Earnings Season Kicks Off Tonight, Focus on the Winners

Top Companies to Watch

Given the uncertainty this earnings season, a great approach could be to focus on companies with a proven history of beating earnings estimates. These companies know how to manage expectations and have proven that they can deliver in times of volatility.

JC Penney (JCP)

JC Penney has been on an incredible turnaround lately and it is one of the few department stores to be doing well these days. In fact, the stock is currently the best-ranked security in the retail-regional department store industry at time of writing.

The company has been on a nice history of earnings beats, and it has beaten out estimates in each of the last four quarters. Its four quarter average beat is now above 35%, and the recent earnings estimate revision activity has been solid. This suggests that another beat could be ahead for JCP, as evidenced by a 4:1 ratio of increases:decreases for this quarter’s earnings expectations in the past two months, and then an 8:1 ratio over the same time period for the current year outlook.

Adobe Systems (ADBE)

Adobe is one of the country’s best known software companies thanks to its vast array of products including Creative Cloud, Digital Marketing suite, and many others. The stock was beaten down like the rest of the technology sector to start the year, but ADBE has made a nice comeback and appears well positioned for more gains in the months ahead.

That is because ADBE has already seen some nice estimate revisions from covering analysts, and this has helped to push the growth rate up to an impressive 50% for both the current year earnings, and the current quarter as well. The security actually has a ‘B’ Grade for growth and an ‘A’ grade for momentum so clearly the wind is at this company’s back going into its next earnings report in a few months.

And if you are worried about ADBE living up to outsized expectations, consider that the stock has beaten estimates in each of the last four quarters while it has produced an average surprise of 9%. In fact, ADBE hasn’t missed estimates in over two years

ULTA Salon, Cosmetics & Fragrance (ULTA)

ULTA is another strong stock that is riding nice momentum following its most recent earnings report. This retailer best known for selling a variety of makeup, bath and body products, and fragrances is approaching 52-week highs following its nice earnings beat about a month ago which continued its earnings streak that stretches back to 2013.

Analysts are really liking the story here though, as not a single one in our coverage universe has reduced their EPS estimates for the stock going forward, either in the current quarter, current year, or next year time frames. The magnitude of the revisions has also been pretty intense, as this quarter’s EPS estimate has risen by 6.6% in the past few months, while the full year estimate has added nearly 5% in the same time frame.

Express (EXPR)

Another retail stock that is testing 52 week highs as of late is Express. However, unlike ULTA, this stock focuses on the apparel market zeroing in on clothing for people in their 20s-30s. While this market has definitely been tough, EXPR has proven to be a winner as of late and it is now riding a streak of six straight earnings beats.

There is still potential for this company, at least if we look to recent earnings estimate revisions on the stock. Covering analysts have been universally raising estimates on EXPR shares for both the current quarter and the current year, raising the consensus by over 6.25% for each time period.

Bottom Line

This earnings season is going to be rocky, that much we do know. And if last quarter is any guide, companies are going to need to deliver in order to protect investors from losses.

I still Bullished on FANG! buy any dips of FANG into the earning season!