We are in the final leg of the Q1 2022 earnings session. US corporate earnings results are expected to return to normal after last year’s stunning growth. Earnings results for 2021 were favorably impacted compared to the pandemic-induced lockdowns in 2020. So far, corporate America has delivered better-than-expected results despite some large corporate earnings losses.
Several large-cap companies are expected to announce their quarterly financial figures this month. A handful of them with favorable Zacks rankings have the potential to beat earnings estimates, which should help stock prices going forward. Five of them are – Olaplex Management Inc. (OLPX – free report), Cisco Systems Inc. (CSCO – free report), Analog Devices Inc. (ADI – free report), Ross Stores Inc. (ROST – free report) and Costco Wholesale Corp. (COST – free report).
Strong first quarter results so far
As of May 6, 437 S&P 500 companies have released their results. Year-over-year, total profits for these companies rose 8.9% on revenues up 14.6%. Additionally, 79.4% of these companies exceeded profit estimates and 75.3% exceeded revenue estimates.
For the first quarter, total earnings for the S&P 500 are currently expected to rise 9.4% year-over-year, on revenue up 13.2%. The current estimate saw a significant 4.3% improvement in year-over-year earnings to estimated 10% higher earnings at the start of the reporting cycle.
Our top picks
Five companies with favorable Zacks rankings will release their results this month. Each of these stocks carries a Zacks Rank #2 (Buy) and has a positive earnings ESP. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that for stocks with the combination of a Zacks rank of #3 (Hold) or better and a positive earnings ESP, the probability of an earnings overshoot is as high as 70%. These shares should appreciate after the publication of their results. You can discover the best stocks to buy or sell before they’re flagged with our earnings ESP filter.
The chart below shows the price performance of our five picks over the past quarter.
Image source: Zacks Investment Research
Olaplex is a technology-driven beauty care company. OLPX manufactures and sells hair care products. Olaplex offers hair care shampoos and conditioners for the treatment, maintenance and protection of hair.
Olaplex provides hair care products to professional hair salons, retailers and everyday consumers. OLPX’s products are sold through an omnichannel platform serving professional, specialty retail and direct-to-consumer channels.
Olaplex has an ESP on gains of +6.93%. It has an expected earnings growth rate of 35% for the current year. The Zacks consensus estimate for current-year earnings has improved 12.5% over the past 60 days. OLPX is expected to release results on May 11, before the opening bell.
Analog devices operates in the communication, consumer, industrial and automotive end markets. Additionally, strong demand for high-performance analog and mixed-signal solutions has been a tailwind. The growing momentum in the electric vehicle space through robust battery management system solutions remains a positive for ADI.
Additionally, the increasing gains in power design are the other bright spots for Analog Devices. The strong momentum of the HEV platform in the cabin electronics ecosystem remains a tailwind for ADI. Additionally, Analog Devices remains optimistic about the growth prospects associated with its acquisition of Maxim and 5G.
ADI has an ESP on earnings of +0.60%. It forecasts a profit growth rate of 30.5% for the current year (October 2022). The Zacks consensus estimate for current-year earnings has improved 1.3% over the past 60 days.
Analog Devices has recorded earnings surprises over the past four quarters, averaging 6%. The company is expected to release its results on May 18, before the opening bell.
CiscoThe performance of benefited from the strength of its product portfolio, its customer segments and the momentum of growth in product orders. The strength of the Webscale business and strong adoption of switching solutions, particularly the Catalyst 9000 and Meraki offerings, as well as robust adoption of the company’s subscription offerings, are its bright spots.
CSCO is benefiting from a healthy adoption of identity and access security solutions, advanced threats and unified threat management in a context of strong growth in Internet traffic. The acquisition of Acacia Communications bodes well for the long term.
Cisco has a +0.84% earnings ESP. It forecasts a profit growth rate of 7.1% for the current year (July 2022). The Zacks consensus estimate for current-year earnings has improved 0.9% over the past 90 days.
CSCO has posted earnings surprises over the past four quarters, averaging 1.8%. The company is expected to release its results on May 18, after the closing bell.
Ross Stores is benefiting from strong customer demand, accelerating vaccination rates, government stimulus payments and easing of COVID-19 restrictions. ROST sales benefited from broad-based growth in certain merchandise categories and regions, as well as strong comparable store sales.
The children’s and men’s categories performed well during the holiday sales period, and the Midwest and Southeast regions were the best performing regions for Ross stores. Sales trends were also robust in dd’s DISCOUNTS business.
ROST has an ESP on gains of +1.24%. It forecasts a profit growth rate of 3.9% for the current year (January 2023). Ross Stores has recorded earnings surprises over the past four reported quarters, averaging 33.3%. The company is expected to report results on May 19, after the closing bell.
CostcoKey strengths of are strategic investments, a customer-centric approach, merchandise initiatives and a focus on membership growth. These factors have helped COST record impressive sales and profit numbers.
We expect Costco to report a 15.8% improvement in adjusted net income in fiscal 2022 on 13.1% revenue growth. This outlook explains COST’s ability to navigate the current inflationary environment and supply chain bottlenecks on multiple fronts. A favorable product mix, steady store footfall, pricing power and strong liquidity position should help Costco continue to outperform.
Costco has an ESP on earnings of +1.09%. It has an expected earnings growth rate of 18% for the current year (August 2022). The Zacks consensus estimate for current year earnings has improved 0.3% over the past 7 days.
COST has recorded earnings surprises over the past four reported quarters, averaging 13.3%. The company is expected to release its results on May 26, after the closing bell.
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