Elude Volatility: Avoid These 3 Stocks Likely to Miss Earnings

Stocks opened lower on Tuesday morning, just one day after markets signaled an intent to bounce back quickly from their worst week in two years. No one should be declaring a bottom just yet, but the sell-off appears to be more so a return of volatility than a market-wide crash—and some investors might need to adjust their strategies accordingly.

One method to implement in a volatile market is to avoid companies that are likely to disappoint investors by posting soft earnings results. The busiest stretch of Q4 earnings seasons is already over, but several market-moving reports are still on the horizon.

With that said, one of the best ways for investors to elude the possibility of continued volatility over the next few trading periods is to avoid companies that are likely to underperform earnings estimates. Luckily, Zacks Premium customers can utilize the Earnings ESP Screener in order to search for stocks that are expected to surprise, in one way or the other.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

In contrast, a stock with a Zacks Rank #3 (Hold) or worse, coupled with a negative Earnings ESP, is one that we typically want to avoid during earnings season. Today, we are giving our readers a free look at three of these weak stocks in order to help them identify the high-risk companies ahead of their upcoming reports.

Check them out now:

1.       Pilgrim’s Pride Corporation (PPC)

Pilgrim’s Pride is one of the largest chicken companies in the US, Mexico, and Puerto Rico. The company is scheduled to report its latest quarterly earnings results after the market closes on Feb. 14. PPC is currently sporting a Zacks Rank #4 (Sell) and has an Earnings ESP of -3.77%.

Based on our current consensus estimates, Pilgrim’s Pride is expected to report earnings of $ 0.53 per share and revenues of $ 2.56 billion. But the company has witnessed two negative estimate revisions within the past 30 days, and its Most Accurate Estimate—the representation of the most recent analyst sentiment—calls for earnings of just $ 0.51 per share.

 

2.       Hudson Pacific Properties, Inc. (HPP)

Hudson Pacific Properties is a full-service, vertically integrated real estate company focused on owning office properties and media and entertainment properties in California. The company is scheduled to release its brand-new quarterly report before the market opens on Feb. 15. HPP is holding a Zacks Rank #5 (Strong Sell) and an Earnings ESP of -0.51%.

According to our overall consensus estimates, Hudson Pacific is projected to report earnings of $ 0.50 per share and revenues of $ 184.60 million. These results would represent respectable growth of 8.7% and 10.4%, respectively. However, the company’s Most Accurate Estimate has slipped to $ 0.49 per share recently.

 

3.       Newell Brands Inc. (NWL)

Newell Brands is a global consumer goods company with a portfolio of well-known brands, including Paper Mate, Sharpie, Dymo, EXPO, Parker, Elmer’s, Coleman, and many more. The company is scheduled to announce its quarterly results before the opening bell on Feb. 16. NWL is currently sporting a Zacks Rank #5 (Strong Sell) and an Earnings ESP of -2.22%.

Our overall consensus estimates are calling for earnings of $ 0.69 per share and revenues of $ 3.72 billion. These results would represent year-over-year growth of -13.8% and -10.2%, respectively. Newell has also witnessed nine negative estimate revisions within the past 30 days, and its Most Accurate Estimate sits at $ 0.67 per share.

 

Want more analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

The Hottest Tech Mega-Trend of All

Last year, it generated $ 8 billion in global revenues. By 2020, it's predicted to blast through the roof to $ 47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Newell Brands Inc. (NWL): Free Stock Analysis Report
 
Pilgrim’s Pride Corporation (PPC): Free Stock Analysis Report
 
Hudson Pacific Properties, Inc. (HPP): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research
Zacks Investment Research – All Commentary Articles

Pin It