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Barron's: 4 Stocks That Could Be Earnings-Season Winners

Barron's: 4 Stocks That Could Be Earnings-Season Winners

By    |   Tuesday, 15 October 2019 09:28 AM

Savvy investors reportedly can still find some stocks that could still be “winners” in a tough earnings season.

BTIG strategist Julian Emanuel notes that S&P 500 companies are expected to report a drop in their earnings-per-share of a about 4%, Barron’s reported.

“But these companies also tend to beat earnings forecasts, and if that continues at its historical rate, earnings growth would be down just around 1%, Emanuel explains. That isn’t too bad, all else being equal,” Barron’s explained.

“Despite the prospects for a small EPS recession this quarter, we look for good news to be rewarded as good news,” Emanuel predicted, according to Barron’s.

Emanuel screened for what he calls “positivity performers”—companies that are expected to produce year-over-year third-quarter earnings growth, and have beaten both revenue and EPS forecasts over the last eight quarters.

Emanuel found that 12 companies met those criteria, including Cisco Systems (CSCO), Mastercard (MA), United Technologies (UTX), and Salesforce.com (CRM).

To be sure, there is always the proverbial "wall of worry" for investors to scale as earnings season begins.

Investors are preparing for more cautious capital investment outlooks from U.S. companies as worries mount heading into earnings season about the possibility of an economic recession, Reuters explained.

Capital expenditure increases have been weaker than last year, when corporate tax cuts helped to bolster spending, and some strategists say they may even fall short of Wall Street's expectations given the concerns about the economy and a prolonged trade war between the United States and China.

Less spending on technology, machinery and other equipment would suggest corporate executives are less confident in the economy than they had been, another potential negative for the stock market, which has fallen amid a series of weak economic reports.

Capital expenditures are expected to have increased just 3.0% in the third quarter from a year ago, which would be the lowest since the second quarter of 2017, when capex declined slightly, according to data based on analysts' estimates compiled by Refinitiv's research senior manager, David Aurelio.

That estimate drops to 1.1% in the fourth quarter, and year-over-year declines are projected in some quarters of 2020.

"It's very likely that capex spending is going to be below expectations," said Kristina Hooper, chief global market strategist at Invesco in New York. "We are in a state of heightened economic policy uncertainty. That tamps down business investment."

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Savvy investors reportedly can still find some stocks that could still be “winners” in a tough earnings season.
stocks, winners, earnings
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2019-28-15
Tuesday, 15 October 2019 09:28 AM
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