The fourth-quarter 2022 earnings season is gradually gaining momentum. This week is the first big one of this reporting cycle. The season will be important as market participants will closely monitor any sign of earnings, revenues or margin decline.
A large section of economists and financial experts are concerned that the U.S. economy may face at least a mild recession in 2023 with a higher interest rate regime and tighter monetary control adopted by the Fed.
Nevertheless, five large-cap companies are set to beat Q4 2022 earnings results next week. These are Nucor Corp. NUE, American Airlines Group Inc. AAL, International Business Machines Corp. IBM, SAP SE SAP and Rockwell Automation Inc. ROK.
Q4 2022 Earnings Results So Far
As of Jan 20, 55 S&P 500 companies reported their earnings results. Total earnings of these companies are down 10.8% year over year on 7.4% higher revenues with 67.3% beating EPS estimates and 67.3% 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 7.4% year over year on 4% higher revenues.
Our Top Picks
Five large-cap companies are set to beat earnings estimates this week. Each of these stocks carries either a Zacks Rank #2 (Buy) and 3 (Hold) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that for stocks with the combination of a Zacks Rank #3 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 five above-mentioned stocks in the last quarter.
Image Source: Zacks Investment Research
Nucor is committed to expanding its production capabilities and growing its business through strategic acquisitions. NUE has already commissioned some of its growth projects. These should drive growth and strengthen Nucor’s position as a low-cost producer.
NUE is also seeing strong momentum in the non-residential construction market and strong demand in the heavy equipment market. NUE remains focused on achieving greater penetration of the automotive market because of the segment’s long-term growth opportunities. Higher steel prices due to tight supply and higher end-market demand should also drive Nucor’s margins.
Zacks Rank #2 Nucor has an Earnings ESP of +3.29%. The Zacks Consensus Estimate for current-year earnings has improved 10.5% over the last 30 days. NUE recorded earnings surprises in the last four reported quarters, with an average beat of 3.9%. The company is set to release earnings results on Jan 26, before the opening bell.
American Airlines Group has benefitted from improved air-travel demand, particularly on the domestic front. Driven by soaring demand on healthy bookings, management expects total revenues in the fourth quarter of 2022 to be roughly 11-13% higher than the level recorded in fourth-quarter 2019.
AAL’s debt-reduction efforts are impressive as well. Management aims to reduce its debt by $15 billion by 2025. AAL’s codeshare agreement with Indian low-cost airline, IndiGo, is an added positive.
Zacks Rank #2 American Airlines Group has an Earnings ESP of +9.79%. It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 17.7% over the last 30 days.
AAL recorded earnings surprises in the last four reported quarters, with an average beat of 8.6%. The company is set to release earnings results on Jan 26, before the opening bell.
International Business Machines is likely to witness growth driven primarily by analytics, cloud computing, and security in the long haul. Synergies from the Red Hat buyout are boosting the competitive position of IBM in the hybrid cloud market.
International Business Machines is likely to benefit from the robust adoption and broad-based availability of IBM Blockchain World Wire — a blockchain-driven global payments network aimed at accelerating and optimizing cross-border payments. IBM is also poised to gain from the spin-off of the legacy infrastructure services business as it focuses on the hybrid cloud strategy.
Zacks Rank #3 International Business Machines has an Earnings ESP of +1.90%. It has an expected earnings growth rate of 5.3% for the current year. IBM recorded earnings surprises in three out of the last four reported quarters, with an average beat of 1.5%. The company is set to release earnings results on Jan 25, after the closing bell.
SAP’s performance is gaining from continued strength in its cloud business (especially the new Rise with SAP solution) across all regions. Synergies from recent acquisitions bode well. Frequent product launches like SAP Build augur well.
Momentum in SAP’s Business Process Intelligence platform, particularly the S/4HANA solutions along with healthy traction witnessed in SuccessFactors Employee Central, Ariba and Fieldglass, Qualtrics and other cloud-based offerings is noteworthy.
Zacks Rank #2 SAP has an Earnings ESP of +3.09%. It has an expected earnings growth rate of 20.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 20.2% over the last 30 days. SAP is set to release earnings results on Jan 26, before the opening bell.
Rockwell Automation reported record order levels of more than $10 billion in fiscal 2022, indicating solid underlying demand from customers across many industries and regions. ROK expects total sales growth of 7.5% to 11.5% for fiscal 2023.
Organic sales growth is projected at 9-13% for the fiscal with the CUBIC acquisition adding 1%. Huge capital investments across many end markets coupled with higher automation and digital transformation will continue to support ROK’s solid order levels.
Zacks Rank #3 ROK has an Earnings ESP of +4.76%. It has an expected earnings growth rate of 12.5% for the current year (ending September 2023). The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 30 days. ROK is set to release earnings results on Jan 26, before the opening bell.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.