In this article, we discuss the 10 stocks to buy before their earnings reports. If you want to read about some more stocks expected to gain following their quarterly results, go directly to 5 Stocks to Buy Before Their Earnings Reports.
With the inflation in the US at a 40-year high and the Federal Reserve trying to combat it with interest rate hikes, the probability of a recession occurring by the end of 2023 is gaining momentum with every passing day. Hence, investors are looking for companies that are fundamentally strong and can withstand the impact of a severe economic downturn in the long term. In the next quarterly results, analysts anticipate the companies in the S&P 500 Index to report an average increase in revenue of 10%, but the earnings are only expected to rise by 5.5% as inflation and other economic factors are expected to erode the bottom-line margins.
The S&P 500’s second-quarter earnings season has gotten off to a slower start than usual due to the lower-than-average number and size of revenue and earnings beats. As a consequence, since June 30, there hasn’t been any progress in the second quarter’s revenue and earnings growth rates. Till July 15, the total proportion of companies that had released their Q2 results stood at 7%. The actual EPS provided by these firms exceeded projections by 60%, lower than the 77% average of five years. Companies are collectively declaring earnings that are 2% over projections, which is less than the 8.8% five-year average. Popular companies such as Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), and The Procter & Gamble Company (NYSE:PG) are expected to announce their quarterly earnings reports in the following two weeks.
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Our Methodology
In this article, we will discuss 10 stocks that investors should buy before their earnings reports are published. These companies have reported strong quarterly revenue and EPS figures in the past, and we expect them to do the same in the coming quarter as well. We will discuss the catalysts that reflect why these companies are in a position to report strong growth and also go through the guidance outlook for the upcoming quarters. The companies discussed are expected to report their earnings in the next two weeks.
10 Stocks to Buy Before Their Earnings Reports
10. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 64
Earnings Announcement Date: July 26
The Coca-Cola Company (NYSE:KO) is a Georgia-based multinational beverage firm.
On July 20, Andrea Teixeira at JPMorgan gave The Coca-Cola Company (NYSE:KO) an Overweight rating with a price target of $70 ahead of the company’s Q2 2022 results. Teixeira stated that it would be ideal for The Coca-Cola Company (NYSE:KO) to maintain its status as a “defensive holding with upside and strong underlying momentum.”
The Coca-Cola Company (NYSE:KO) surpassed the consensus EPS estimates for Q1 2022 by 10.44%. The company also recorded a 16% YoY growth in sales to $10.5 billion. For Q2 2022, The Coca-Cola Company (NYSE:KO) is expected to post an EPS of $0.69, higher than the consensus estimates by $0.2.
The Coca-Cola Company (NYSE:KO) was discussed in the Q4 2021 investor letter of ClearBridge Investments. Here’s what the firm said:
“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We added to more defensive areas of the portfolio like consumer staples (Coca-Cola). While the next month or two will likely prove choppy on account of the Omicron variant, we believe that Omicron, like Delta, represents a speed bump on the way to recovery rather than a true change in course. We see strong economic momentum continuing in 2022 and we expect interest rates to rise. After a decade of remarkably low rates, we would not be surprised if this change in direction is accompanied by some fits and starts in the markets. With our emphasis on pricing power, purposeful sector exposure, valuation discipline, and a strong dividend profile, we believe we are well-positioned for the year ahead.”
As of Q1 2022, 64 funds held a stake in The Coca-Cola Company (NYSE:KO).
9. First United Corporation (NASDAQ:FUNC)
Number of Hedge Fund Holders: 5
Earnings Announcement Date: July 26
First United Corporation (NASDAQ:FUNC) operates as a bank holding corporation.
Analysts expect First United Corporation (NASDAQ:FUNC) to record an EPS of $0.88 for Q2 2022, reflecting a YoY increase of over 33%. Furthermore, the revenue has been predicted at $18.73 million, reflecting a 9.3% rise from the same period last year. Analysts remain bullish on First United Corporation (NASDAQ:FUNC) stock due to the company’s strong fundamentals. The EPS estimates were revised upwards by 7.87% in the last 30 days.
First United Corporation’s (NASDAQ:FUNC) payout ratio stands at 17% as of July 22, reflecting a sustainable level. If the company continues the dividend-paying trend, the payout ratio will rise to 22% by 2023.
EJF Capital was the leading hedge fund holder in First United Corporation’s (NASDAQ:FUNC) during the first quarter of the year. At the end of Q1 2022, 5 funds held a cumulative stake worth over $17 million in First United Corporation (NASDAQ:FUNC).
8. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 259
Earnings Announcement Date: July 26
Microsoft Corporation (NASDAQ:MSFT) is a Redmond, Washington-based diversified technology corporation.
In the last four quarters, Microsoft Corporation (NASDAQ:MSFT) has consistently surpassed revenue and earnings estimates. Microsoft Corporation (NASDAQ:MSFT) has announced that it will slow down the new hiring of employees in the cloud and security division during challenging economic times. Industry peers like Alphabet Inc. (NASDAQ:GOOGL), Apple Inc. (NASDAQ:AAPL), and Meta Platforms, Inc. (NASDAQ:META) have already made similar announcements as corporations are taking a conservative approach due to inflation and a recession looming. In Q1 2022, Microsoft Corporation (NASDAQ:MSFT) recorded a 31% YoY increase in revenue. Analysts expect Microsoft Corporation (NASDAQ:MSFT) to record revenue of $51.1 billion in Q2 2022, higher than the consensus forecast of $50.9 billion.
