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Buy 5 Top Stocks Set to Beat Earnings Estimates This Month

The coronavirus-stricken first-quarter 2020 earnings season is gradually moving toward its end. Economic disaster due to lockdowns imposed by several governments to curb the pandemic, has taken a significant toll on corporate earnings. However, a handful of stocks with a favorable Zacks Rank are poised to beat earnings estimates this month.

Brief Review of First Quarter

U.S. GDP for first-quarter 2020 contracted 4.8% compared with an expansion of 2.1% in the previous quarter. This marks the first negative GDP quarter since first-quarter 2014 and the highest decline in GDP in any quarter since fourth-quarter 2008.

Notably, consumer spending, the largest component (67%) of the GDP plunged 7.6%. Durable goods spending plummeted 16.1% while expenditures on services declined 10.2%. Goods consumption dropped 1.3% while services shed 10.2%.

Several disappointing numbers including jobs data, industrial production, retail sales, manufacturing activities, home building and consumer confidence, revealed how badly the U.S. economy was hurt in the first quarter due to lockdowns, both domestic and international.

Disappointing First-Quarter Earnings So Far

As of May 8, 434 S&P 500 members reported first-quarter  earnings results. Total earnings of these companies are down 10.6% from the same period last year on 1.1% higher revenues. Of the total, 67.7% surpassed EPS estimates and 58.3% outpaced revenue estimates.

Overall, first-quarter  earnings for the S&P 500 Index were projected to be down 12.8% year over year on 1.3% higher revenues. This is in sharp contrast to 4% earnings growth expected in early January.

Our Top Picks

We have narrowed down our search to five stocks that will release earnings results this month. Each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy) and has a positive Earnings ESP.

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 expected to soar after earnings release. 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.

JOYY Inc. YY is engaged in the live streaming business in the People's Republic of China. It operates YY Live platform, an online music and entertainment live streaming service, Huya platform, a live streaming platform and Bigo, a leading short-form video social platform. The Zacks Rank # 1 company has an Earnings ESP of +2.52% for first-quarter 2020. It has a trailing four-quarter positive earnings surprise of 3.8%, on average. The company is set to release earnings results on May 20, after the closing bell.

BJ's Wholesale Club Holdings Inc. BJ is an operator of membership warehouse clubs primarily in East United States. It operates clubs and BJ's Gas locations in several states. The Zacks Rank # 1 company has an Earnings ESP of +6.42% for the first quarter of fiscal 2021.

BJ's Wholesale Club has an expected earnings growth rate of 18.5% for the current year (ending January 2021). The Zacks Consensus Estimate for current-year earnings has improved 4.2% over the last 30 days. It has a trailing four-quarter positive earnings surprise of 3%, on average. The company is set to release earnings results on May 21, before the opening bell.

NVIDIA Corp. NVDA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. It operates in two segments, GPU and Tegra Processor. The Zacks Rank # 2 company has an Earnings ESP of +0.15% for the first quarter of fiscal 2021.

NVIDIA has an expected earnings growth rate of 28.7% for the current year (ending January 2021). The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 30 days. It has a trailing four-quarter positive earnings surprise of 10.6%, on average. The company is set to release earnings results on May 21, after the closing bell.

Anaplan Inc. PLAN develops and publishes a cloud platform for business applications. It offers a platform which allow business users to build and maintain strategic, operational and business planning and performance management. The Zacks Rank # 1 company has an Earnings ESP of +3.70% for the first quarter of fiscal 2021. Anaplan has a trailing four-quarter positive earnings surprise of 30.9%, on average. The company is set to release earnings results on May 26, before the opening bell.

Nutanix Inc. NTNX provides enterprise cloud operating system that combines server, storage, virtualization and networking software into one integrated solution. The Zacks Rank # 1 company has an Earnings ESP of +1.68% for the third quarter of fiscal 2020.

The Zacks Consensus Estimate for current-year earnings has improved 2.7% over the last 30 days. It has a trailing four-quarter positive earnings surprise of 9%, on average. The company is set to release earnings results on May 27, after the closing bell.

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