Over the past two weeks, more than 50% of S&P 500 companies have reported results for the second quarter of 2021. Of these, 88% reported EPS results above estimates. This is well above the average of the last five years.
However, markets have to do with future growth, and the good news is that analysts are improving their EPS estimates for the third quarter by an average of 3.6%. This is the third largest increase in EPS estimates during the first month of a quarter in eleven years. (font: Factset Research)
Even better news, many of these companies that reported strong second-quarter earnings and also revised their higher estimates are making huge gains. Last week, each of the best artists in the S&P 500 was a company that advanced forecasts and improved their prospects.
Here are four examples, and their average gain for the week was 11%, well above the generally flat performance of the S&P 500.
LAST PERFORMANCE OF LAST WEEK S&P 500
It is not too late to take advantage of this market share, as there are many more companies that need to report second quarter results. Listed below are two companies expected next week. They are in industrial groups where joint ventures have experienced explosive movements after good results, as they offer products in high demand.
The first is Rambus (RBMS), which provides chip design products for the computer, gaming and graphics market. Analysts predict second-quarter earnings to grow 875% over last year as demand for their products has grown substantially.
RBMS is in the same industry as Applied Micro (AMD), which is much larger, appearing among those with higher performance. In addition to receiving a target price hike last week, Rambus is a long way from a one-month base deal at $ 24. The company will have to report gains after the market closes on Monday.
RAMBUS DAILY TABLE, INC. (RMBS)
Next up is Western shoe and apparel retailer Boot Barn (BOOT), which will have to report revenue after the market closes on Wednesday. The average estimate calls for earnings per share of $ 1.16, which would be well above last year’s negative report due to the pandemic.
BOOT also received an update on the price target last week before its report, and the shares are in the strong footwear group, where several names like Crocs (CROX) have advanced to new highs after having advanced forecasts, with analysts estimates in the future.
DAILY BOOT BOOT BARN HOLDINGS, INC. (BOOT)
When looking for candidates for additional actions that can far outperform the markets after posting second quarter results, here are some key attributes that will improve your success:
First, you’ll want the shares to be part of an industry group that has seen several companies exceed estimates and guide more. This means that you are in an area with a high demand for products.
Subscribers to my MEM Edge Report were introduced to West Pharmaceutical (WST) in late April as it was exploding from a long base after strong first quarter results. Shares are among the best performers (above) as they gained 9% last week after another strong quarter. The company Medical Supply offers products to administer drugs that cannot be injected and that have seen an increase in demand as vaccines continue to be developed worldwide.
Another attribute is the analysts update within two weeks of the earnings release. Wall Street analysts will not put their necks on the line unless they have research that has them positive. With Advanced Micro (AMD) mentioned above, Citigroup finally turned bullish in stocks 2 weeks before the company’s gains.
Lastly, a bullish chart will always provide an advantage. You will want stocks to trade above key support and on an uptrend. Although many banking stocks have been reporting very strong quarterly results, their current downward trends prevent them from trading on the news.
Of course, you will need the broader markets to be positive for the above strategy to work. Subscribe to my MEM Edge half-yearly report to stay ahead of the broader markets, while alerting you to actions ready to outperform the broader markets. An in-depth sectoral analysis is also included. Use this link here to get a special 4 week trial offer.
Mary Ellen McGonagle, MEM Investment Research
In this week’s edition of StockCharts TV’s The MEM Edge, I review last week’s market dynamics and discover what supports the continued upward trend in the broader markets. I also share how to take advantage of the strength of second-quarter GDP. See now!