Polen Capital shared its insights on Microsoft Corporation (NASDAQ:MSFT) in its Q1 2022 investor letter. Here’s what the firm said:
“Microsoft’s business is firing on all cylinders and continue to enjoy an acceleration in their respective fundamentals because of the increase in digitization around the world. Nearly every company today is searching for ways to become more digital, and both Microsoft and Accenture are positioned to provide many of the solutions these companies seek. This inflection in fundamentals was not lost on the market, and each business’s stock performed exceptionally well in 2021. In fact, they represented two of the three top absolute performers for the Global Growth Portfolio last year. As a result, their respective stocks are currently more fully priced. As such, we lowered Microsoft from our largest position within the Portfolio. We maintain high conviction in Microsoft and plan to own it for many years, but recognize the increase in its prices.”
Of the 912 hedge funds in Insider Monkey’s database, 259 funds held a stake in Microsoft Corporation (NASDAQ:MSFT) as of Q1 2022.
7. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 160
Earnings Announcement Date: July 26
Alphabet Inc. (NASDAQ:GOOGL) is a Mountain View, California-based diversified multinational technology conglomerate.
Since the start of the year, Alphabet Inc. (NASDAQ:GOOGL) stock has lost 24% of its value. Alphabet Inc. (NASDAQ:GOOGL) has undergone a 20-for-1 stock split to make its shares affordable to retail investors and give life to dwindling share price performance. Although Alphabet Inc. (NASDAQ:GOOGL) can be expected to decelerate in top-line growth due to foreign exchange headwinds and tougher YoY comparatives, the company has taken actions to safeguard its margin and keep it stable in the upcoming quarterly results. In Q2 2022, Alphabet Inc. (NASDAQ:GOOGL) is expected to report an EPS of $1.30 and revenue of $58.1 billion, reflecting an increase of 14% from the same period last year.
Diamond Hill Capital discussed its stance on Alphabet Inc. (NASDAQ:GOOGL) in its Q1 2022 investor letter. Here’s what the investment management firm said:
“The market environment in Q1 provided a meaningful opportunity for us to initiate positions in high-quality names that sold off indiscriminately during the quarter and were trading at prices we haven’t seen in quite some time. Alphabet (NASDAQ:GOOG) is an example. Alphabet, which owns Google and other products, sold off as the expected rise in interest rates by the Federal Reserve drove what we viewed as excessive investor pessimism. We believe these headwinds are temporary and expect Google’s search engine advertising, YouTube advertising and other initiatives to continue driving revenue growth over the long term.”
Overall, 160 hedge funds held a stake in Alphabet Inc. (NASDAQ:GOOGL) as of Q1 2022.
6. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 73
Earnings Announcement Date: July 27
QUALCOMM Incorporated (NASDAQ:QCOM) is a San Diego, California-based semiconductor company.
Ross Seymore at Deutsche Bank sees fundamental strength in the majority of the semiconductor sector during Q2 and Q3 2022 earnings seasons. The analyst has given QUALCOMM Incorporated (NASDAQ:QCOM) stock a Buy rating with a target price of $170 in a note issued to investors on July 20. It must be noted that QUALCOMM Incorporated (NASDAQ:QCOM) is an industry leader in the growing 5G technology and will have an active role in the adoption of 5G handsets. Furthermore, QUALCOMM Incorporated (NASDAQ:QCOM) offers diversity as it sells chips to the cloud computing and automobile industry. The company now has a robust licensing business after settling and winning numerous legal battles.
Here’s what ClearBridge Investments said about QUALCOMM Incorporated (NASDAQ:QCOM) in its Q4 2021 investor letter:
“Market strength continued in the fourth quarter, with only the communication services sector down in the Russell 1000 Value Index. Portfolio returns benefited from the strong performance of semiconductor maker Qualcomm, which has executed exceptionally well in pursuing the transition to 5G, growing both content and share due to its leadership position in cellular technology. The chipmaker recently outlined a number of peripheral growth opportunities outside of mobile markets, including automotive (where it hopes to leverage its strong presence in the automotive infotainment space into advanced driver assistance systems), Internet of Things (including opportunities in the PC market, VR/AR market, and factory automation) and radio frequency (where mmWave adoption globally, including China, would drive substantial upside).”
Beech Hill Partners is the leading hedge fund investor in QUALCOMM Incorporated (NASDAQ:QCOM) as of Q1 2022.
In addition to QUALCOMM Incorporated (NASDAQ:QCOM), analysts are bullish on popular stocks such as Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), and The Procter & Gamble Company (NYSE:PG) ahead of their quarterly results.
Click to continue reading and see 5 Stocks to Buy Before Their Earnings Reports.
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Disclose. None. 10 Stocks to Buy Before Their Earnings Reports is originally published on Insider Monkey.
