Equity markets are sensitive to quarterly earnings reports. A slight earnings miss by a company translates into a knee-jerk decline of its stock. On the other hand, stocks can go ballistic on earnings beats. It’s therefore a good idea to consider opening near-term long or short positions in stocks just ahead of companies’ quarterly earnings reports. And even during turbulent market conditions, there are good blue-chip stocks to buy before companies’ earnings releases.
The blue-chip stocks to buy that I’ve selected seem attractively valued. Additionally, these names are unlikely to drop much further, while they have the potential to climb meaningfully.
I also believe that these companies are likely to deliver strong financial results, not just for the third quarter, but for the next few quarters as well. Depending on your investment objective, you can also initiate long-term positions in these stocks at their current levels.
Let’s talk about three blue-chip stocks to buy ahead of Q3 earnings bumps.
| NIO | Nio | $13.28 |
| LMT | Lockheed Martin | $410 |
| Costco | Costco | $466 |
Nio (NIO)
Electric -vehicle stocks have been trending lower, and Nio (NYSE:NIO) stock is no exception. However, since it’s trading at deeply oversold levels, it’s among the blue-chip stocks to buy before Q3 earnings.
Another reason to be bullish on NIO stock is that the automaker is likely to report strong Q3 results. Last quarter, Nio reported that it had delivered 31,607 EVs. On a year-on-year basis, its vehicle deliveries increased 29.3% to a quarterly record.
Nio recently announced that it would aggressively expand in Europe, as the company will be moving into the German, Danish, Dutch and Swedish markets. Nio also plans to have 1,000 battery-swap stations in nations other than China by 2023. Outside of China, Europe is likely to remain the automaker’s focus.
As of the end of Q2, Nio reported that it had $8.1 billion of cash as of the end of Q2. The company therefore can easily bankroll its aggressive expansion plans.
Given its big global growth plans, Nio’s deliveries are likely to grow at healthy rates in the next few years. NIO stock is therefore attractive for longer-term investors.
Lockheed Martin (LMT)
Lockheed Martin (NYSE:LMT) is also among the top blue-chip stocks to buy for investors seeking robust dividends and capital gains. LMT stock trades at a forward price-earnings ratio of 14 and looks attractive considering the positive catalysts that the defense sector has.
Additionally, the company recently raised its quarterly dividend by 7.1% to $3 per share. The company’s strong order backlog of $135 billion makes its cash flow outlook quite visible. And as the company’s backlog swells, its dividend can climb further.
The company’s recent dividend increase might also indicate that its Q3 results are likely to be strong. Analysts, on average, expect the company to report Q3 earnings per share of $6.63. If LMT’s EPS comes in above that level, which is likely, LMT stock will probably advance in the wake of its results.
It’s worth noting that the company’s Q2 results were negatively impacted by supply-chain issues and the timing of contract negotiation. The markets will look for more information from Lockheed on its supply-chain challenges. Once these issues ease, its growth is likely to accelerate.
Overall, LMT stock has climbed 15% in 2022. However, considering the company’s backlog, dividend growth and the industry’s strong position, the stock is poised to climb further.
Costco Wholesale (COST)
If there is one retail stock that I recommend buying, it’s undoubtedly Costco Wholesale (NASDAQ:COST). Despite the retail sector’s inflationary challenges, the company’s financial performance has been resilient.
COST stock closed yesterday at $466 and has largely traded sideways in the last 12 months. A rally by the stock seems imminent due to the retailer’s strong quarterly sales growth. Jefferies has a price target of $610 on the stock, about 30% above its current level.
For its fiscal 2022, Costco reported comparable store sales growth of 10.6%. And I think that the company generated strong results last quarter.
For September, the company reported comparable store YOY sales growth of 8.6%. If COST continues to generate similar growth levels, the company’s cash flows will climb. With the holiday season approaching, there is reason to remain bullish on the name.
Further, I believe that Costco can expand significantly outside of the U. S. That’s a key long-term growth catalyst for the shares. Finally, Costco has boosted its omnichannel sales capabilities, and that’s likely to accelerate its growth going forward.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
