We are in the initial days of the third-quarter 2022 earnings season. Market participants are keenly watching this reporting cycle as it will provide the most descriptive view of U.S. corporate strength amid threats of a near-term recession.
In addition to revenues and net profit numbers of companies, several metrics of margins, like gross margin, operating margin and net margin will be closely monitored by investors. Moreover, the outlook of U.S. corporates will indicate, to a great extent, the health of the U.S. and global economy.
We have identified five S&P 500 stocks with a favorable Zacks Rank that are set to beat on third-quarter earnings. Investment in these stocks should be fruitful as an earnings beat is expected to drive stock prices going forward. These companies are — Exxon Mobil Corp. (XOM – Free Report) , The Williams Companies Inc. (WMB – Free Report) , Albemarle Corp. (ALB – Free Report) , Expedia Group Inc. (EXPE – Free Report) and Marriott International Inc. (MAR – Free Report) .
S&P 500 in Q3
The U.S. stock markets witnessed a broad-based decline in third-quarter 2022. Wall Street rallied impressively in July and the first half of August. Historically, September is the worst-performing month on Wall Street. And this year, it was the most disastrous in a decade.
The S&P 500 Index tumbled 5.3% in third-quarter 2022, recording losses in three consecutive quarters for the first time since 2009. Mounting inflation across the world, rigorous interest rate hike, an ultra-hawkish monetary policy taken by the Fed and massive turbulence in global financial markets due to the soaring U.S. dollar were the primary reasons for this pathetic performance.
Q3 Earnings Results So Far
Our estimates for third-quarter earnings of the market’s benchmark, the S&P 500 Index, has shown a gradual decline in the past three and a half months. As of Oct 21, 99 companies of the S&P 500 Index have reported results.
Total earnings of these companies are down 4% from the same period last year on 7.3% higher revenues, with 76.8% beating EPS estimates and 64.6% beating revenue estimates. Our current estimate has projected that total earnings of the S&P 500 Index are expected to be up 0.9% year over year on 9.1% higher revenues.
Our Top Picks
Five S&P 500 companies will report third-quarter 2022 earnings within 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.
Image Source: Zacks Investment Research
Exxon Mobil’s bellwether status and an optimal integrated capital structure, which have historically led to industry-leading returns, make it a relatively lower-risk energy sector play. The integrated oil giant expects to reduce greenhouse gas emissions by 30% in its upstream business.
At the same time, XOM expects to reduce flaring and methane emissions by 40%. With the reopening of the global economy, crude oil prices are likely to remain high despite near-term growth concerns.
Zacks Rank #2 XOM has an Earnings ESP of +1.39%. It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last seven days.
Exxon Mobil recorded earnings surprises in three out of the last four reported quarters, with an average beat of 1.6%. The company is set to release earnings results on Oct 28, before the opening bell.
The Williams Companies operates as an energy infrastructure company primarily in the United States. With U.S. natural gas demand projected to grow significantly in the long term, WMB seems well positioned to capitalize on the same owing to its impressive portfolio of large-scale value-creating projects.
In particular, the company’s existing and expansionary development projects associated with the massive Transco gas transmission system are expected to boost Williams’ growth prospects. WMB’s thriving deepwater transportation business is another positive.
Zacks Rank #1 WMB has an Earnings ESP of +1.53%. It has an expected earnings growth rate of 13.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.7% over the last seven days.
The Williams Companies recorded earnings surprises in the last four reported quarters, with an average beat of 17.3%. The company is set to release earnings results on Oct 31, after the closing bell.
Albemarle should gain from long-term growth in the battery-grade lithium market. It is expected to benefit from its actions to boost its global lithium derivative capacity. ALB will also benefit from the synergies of the Rockwood acquisition. The buyout has enhanced diversity across end markets.
Albemarle also remains focused on executing its cost-reduction program. Its cost-saving actions are expected to support margins in 2022. ALB also remains committed to boosting shareholder returns by leveraging strong cash flows. It remains focused on maintaining its dividend payout. Albemarle has ample liquidity to meet its short-term debt obligations.
Zacks Rank #1 ALB has an Earnings ESP of +3.64%. It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last seven days.
Albemarle recorded earnings surprises in the last four reported quarters, with an average beat of 24.2%. The company is set to release earnings results on Nov 2, after the closing bell.
Marriott International is gaining from the reopening of international borders and leniency in travel restrictions. Several countries are gradually removing travel restrictions. MAR is consistently expanding its worldwide presence and capitalizing on the demand for hotels in international markets.
Zacks Rank #1 MAR has an Earnings ESP of +1.55%. It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 6.2% over the last seven days.
Marriott International recorded earnings surprises in the last four reported quarters, with an average beat of 18.6%. The company is set to release earnings results on Nov 3, before the opening bell.
Expedia Group is benefiting from strong improvement across all its lines of business, owing to the increasing travel resiliency of people. Moreover, growing agency and merchant bookings is contributing well to top-line growth.
We expect total gross bookings to be up 30.7% in 2022 on a year-over-year basis. Further, EXPE is witnessing growth in its domestic and international businesses, which remains a positive factor. Considering these, total revenues are anticipated to witness a 36.2% rise in the current year.
Zacks Rank #2 EXPE has an Earnings ESP of +14.08%. It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 16% over the last seven days.
Expedia Group recorded earnings surprises in three out of the last four reported quarters, with an average beat of 18.2%. The company is set to release earnings results on Nov 3, after the closing bell.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.