5 stocks ranked by buy that beat estimates this week

Overall, earnings season is going pretty much as expected. Most members of the S&P 500, which is like a benchmark for the broader market, are still beating estimates, but the beat ratios are coming down and not as wide, especially when you take the energy sector out of high flight.

Management’s comments reflect continued inflation in input costs, although most of this is still attributed to supply chain issues rather than the Russian-Ukrainian war. This is not surprising given that the segments most affected by the war are energy, minerals and cereals. And of course there’s a whole lot more to the market than that, although energy tends to affect everything else.

It looks like supply chain issues will continue through 2022 as the supply/demand mismatch is real and the Fed’s measures to rein in demand don’t have an immediate effect. For most businesses, this continues to mean escalating input costs.

Labor markets also remain tight, and although the latest figures (for March) are yet to be released, it is clear that wage inflation continued into February. For businesses, this is another reason for the higher cost of operation.

Some of the rising costs have been passed on to the consumer, but the pressure on margins is evident across the board and indicates that companies are only passing on what the traffic will bear.

A healthy consumer is not a bad thing at all, because in the end it all comes down to this: the consumer must be able to weather the effects of the Fed’s actions if we are to avoid a recession.

For today’s picks, I’ve focused on stocks ranked long that have exceeded estimates this week. But I focused on those with value scores of A or B, the reason being that shares of a company tend to rise after beating earnings estimates and there is always the fear that there is there is no additional advantage in the cards. Buying below intrinsic value adds another layer of security if you will. And we could all do with some security given all the uncertainty out there.

The first on the list is Pilgrim’s Pride society PPC, which is involved in the production, processing, marketing and distribution of fresh, frozen and value-added chicken and pork products (various cuts, frozen, prepared) to retailers, distributors and foodservice operators in the States USA, UK, Mexico, the Middle East, Asia and Continental Europe.

Pilgrim’s Pride earnings beat estimates by 81.5%, despite significant pressure from rising input and labor costs, as well as a negative mix. Revenues increased by more than 29% compared to last year. U.S. restaurant volumes exceeded pre-pandemic levels, although retail volumes remained flat. Volumes and costs were both unfavorable in Europe, but collaborations with key customers could change things for PPC. Mexican demand remains strong despite ongoing operational challenges.

Zacks Rank #1 (Strong Buy) stock with value and growth scores of B belongs to the Food – Meat Products industry, which is among the 18% of Zacks-ranked industries. According to historical data from Zacks, a stock ranked buy in a top industry (the higher the ranking, the better) generally has a high chance of upside.

And Pilgrim’s Pride is also experiencing positive rating reviews. Estimates for 2022 and 2023 have increased by 5 cents over the past 30 days. The positive impression indicates that further revisions may be in the cards.

Its revenues are expected to increase by about 22% this year.

As a manufacturer and distributor of transportation fuels and petrochemicals in the United States, Canada, United Kingdom and Ireland, Valero Energy Corp. VLO is poised to take advantage of the current energy crisis. As of December 31, 2021, the company had 15 oil refineries with a combined throughput capacity of approximately 3.2 million barrels per day; and 12 ethanol plants with a combined ethanol production capacity of approximately 1.6 billion gallons per year.

Valero beat earnings estimates by 43.5% on revenues that beat by 20.2%.

The company benefits from a few factors affecting the industry in which it operates. The first concerns sanctions against Russia that are limiting global oil supply even as demand approaches pre-pandemic levels. The second is the tightening of refining capacity in the United States, as demand continues to increase in an industry that has shut down facilities. This translates into strong pricing and margins for the business.

Zacks Rank #2 (Buy) stock has value and growth scores of A. It belongs to the oil and gas industry – Refining and marketing (top 11%).

Analysts are optimistic about the company’s outlook and have raised their estimates. As a result, the Zacks consensus estimate for 2022 revenue rose 13 cents over the past 7 days, while the estimate for 2023 rose 11 cents.

Its revenue and profit are expected to grow by 23.3% and 250.9% respectively this year.

The next step is Dorman Products, Inc. DORM, a global supplier of spare parts and fasteners for passenger cars, light trucks and medium and heavy trucks.

Dorman’s quarterly earnings surprised 4.9% while its revenue surprised 7.5%.

The company is benefiting from favorable momentum across the industry and across all customer channels, as well as increased penetration of new revenue-driving products. In addition, price increases help to offset inflation in logistics, wages and raw materials.

Zacks Rank #2 stock has value and growth scores of B. It belongs to the automotive industry – aftermarket parts ranked by Zacks (top 24%).

The Zacks consensus estimate for 2022 has risen by a few cents over the past 7 days, while the 2023 estimate has risen by a penny.

Its turnover and profits are expected to grow by 20.6% and 18.8% respectively.

Arch Resources, Inc. ARCH produces and sells thermal and metallurgical coal from surface and underground mines. Coal is considered one of the dirtiest fuels and its use in the thermal segment has been declining for some years.

As a result, Arch Resources has refocused its activity on the steel/metallurgy segment. The current energy crisis and the inventory situation, however, lead to very strong demand from the thermal segment, which has been positive for its recent results. The company also returns money to investors through handsome dividends.

Zacks Rank #1 stock has a value score of B and a growth score of C. It is in the coal industry (top 1%).

About 30 days ago, Arch Resources estimates nearly doubled from $37.73 to $60.48 (for 2022) and from $16.54 to $25.52 (for 2023). And the announcement of the results ensured that there were no downward revisions.

Arch Resources’ revenues are expected to increase 58.0% this year and its profits are expected to increase 195.5%.

The ending stock on this listing is Range Resources Corp. RRC, which is engaged in the exploration, development and acquisition of oil and gas properties. As of December 31, 2021, it owned and operated 1,350 net producing wells and operated approximately 794,000 net acres under lease in the Appalachian region of the northeastern United States. Its natural gas and natural gas liquids (NGLs) are sold to utility, marketing and midstream companies, and industrial users; petrochemical end users, traders/traders and natural gas processors. Its oil and condensate are sold to crude oil processors, transporters, and refining and marketing companies.

Like the other energy companies discussed above, Range Resources is also benefiting from the current energy crisis and the resulting escalation in the price of natural gas and NGLs. Additionally, the company’s properties in Appalachia allow for very efficient mining, which will continue to be an important cost containment factor. Recent price strength has allowed the company to reduce debt and return cash to shareholders despite maintaining a decent level of investment.

Range Resources has a Zacks Rank #2, Value Score B, and Growth Score A. The Oil & Gas – Exploration & Production – USA industry, to which it belongs, is within 2% tops of Zack-ranked industries.

In the past 7 days, its 2022 estimate jumped 73 cents while the 2023 estimate jumped $1.27. And these increases are in addition to previous increases. In other words, this company’s estimates have steadily increased over the past 90 days.

For 2022, analysts forecast revenue growth of 39.1% and earnings growth of 144.0%.

One month price movement

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Range Resources Corporation (RRC): Free Stock Analysis Report

Valero Energy Corporation (VLO): Free Inventory Analysis Report

Pilgrim’s Pride Corporation (PPC): Free Stock Analysis Report

Dorman Products, Inc. (DORM): Free Inventory Analysis Report

Arch Resources Inc. (ARCH): Free Stock Analysis Report

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