Top 5 large-cap stocks set to beat Q2 earnings next week – July 29, 2022

The Q2 2022 earnings season accelerated this week. Next week will be another big one with no fewer than 964 companies set to release their quarterly figures. Earnings results have been better than expected so far and corporate America has yet to show any major signal of a near-term recession.

We’ve selected five large-cap companies with favorable Zacks rankings that are expected to report results next week. The combination of a favorable Zacks ranking and a possible beating in earnings should drive their stock price higher.

These companies are – CF Industries Holdings Inc. (heart rate free report), Occidental Petroleum Corp. (OXY free report), Marriott International Inc. (TUE free report), Airbnb inc. (ABNB free report) and Enterprise Products Partners LP (DEP free report).

Second quarter results so far

As of July 28, 245 companies in the S&P 500 index have released their financial figures. Total profit for these companies is up 1.4% year-over-year, with revenue up 11%, 75.5% beating EPS estimates and 65.7% beating income estimates. Our latest projection is that for the second quarter as a whole, total S&P 500 earnings will rise 4.2% year-over-year on revenue up 10.4%.

Q2 in brief

Like the first quarter, the second quarter of 2022 also remained difficult for the US economy. Various measures of inflation remained elevated at a 41-year high. The Fed raised the benchmark interest rate by 1.25% to a range of 1.5% to 1.75% at the end of the second quarter, from 0.25% to 0.50% at the end of of the first trimester. Additionally, the central bank has begun systematically reducing the size of its balance sheet by $9 trillion since June.

Despite these aggressive monetary policies adopted by the Fed, inflation shows no signs of abating. The latest measure of inflation showed the consumer price index jumped 9.1% year-on-year in June, marking the biggest monthly rise since November 1981.

The complete devastation of the global supply chain system and labor shortages continued to put pressure on businesses in the form of rising input costs and wages. The ongoing war between Russia and Ukraine and the lockdown in China due to the resurgence of COVID-19 infections have been major obstacles to restoring the global supply chain system.

Our top picks

Five large-cap companies will release their Q2 2022 results next week. 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 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

CF Industries is well positioned to take advantage of the growing demand for nitrogen fertilizers in major markets. Demand for CF’s products is expected to increase due to higher industrial activity and high levels of planted acres in key regions. Nitrogen demand is expected to be strong in North America, supported by good corn acreage in the United States.

Increased planted acreage, higher crop prices and improving farm economics are also expected to boost demand in Brazil. This, combined with higher nitrogen prices, should boost CF Industries’ bottom line. We expect the company’s adjusted EPS to grow 374.2% in 2022. CF also remains committed to reducing debt and increasing shareholder value by leveraging strong cash flow.

CF Industries has an ESP on earnings of +0.30%. It has an expected earnings growth rate of over 100% for the current year. The Zacks consensus estimate for current-year earnings has improved 12.2% over the past 90 days. CF is expected to release its results on August 1, after the closing bell.

Marriott benefits from the focus on expansion initiatives, digital innovation and the loyalty program. MAR is taking advantage of the reopening of international borders and leniency in travel restrictions.

Marriott is constantly trying to expand its global presence and capitalize on the demand for hotels in international markets. The US and global economies have largely reopened as new coronavirus cases have dropped significantly. Several countries are phasing out travel restrictions. MAR will be a major winner from the reopening of the economy.

Marriott has an ESP on earnings of +7.11%. It has an expected earnings growth rate of 90.9% for the current year. The Zacks consensus estimate for current-year earnings has improved 1.3% over the past 7 days.

MAR has recorded earnings surprises in the last four reported quarters, averaging 36.2%. The company is expected to release its results on August 2, before the opening bell.

western oil continues to increase hydrocarbon production volumes from its high-quality assets and to reduce outstanding debt through proceeds from the sale of non-core assets. The acquisition of Anadarko, infrastructure reinforcement investments and its exposure to the Permian Basin continue to boost OXY’s performance.

Occidental Petroleum hit the $10 billion divestment target through the sale of non-core assets. Its cost management initiatives will increase margins in the future. OXY is also working to reduce emissions and is aiming for net zero emissions by 2050.

Occidental Petroleum has an earnings ESP of +1.78%. It has an expected earnings growth rate of over 100% for the current year. The Zacks consensus estimate for current-year earnings has improved 1.3% over the past 30 days.

OXY has recorded earnings surprises over the past four reported quarters, averaging 26.2%. The company is expected to report results on August 2, after the closing bell.

Airbnb banking on an improvement in the travel industry. The continued resumption of long-distance and cross-border travel through reduced travel restrictions is benefiting ABNB’s Nights & Experience bookings. In addition, growth in average daily rates and gross booking value remains a tailwind.

Growth in active listings in Latin America, North America and EMEA is contributing well to revenue. Additionally, growing sales and marketing initiatives as well as continued efforts to upgrade various aspects of Airbnb’s service are helping the company gain momentum with hosts and travelers.

ABNB has an ESP on earnings of +0.82%. It has an expected earnings growth rate of over 100% for the current year. The Zacks consensus estimate for current year earnings has improved 0.5% over the past 7 days.

Airbnb has recorded earnings surprises over the past four quarters, with an average pace of 67.8%. The company is expected to report results on August 2, after the closing bell.

Enterprise Product Partners has an extensive pipeline network that spans over 50,000 miles and connects to all major US shale plays. EPD has a huge storage capacity of 260 million barrels of liquids and 14 billion cubic feet of natural gas.

Nearly 80% of its pipeline contracts with shippers have been extended for 15 to 20 years, which will help generate stable cash flow for unitholders. Enterprise Products Partners is well positioned to generate additional cash flow from $4.6 billion in growth capital projects under construction.

Enterprise Products Partners has an ESP on Earnings of +2.42%. He predicts a 16.2% profit growth rate for the current year. The Zacks consensus estimate for current year earnings has improved 0.4% over the past 7 days.

The EPD recorded earnings surprises in three of the last four reported quarters, averaging 3.4%. The company is expected to release its results on August 3, before the opening bell.

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