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Earnings Season Outlook: Bank of America Identifies Stocks with Upside Potential
Bleak Outlook for Earnings Season
The upcoming earnings season appears gloomy, with analysts expecting a 7.2% decline in S&P 500 earnings for the second quarter compared to the previous year. This would mark the largest year-over-year profit decline since Q2 2020. However, Bank of America believes that there are still some companies that have the potential to deliver upside surprises.
Bank of America's Criteria
To identify these stocks, Bank of America applied specific criteria. They selected companies that had an earnings estimate above the Street consensus, had previously beaten earnings per share and revenue expectations, and carried buy ratings from BofA analysts. Following these criteria, the bank identified 12 stocks that met their standards.
Stocks Poised for Upside
Among the stocks identified by Bank of America, Meta Platforms stands out. The company has experienced significant growth this year, with its stock more than doubling in value. Meta's recent launch of Threads, a rival app to Twitter, has also attracted over 100 million users. Meta is set to report its second-quarter earnings on July 26.
Another stock on the list is SolarEdge. Although the solar stock has declined by more than 6% year-to-date, Bank of America's price target implies a potential upside of nearly 50% over the next 12 months. Analysts argue that concerns about the outlook for components seem misplaced, and expect EBITDA acceleration driven by operating leverage and commercial and industrial deployments.
D.R. Horton, United Rentals, and Corning also made Bank of America's list of stocks with potential for positive surprises. These companies have demonstrated strong performance and met the bank's criteria for earnings and revenue beats in previous reporting seasons.
In conclusion, while the earnings season is expected to bring overall declines, Bank of America has identified several stocks that have the potential to exceed consensus earnings expectations. Investors should carefully consider these opportunities as they navigate the current market.
Hot Take: Potential Impact on New Businesses
The outlook for the upcoming earnings season may appear gloomy overall, with declines expected in S&P 500 earnings. However, Bank of America's identification of stocks with upside potential could offer valuable insights for new businesses seeking to navigate the current market.
Bank of America's criteria for selecting these stocks, such as beating earnings and revenue expectations, can serve as a valuable benchmark for new businesses. By focusing on achieving earnings estimates above the Street consensus and delivering strong results, new companies can position themselves for potential upside surprises in future earnings seasons.
Meta Platforms, one of the stocks identified by Bank of America, stands out as an example. With significant growth and the launch of a rival app attracting a large user base, Meta demonstrates the importance of innovative offerings for success. New businesses can take inspiration from Meta's approach and invest in groundbreaking solutions that differentiate them from competitors.
Additionally, the inclusion of SolarEdge, D.R. Horton, United Rentals, and Corning on the list highlights the importance of consistent performance. These companies have consistently met the criteria for beating earnings and revenue expectations. New businesses should prioritize maintaining a track record of strong performance to attract investor confidence and secure potential positive surprises during earnings seasons.
In conclusion, the insights provided by Bank of America's identification of stocks with upside potential can offer valuable lessons for new businesses. By focusing on beating earnings and revenue expectations, delivering innovative solutions, and maintaining consistent performance, new companies can position themselves for success amidst an otherwise bleak earnings season.
Article First Published at: https://www.cnbc.com/2023/07/11/bet-on-these-stocks-to-beat-the-street-with-earnings-season-about-to-kick-off-says-bank-of-america.html