With second-quarter earnings seasons getting started, you might be wondering how companies’ financials will stack up against analysts’ expectations.
Stocks often rise or fall depending on how actual earnings compare to expectations.
Bank of America strategists have created lists of the S&P 500 stocks most likely to beat analysts’ forecasts and those most likely to lag the forecasts.
For the “beats,” BofA strategists screened for companies with buy ratings from BofA analysts that also beat Wall Street estimates for earnings per share (EPS) and sales in the first quarter.
Here are eight of the stocks that appear on the list and are underweighted by active funds, according to BofA.
· Marathon Petroleum (MPC), an oil refiner;
· Coca-Cola (KO), the beverage company;
· Bristol-Myers Squibb (BMY), the drug company;
· Emerson Electric (EMR), which makes industrial products;
· BorgWarner (BWA), which makes auto parts;
· Ansys (ANSS), an engineering software maker;
· International Flavors & Fragrances (IFF), which provides flavor and fragrances for food and cosmetics;
· Synchrony Financial (SYF), a consumer financial services company.
For its list of laggards, BofA applied reverse screens from its list of beats. It’s S&P 500 companies with underperform ratings from BofA analysts that also trailed Wall Street analysts’ estimates for EPS and sales in the first quarter.
Among such stocks that are overweighted by active funds, according to BofA, are Las Vegas Sands (LVS), the casino company and Align Technology (ALGN), a medical device maker for orthodontics.
Morningstar’s Take on Marathon Petroleum
Morningstar analyst Allen Good assigns the company no moat and puts fair value for the stock at $87. It recently traded at $82.70.
“Marathon Petroleum turned in another strong quarter,” he wrote in a commentary after its first-quarter earnings report.
“The refining market continues to gain strength, as margins widen given strong demand and Russia sanction-related disruptions to supply. Marathon stands to be a beneficiary, while its large repurchase program sets it apart from peers.”
Morningstar’s Take on Coca-Cola
Morningstar analyst Chris Own gives the company a wide moat and puts fair value for the stock at $58. It recently traded at $63.
“Coca-Cola’s ubiquity and brand resonance in the non-alcoholic beverage category has been going strong for over 130 years, and we see structural dynamics that will ensure this persists,” he wrote in a commentary.
“Despite competing in a mature industry, the firm is adequately exposed, either directly or indirectly, to growth vectors such as premium water and energy drinks.
“Moreover, we believe Coke will be able to continue extracting incremental value growth from the carbonated soft drink market.”
The author of this story owns shares of Coca-Cola.
