quarter 2018 results before the market opens.
Arconic reported a positive earnings surprise of 6.25% in the last reported quarter. The company has an average positive earnings surprise of 11.63% in the trailing four quarters. The Zacks Consensus Estimate of 29 cents per share for the to-be-reported quarter reflects a year-over-year decrease of 9.4%.
Arconic Inc. Price and EPS Surprise
Arconic Inc. price-eps-surprise | Arconic Inc. Quote
Arconic is focusing on cost reduction and productivity improvements across its businesses, which should lend support to its bottom line. The company gained from net cost saving in the last reported quarter and is expected to continue to benefit from its cost actions in the June quarter. However, Arconic is exposed to headwind from charges associated with higher aluminum prices, driven by LIFO (last-in, first-out) method of inventory accounting, increased processing costs and metal lag. (Read More: Arconic Q2 Earnings Preview: What's in the Cards?)
Our proven model does not conclusively show that Arconic is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. You can see the complete list of today’s Zacks #1 Rank stocks here.
Though a Zacks Rank #3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
U.S. Silica Holdings, Inc. SLCA, producer of industrial minerals, including sand proppants, whole grain silica, ground silica, fine ground silica, calcined kaolin clay and aplite clay, is set to release second-quarter 2018 results before the opening bell. In the last reported quarter, the company delivered a positive earnings surprise of 20%. Notably, U.S. Silica beat the Zacks Consensus Estimate in three of the trailing four quarters, recording an average positive surprise of 5.9%.
U.S. Silica Holdings, Inc. Price and EPS Surprise
U.S. Silica Holdings, Inc. price-eps-surprise | U.S. Silica Holdings, Inc. Quote
The Zacks Consensus Estimate of 69 cents per share for the to-be-reported quarter reflects a year-over-year increase of 81.6%.
The company expects volumes in the Oil & Gas segment to rise in the range of 10-15% for the second quarter. Moreover, the company expects spot pricing to continue to increase in the quarter at mid-single digit clips. It also expects improved pricing and volumes for Sandbox in the second quarter. For the Industrial and Specialty Products (ISP) unit, the company expects second-quarter results to be bolstered by higher volumes and margins, which is likely to be driven by a favorable product mix and positive seasonality.
U.S. Silica currently carries a Zacks Rank #3, which when combined with a ESP of -0.62%, makes surprise prediction difficult. (Read More: Will Sandbox Boost U.S. Silica's Earnings in Q2?)
Nexa Resources S.A. NEXA is expected to report second-quarter 2018 results after the closing bell.
The company reported a negative earnings surprise of 18.00% in the last reported quarter. It has an average negative earnings surprise of 35.25% in the trailing four quarters.
Nexa Resources S.A. Price and EPS Surprise
Nexa Resources S.A. price-eps-surprise | Nexa Resources S.A. Quote
The Zacks Consensus Estimate is at a loss of 47 cents per share for the to-be-reported quarter in contrast with earnings per share of 5 cents in the prior-year quarter.
The company has an Earnings ESP of 0.00%, which combined with a Zacks Rank #4 (Sell), lowers the predictive power of ESP and leaves our surprise prediction inconclusive.
Notably, we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
Arch Coal Inc. ARCH is scheduled to release second-quarter 2018 results before the market opens.
The company reported a negative earnings surprise of 26.25% in the last reported quarter. The company recorded an average positive earnings surprise of 19.29% in the preceding four quarters.
The Zacks Consensus Estimate of $1.95 for the to-be-reported quarter reflects a year-over-year improvement of 5.4%.
Our model does not indicate that the company is likely to beat on earnings this time around, as it has a Zacks Rank #3 and an Earnings ESP of -2.05%. Though a Zacks Rank of 3 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.
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