The fourth-quarter 2022 earnings season is gradually gaining momentum. As of Jan 18, 38 S&P 500 companies have reported their earnings results. Total earnings of these companies are down 13.2% year over year on 7.3% higher revenues with 65.8% beating EPS estimates and 63.2% beating revenue estimates. Our current projection shows that for fourth-quarter 2022, total earnings of the S&P 500 Index as a whole are expected to decline 7.2% year over year on 4% higher revenues.
Nevertheless, five midcap stocks with a favorable Zacks Rank are set to beat on earnings. The combination of a favorable Zacks Rank and a possible earnings beat should drive their stock prices in the near-term. These companies are – Patterson-UTI Energy Inc. PTEN, e.l.f. Beauty Inc. ELF, Helmerich & Payne Inc. HP, Reinsurance Group of America Inc. RGA and Janus Henderson Group plc JHG.
Mid-Caps in Q4 2022 At a Glance
Like large-cap and small-cap stocks, the mid-caps have also suffered in 2022. The mid-cap centric S&P 400 Index was down 14.9%. However, in fourth-quarter 2022, the S&P 400 Index witnessed an impressive rally with a gain of 10.3%.
This happened despite the fact that the inflation was stuck at its 40-year high level due to the pandemic-led destruction of the global supply-chain system and strong demand from U.S. citizens due to unprecedented fiscal and monetary stimuli in the pandemic-ridden years.
Moreover, aggressive interest rate hikes by major central banks led by the Fed, lockdown in China due to the resurgence of COVID-19 infections and the geopolitical conflict between Russia and Ukraine rattled the global financial world last quarter.
Our Top Picks
Five mid-cap (market capital > $1 billion Earnings ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.
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%. These stocks are anticipated to appreciate after their earnings releases. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The chart below shows the price performance of our five picks in the last quarter.
Image Source: Zacks Investment Research
Helmerich & Payne is engaged in the contract drilling of oil and gas wells in the United States and internationally. HP’s technologically-advanced FlexRigs are much in demand and the company has already upgraded most of its drilling feet with the latest technology.
Customer acceptance of Helmerich & Payne’s digitization efforts has led to cost reduction, improvement in efficiency and higher profits. HP’s low debt levels, both on an absolute and relative basis, are also impressive.
Helmerich & Payne has an Earnings ESP of +8.68% for first-quarter fiscal 2023. It has an expected earnings growth rate of more than 100% for the current year (ending September 2023). The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last seven days.
HP recorded earnings surprises in the last four reported quarters, with an average beat of 120.2%. The company is set to release earnings results on Jan 30, after the closing bell.
e.l.f. Beauty operates as a cosmetic company. ELF’s cosmetic category primarily consists of face makeup, eye makeup, lip products, nail products and cosmetics sets/kits. ELF sells its products through national and international retailers and direct-to-consumer channels, which include e-commerce platforms in the United States, and internationally primarily through distributors.
e.l.f. Beauty has an Earnings ESP of +31.48% for third-quarter fiscal 2023. It has an expected earnings growth rate of 23.3% for the current year (ending March 2023). The Zacks Consensus Estimate for current-year earnings has improved 30% over the last 90 days.
ELF recorded earnings surprises in the last four reported quarters, with an average beat of 92.8%. The company is set to release earnings results on Feb 1, after the closing bell.
Reinsurance Group of America steadily benefits from a mix of organic and transactional opportunities. RGA’s niche position in reinsurance markets and expansion of international footprint are positives. Individual mortality has matured and provides a base for stable earnings. Individual mortality has matured and provides a base for stable earnings.
Significant value embedded in in-force business should generate predictable long-term earnings. RGA is poised to benefit from improving life reinsurance pricing environment and higher investment income. A solid solvency position reflects its ability to make interest payments.
Reinsurance Group of America has an Earnings ESP of +1.59% for fourth quarter 2022. It has an expected earnings growth rate of 5.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the last 30 days.
RGA recorded earnings surprises in three out of the last four reported quarters, with an average beat of 49.7%. The company is set to release earnings results on Feb 2, after the closing bell.
Patterson-UTI Energy provides onshore contract drilling services to oil and natural gas operators in the United States and internationally. PTEN operates through three segments: Contract Drilling Services, Pressure Pumping Services, and Directional Drilling Services.
The Contract Drilling Services segment markets its contract drilling services primarily in west Texas, Appalachia, Rockies, Oklahoma, South Texas, East Texas, and Colombia. The Pressure Pumping Services segment offers pressure pumping services that consist of well stimulation for the completion of new wells and remedial work on existing wells, as well as hydraulic fracturing, cementing, and acid pumping services in Texas and the Appalachian region.
The Directional Drilling Services segment provides a suite of directional drilling services, including directional drilling and measurement-while-drilling services, supply and rental of downhole performance motors, and software and services that enhances the accuracy of directional and horizontal wellbores, wellbore quality, and on-bottom rate of penetration.
Patterson-UTI Energy has an Earnings ESP of +5.53% for fourth-quarter 2022. It has an expected earnings growth rate of 5.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 11% over the last 30 days.
PTEN recorded earnings surprises in three out of the last four reported quarters, with an average beat of 169.2%. The company is set to release earnings results on Feb 8, after the closing bell.
Janus Henderson Group is an asset management holding entity. Through its subsidiaries, JHG provides services to institutional, retail clients, and high net worth clients. Janus Henderson Group manages separate client-focused equity and fixed income portfolios. JHG also manages equity, fixed-income, and balanced mutual funds for its clients. JHG invests in public equity and fixed income markets, as well as in real estate and private equity.
Janus Henderson Group has an Earnings ESP of +10.84% for fourth-quarter 2022. The Zacks Consensus Estimate for current-year earnings has improved 2.1% over the last seven days.
JHG recorded earnings surprises in two out of the last four reported quarters, with an average beat of 2%. The company is set to release earnings results on Feb 2, before the opening bell.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.