We’re now a few days into the first-quarter earnings season, and I’m pleased to say that this earnings season has started off on fairly strong footing. FactSet noted that as of last Friday, out of the S&P 500 companies that had announced their quarterly results, 90% had topped analysts’ earnings expectations and 63% beat revenue estimates.
The even better news is that Wall Street is rewarding companies that announce earnings surprises. We saw this with the big banks last Friday – Citigroup (C), JPMorgan Chase (JPM) and Wells Fargo Company (WFC) – all of which opened higher in the wake of their earnings beats.
Shares of Lockheed Martin rallied to a new 52-week high this morning after releasing first-quarter results that beat analysts’ expectations. First-quarter sales rose slightly to $15.1 billion, up from $15.0 billion in the same quarter a year ago. Earnings per share increased 3.3% year-over-year to $6.61 per share, compared to $6.44 per share in the first quarter of 2022. Adjusted earnings per share were flat year-over-year at $6.43 per share, which topped estimates for $6.06 per share.
Clearly, investors are growing more fundamentally focused. So, in today’s Market 360, I’ll share the stocks whose fundamentals are lacking and should be avoided right now. And then, we’ll consider how to be successful this earnings season.
This Week’s Ratings Changes
After taking a close look at the latest data on institutional buying pressure and each company’s health, I decided to revise my Portfolio Grader recommendations for 75 big blue chips. 29 were downgraded to a “Hold” (C-rating) or “Sell” (D-rating) and are not the stocks you want in your portfolio this earnings season.
I’ve listed the first 10 stocks that were downgraded to a D-rating below, but you can find the full list – including their Fundamental and Quantitative Grades – here. Chances are that you have at least one of these stocks in your portfolio, so you may want to give this list a skim and act accordingly.
|Ticker||Company Name||Total Grade|
|ACI||Albertsons Companies, Inc. Class A||D|
|CHD||Church & Dwight Co., Inc.||D|
|CMS||CMS Energy Corporation||D|
|DUK||Duke Energy Corporation||D|
|ELS||Equity LifeStyle Properties, Inc.||D|
|IP||International Paper Company||D|
We’re still in the early innings of the first-quarter earnings season, but what matters most is the companies that post better-than-expected earnings results. I expect companies that report strong earnings and sales to climb higher, while companies that disappoint investors should drop like rocks.
So, to be successful in the current environment, your best bet is to invest in fundamentally superior stocks.
If you’re not sure where to look, then consider my Growth Investor service. My Growth Investor stocks are characterized by 39.2% average annual sales growth and 292.1% average annual earnings growth. My stocks also posted an average 7.9% earnings surprise in the fourth quarter.
The S&P 500 is set to report a 6.5% decline in first-quarter earnings, so wave-after-wave of positive results should drive my Growth Investor stocks higher – like they did for Lockheed Martin this morning – in the coming weeks.
Click here to learn more and become a Growth Investor member today. Once you do, you’ll have full access to my Buy Lists, Monthly Issues, Weekly Updates, Special Market Podcasts, and much more!
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Fortunately, Trump shut down Choke Point…
But now Biden is bringing Choke Point back.
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It’ll all be perfectly legal. You won’t have a choice.
Biden has been working with numerous government agencies and private banks to take away your financial privacy and control. It could begin as soon as a few months from now.
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below: