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The second-quarter 2022 earnings season is at its early stage and the results are mixed so far. The importation thing is that, as of now, earnings results have not revealed anything that can be considered as an indication of an imminent recession. However, market participants will keenly watch this earnings season as it will provide the most descriptive view of the U.S. corporate health amid record-high inflation and an extremely hawkish Fed.
Next week will be the first big one of this reporting cycle as 892 companies are slated to declare quarterly numbers. We have selected five of them with a favorable Zacks Rank that are poised to beat earnings estimates. These companies are — EQT Corp. EQT, Medpace Holdings Inc. MEDP, Crane Holdings Co. CR, Zions Bancorporation National Association ZION and Hess Corp. HES.
Q2 At a Glance
Like the first quarter, the second quarter of 2022 also remained tough for the U.S. economy. Various measures of inflation remained elevated at a 41-year high. The Fed hiked the benchmark interest rate by 1.25% to the range of 1.5% to 1.75% at the end of the second quarter from 0.25% to 0.50% at the end of the first quarter. Moreover, the central bank has started reducing the size of its $9 trillion balance sheet systematically from June.
Despite these aggressive monetary policies adopted by the Fed, inflation is showing no sign of declining. The latest measure of inflation showed that the consumer price index jumped 9.1% year over year in June, marking the highest monthly rise since November 1981.
The complete devastation of the global supply-chain system and shortage of labor continued to put pressure on businesses in the form of higher input costs and wages. The lingering war between Russia and Ukraine and lockdown in China due to the resurgence of COVID-19 infections were the major hindrances to the restoration of the global supply-chain system.
Q2 Earnings Results So Far
As of Jul 20, 60 companies within the S&P 500 Index reported their financial numbers. Total earnings of these companies are down 11% year over year on 6.6% higher revenues, with 73.3% beating EPS estimates and 63.3% beating revenue estimates. Our latest projection is that for the second quarter as a whole, total earnings of the S&P 500 Index will rise 3.1% year over year on 9.6% higher revenues.
Our Top Picks
Five companies will report second-quarter 2022 earnings results next week. Each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our research shows that for stocks with the combination of a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after their earnings releases. 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.
