A Newbies Guide to Growth This Earnings Season, with 3 Stock Picks

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The earnings season has finally kicked-off, and investors will now shift their focus from the uncertainty in China and Greece, to the performance of corporate America. However, one common mistake that most newbies make is to last-minute tinker their portfolios to capitalize on the market’s projections for the quarter; concentrating on stocks that are likely to record strong earnings growth.


Unfortunately, whenever any investor puts his or her money into a stock based on anticipated growth, they usually end up being a victim of the “growth trap.” As the famous market saying goes, everything that is known about a stock is already factored in the price. So, if the market expects earnings to grow, chances are that the stock’s price is already reflecting that positive assessment.


Hence, if the company’s top-line and bottom-line grow at the market projected rate, the stock’s performance will at best be in line with the broad market’s return. As the bullish sentiment has already been built into the price, these stocks will fail to outperform the market.

Under such circumstances, investors should look for stocks that are expected to grow, but at a pace that is faster than what is forecast by analysts. In short, this earnings quarter, focus on stocks that are expected to deliver a positive earnings surprise.

For this earnings season, Zacks has come out with a list of 3 stocks, whose quarterly figures are most likely to surprise Wall Street. With the help of their screening tool, they have zeroed in on these 3 stocks, whose EPS should grow at a minimum of 40 percent or higher. Furthermore, the stocks have been filtered using the Zack’s Ranking System, and then combined with the Earnings ESP (Expected Surprise Prediction). Here’s the list:

Cal-Maine Foods Inc

Cal-Maine Foods Inc is a Mississippi-based producers and distributors of fresh shell eggs. The company is engaged in cleaning, grading and packaging of shell eggs for sale to retailers, and is scheduled to report fourth quarter results and fiscal 2015 numbers on July 20, before the start of trading.

Zacks Rank: #1 (Strong Buy)

Projected EPS Growth: 137%

Quarterly Earnings ESP: +5.17%

Current Market Price: $53.91

Interface, Inc.

Interface, Inc. is a global leader in commercial and institutional interiors market. The company is expected to post second quarter results in the last week of July.

Zacks Rank: #1 (Strong Buy)

Projected EPS Growth: 73%

Quarterly Earnings ESP: +7.14%

Current Market Price: $24.79

BJ’s Restaurants, Inc. 

BJ’s Restaurants, Inc. owns and operates around 164 casual dining restaurants. The California-based company is also likely to report second quarter figures during the last week of July.

Zacks Rank: #1 (Strong Buy)

Projected EPS Growth: 41%

Quarterly Earnings ESP: +2.56%

Current Market Price: $49.71

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