The fourth-quarter 2021 earnings season picked up momentum from Jan 14 as banking behemoths started releasing their financial numbers. The last quarter was an impressive one for Wall Street. The termination of fiscal stimulus, reduction in monetary stimulus, soaring inflation and the resurgence of coronavirus failed to derail the U.S. stock market’s northbound journey.
Five large-cap companies — The PNC Financial Services Group Inc. PNC, United Airlines Holdings Inc. UAL, Discover Financial Services DFS, The Travelers Companies Inc. TRV, and American Airlines Group Inc. AAL — are slated to release their fourth-quarter 2021 earnings results this week. These stocks are likely to gain in the near term, buoyed by their possible earnings beat
Good Start to Fourth-Quarter Earnings
As of Jan 14, 26 S&P 500 companies have reported fourth-quarter 2021 results. Total earnings of these companies are up 19.2% year over year on 11.7% higher revenues with 88.5% beating EPS estimates and 84.6% surpassing revenue estimates.
Total fourth-quarter earnings of the market’s benchmark — the S&P 500 Index — are projected to climb 20.9% from the same period last year on 11.7% higher revenues, following 41.4% year-over-year earnings growth on 17.4% higher revenues in the third quarter, 95% year-over-year earnings growth on 25.3% higher revenues in the second quarter and 49.3% year-over-year earnings growth on 10.3% higher revenues in first-quarter 2021.
The first three quarters of this year were favorably impacted since the preceding quarters of last year were affected by the pandemic-induced lockdowns and restrictions. However, the U.S. economy started reopening at a very slow pace since the beginning of the fourth quarter of 2020.
Stocks in Focus
Five large-cap (market capital > $12 billion) companies will report fourth-quarter 2021 earnings results this week. Each of these stocks carries a Zacks Rank #3 (Hold) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that for stocks with the combination of a Zacks Rank #3 or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after their earnings releases. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The chart below shows the price performance of above-mentioned five stocks in last quarter.
Image Source: Zacks Investment Research
The PNC Financial Services Group is one of the largest diversified financial services institutions in the United States. Going forward, the focus to expand the middle-market lending franchise, and bolster digital products and service offerings should drive PNC’s bottom-line growth.
Growing loan and deposit balances highlight a strong balance-sheet position of PNC. This further supports its inorganic expansion strategies, thereby positioning PNC Financial Services well for bottom-line growth. Its sound capital-deployment activities are likely to instill confidence in the stock.
PNC Financial Services has an Earnings ESP of +2.29%. The Zacks Consensus Estimate for current-year earnings improved 0.1% over the last 7 days. PNC recorded earnings surprises in the last four reported quarters, with an average beat of 29.4%. PNC Financial Services is set to release earnings results on Jan 18, before the opening bell.
The Travelers Companies boasts a strong market presence in auto, homeowners’ insurance, commercial U.S. property-casualty insurance with solid inorganic growth. A high retention rate, increase in new business and positive renewal premium change bode well. TRV’s commercial businesses should perform well, owing to market stability.
The Travelers Companies remains optimistic about the personal line of business, given growth at the profitable agency auto and homeowners business. TRV expects net investment income from non-fixed income portfolio to be $420 million to $430 million quarterly in 2022. Sufficient capital boosts shareholder value.
The Travelers Companies has an Earnings ESP of +3.21%. It has an expected earnings growth rate of 0.2% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.2% over the last 7 days.
TRV recorded earnings surprises in the last four reported quarters, with an average beat of 38.1%. The Travelers Companies is set to release earnings results on Jan 20, before the opening bell.
United Airlines Holdings provides air transportation services in North America, Asia, Europe, the Middle East, and Latin America. UAL transports people and cargo through its mainline and regional operations.
United Airlines aims to become 100% green by 2050. The carrier’s focus on its cargo unit is also encouraging. Moreover, UAL’s cost-control efforts are supporting its bottom line. United Airlines expects 2022 CASM-excluding fuel, profit sharing, third-party business expenses and special charges to be lower than 2019 levels.
UAL has an Earnings ESP of +7.04%. It has an expected earnings growth rate of more than 100% for the current year. United Airlines recorded earnings surprises in two of the last four reported quarters, with an average beat of 7.5%. UAL is set to release earnings results on Jan 19, after the closing bell.
Discover Financial Services is a direct banking and payment services company in the United States. DFS operates through two segments — Direct Banking and Payment Services. Expansion in the global payments business and an attractive core business position the company well for growth.
A gradual economic recovery and improved consumer spending have been providing a boost to DFS’ sales volume. Its strong balance sheet is another positive, highlighted by its cash and investment securities that are higher than long-term borrowings. Discover Financial Services’ banking business provides significant diversification benefits. A solid financial position enables DFS to deploy capital via buybacks and dividends.
Discover Financial Services has an Earnings ESP of +4.74%. The Zacks Consensus Estimate for current-year earnings improved 0.4% over the last 7 days. DFS recorded earnings surprises in the last four reported quarters, with an average beat of 34.7%. Discover Financial Services is set to release earnings results on Jan 19, after the closing bell.
American Airlines Group attracted significant traffic during the Thanksgiving holiday period. With air-travel demand continuing to recover in the United States despite the threat posed by the omicron variant, American Airlines’ passenger revenues increased 56.1% year over year in the first nine months of 2021.
AAL’s debt-reduction efforts are impressive as well. Management aims to reduce its debt by $15 billion within 2025. America Airlines’ codeshare agreement with Indian low-cost airline, IndiGo, is an added positive.
AAL has an Earnings ESP of +7.40%. It has an expected earnings growth rate of 96.8% for the current year. It recorded earnings surprises in the last four reported quarters, with an average beat of 3.3%. America Airlines is set to release earnings results on Jan 20, before the opening bell.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.