We are now well into earnings season with the first big week of the quarter behind us. Although we have several weeks to go, there have already been some interesting results that have led to changes in Portfolio Grader rankings for select stocks.
One of the biggest drivers of stock upgrades is a large earnings surprise that catches the Street off guard. Not only does this mean that the fundamentals of the company are improving, but stocks reporting positive surprises usually attract some strong buying that can push the quantitative grade up a notch or two as well.
Here’s a look at three companies that simply delivered on their most recent earnings reports, and whose stocks have gotten fundamental upgrades as a result.
Upgraded Stocks: United Rentals (NYSE:URI)
United Rentals (NYSE:URI) is in a pretty basic business. URI rents construction and industrial equipment to construction companies, municipalities and other customers. Of course, that equipment includes things such as backhoes, forklifts, earth-moving equipment and portable generators, so … it’s not exactly the most exciting business in the world.
However, the results make URI stock one of the most exciting equities of the current earnings season. United Rentals beat estimates by more than 26% as it posted yet another consecutive positive earnings surprise.
CEO Michael Kneeland expressed confidence that the good times will continue. He told shareholders “We now see solid demand in almost every market, giving us further confidence in our full year outlook.”
Portfolio Grader likes what it see as well and this week upgraded URI stock to an “A,” signaling that URI stock has earned a “strong buy” recommendation.
Upgraded Stocks: Interactive Brokers Group (NASDAQ:IBKR)
Interactive Brokers Group (NASDAQ:IBKR) had a huge quarter, with the broker and market-maker group’s revenues and profits surpassing Wall Street’s expectations.
Earnings per share jumped from 14 cents per share to 34 cents, exceeded consensus estimates by 17%. Revenues were $355 million, compared to just $216 million in the same quarter last year. Margins got a lot fatter this quarter as well — IBKR boasted 61% pretax profit margins, up from 38% in the year-ago quarter. Lastly, customer accounts grew 16% year-over-year to 252,000 as investors and traders continue to return to the stock and bond markets.
Portfolio Grader recognized the strong improvements in the fundamentals and upgraded IBKR stock to an “A” this week, signifying a “strong buy” recommendation.
Upgraded Stocks: Rite Aid (NYSE:RAD)
Wall Street has continually estimated the reality and strength of the earnings turnaround at Rite Aid (NYSE:RAD). The drugstore chain posted a 150% positive earning surprise in the most recent quarter as business conditions just continue to improve for the company.
Total revenues increased 2.2%, primarily as a result of an increase in pharmacy same-store sales, which improved 2.1% year-over-year. RAD also guided higher and now projects sales of $26 billion to $26.5 billion and EPS of 31 cents to 42 cents, which is above the original analyst estimates.
Last week, RAD stock was upgraded to an “A” and is currently a strong buy.
Louis Navellier is the editor of Blue Chip Growth.