The 3 Hottest Stocks of the Q2 Earnings Season

As each quarterly earnings season winds down, I like to take a step back and look at how the cycle fared as a whole — as well as which companies outperformed the rest.

The 3 Hottest Stocks of the Q2 Earnings Season

Wall Street had been expecting S&P 500 Index second-quarter earnings to increase 12% year-over-year, and so far 74% of the companies that have already reported bested estimates. That’s well ahead of the long-term average of 64%.

Revenue numbers also surprised to the upside, with more than 68% of companies seeing better-than-anticipated figures compared to the long-term average of 59%. Overall, revenue grew by 5.1% over last year.

According to Bloomberg, the information technology group was the best-performing sector, with 93% of its companies at least matching estimates. Healthcare and the financials rounded out the top three industries, with the overall average besting consensus at 78%.

Looking closer at those top sectors, here are three hot stocks that were at their best last quarter.

Hot Stocks: Information Technology – Facebook Inc (FB)

Hot Stocks: Information Technology - Facebook Inc (FB)

Facebook Inc (NASDAQ:FB) beat on both the top and bottom lines, with earnings of $1.32 a share better than the expected $1.13 a share and up 69% over last year. Revenue also increased an impressive 45% year-over-year. FB stock gapped up to a new all-time high on the strong report.

A large portion of growth came from mobile ads that continue to outpace even the most bullish analysts’ estimates. And while management did mention a possible slowdown in revenue growth later this year, they also discussed monetizing Messenger and WhatsApp.

I like Facebook here and I would consider it one of the hot stocks to buy on any pullbacks.

Hot Stocks: Healthcare – Johnson & Johnson (JNJ)

Hot Stocks: Healthcare - Johnson & Johnson (JNJ)

At first glance, healthcare giant Johnson & Johnson (NYSE:JNJ) didn’t report a blockbuster second quarter. However, I think the fact that management raised their full-year profit forecast speaks volumes.

JNJ reported earnings of $1.83 a share in the second quarter, which was $0.03 better than what Wall Street had been looking for. Revenue came in slightly below expectations, but as I mentioned the reason this stock is making my list of hot stocks is because of guidance as well as recent performance.

While the overall U.S. pharmaceutical sector has struggled recently, JNJ remains near an all-time high and continues to outperform its peers. And thanks to its product mix, which ranges from Band-Aids to cancer drugs, it has also been able to keep growing its bottom line.

Hot Stocks: Financials – JPMorgan Chase (JPM)

Hot Stocks: Financials - JPMorgan Chase (JPM)

JPMorgan Chase & Co. (NYSE:JPM) ran to a new all-time high after releasing better-than-expected quarterly numbers. While analysts had been predicting earnings of $1.58 a share, the company said it actually brought in $1.82 a share. Revenue came in at $25.2 billion, which also bested the consensus. The commercial banking and asset and wealth management divisions both posted record numbers that helped drive the robust quarter.

Even with interest rates failing to move higher, which would be a positive for the financial group, JPM was still able to hit a new post-earnings high and has since held up well amid the recent market pullback. The strength is very encouraging, and I view any weakness to the $87-$90 area as a buying opportunity.

Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt just launched two new investment advisories focused around the “next” generation investing theme. His trademark three-prong investing approach targets the mega-trends old Wall Street is missing out on. Click here for more information on the “NexGen” Experience.

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