The fourth quarter 2021 earnings season accelerated from January 14, as the banking giants began to release their financial figures. The last quarter was impressive for Wall Street. The end of fiscal stimulus, shrinking monetary stimulus, soaring inflation and resurgence of the coronavirus have failed to derail the US stock market’s northward journey.
Five large-cap companies — PNC Financial Services Group Inc. (ANC – free report), United Airlines Holdings Inc. (LAU – free report), Discover financial services (DFS – free report), Voyageurs Companies Inc. (TRV – free report), and American Airlines Group Inc. (AAL – Free Report) – are expected to release their Q4 2021 results this week. These stocks are likely to gain in the near term, supported by their potential earnings overshoot
Good start to fourth quarter results
As of Jan. 14, 26 companies in the S&P 500 had reported their fourth quarter 2021 results. Total profit for these companies was up 19.2% year-on-year, on revenue up 11.7%. %, with 88.5% beating EPS estimates and 84.6% beating revenue estimates.
Total fourth-quarter earnings for the market’s benchmark – the S&P 500 – are expected to climb 20.9% from the same period last year on revenue up 11.7%, after 41.4% year-over-year earnings growth on revenue up 17.4% in the third quarter, 95% year-over-year earnings growth on revenue up 25.3% in the second quarter and year-over-year earnings growth of 49.3% on revenue up 10.3% in the first quarter of 2021.
The first three quarters of this year were favorably impacted as the previous quarters of last year were affected by the pandemic-induced closures and restrictions. However, the US economy has started to reopen at a very slow pace since the start of the fourth quarter of 2020.
Actions in brief
Five large-cap companies (market capital > $12 billion) will release their Q4 2021 results this week. Each of these stocks carries a Zacks rank of No. 3 (Hold) and has a positive earnings ESP. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that for stocks with the combination of a Zacks #3 or higher ranking and a positive ESP on earnings, the probability of an earnings overshoot is as high as 70%. These shares should appreciate after the publication of their results. You can discover the best stocks to buy or sell before they’re flagged with our earnings ESP filter.
The chart below shows the price performance of the five aforementioned stocks over the past quarter.
Image source: Zacks Investment Research
PNC Financial Services Group is one of the largest diversified financial services institutions in the United States. Going forward, a focus on expanding the mid-market lending franchise and strengthening digital product and service offerings should drive PNC’s earnings growth.
Growth in loan and deposit balances highlights PNC’s strong balance sheet position. This further supports its inorganic expansion strategies, positioning PNC Financial Services well for earnings growth. Its good capital deployment activities should inspire confidence in the stock.
PNC Financial Services has an earnings ESP of +2.29%. The Zacks consensus estimate for current-year earnings has improved 0.1% over the past 7 days. PNC has posted earnings surprises over the past four reported quarters, averaging 29.4%. PNC Financial Services is expected to release its results on January 18, before the opening bell.
Traveler Companies enjoys a strong presence in the auto, home and commercial property insurance market in the United States with solid inorganic growth. A high retention rate, an increase in new business and a positive trend in renewal premiums bode well. TRV’s business operations are expected to perform well, thanks to market stability.
The Travelers Companies remains optimistic about the personal line of business, given growth in the profitable car dealership and homeowner businesses. TRV expects net investment income from the non-fixed income portfolio to be between $420 million and $430 million per quarter in 2022. Sufficient capital increases shareholder value.
Traveler Companies have a Gain ESP of +3.21%. He predicts a 0.2% earnings growth rate for the current year. The Zacks consensus estimate for current year earnings has improved 0.2% over the past 7 days.
TRV has recorded earnings surprises over the past four reported quarters, averaging 38.1%. The Travelers Companies is expected to report results on Jan. 20, before the opening bell.
United Airlines Holdings provides air transport services in North America, Asia, Europe, the Middle East and Latin America. UAL transports people and goods through its main and regional operations.
United Airlines aims to become 100% green by 2050. The carrier’s focus on its cargo unit is also encouraging. Additionally, UAL’s cost control efforts are supporting its results. United Airlines expects 2022 CASM, excluding fuel, profit sharing, third-party commercial expenses and special charges, to be lower than 2019 levels.
UAL has an ESP on earnings of +7.04%. It has an expected earnings growth rate of over 100% for the current year. United Airlines has recorded earnings surprises in two of the last four reported quarters, averaging 7.5%. UAL is expected to release its results on January 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 into the global payments industry and an attractive core business position the company well for growth.
A gradual economic recovery and improving consumer spending boosted DFS’s sales volume. Its strong balance sheet is another bright spot, highlighted by its cash and investment securities superior to long-term borrowings. Discover Financial Services’ banking business offers significant diversification benefits. A strong financial position allows DFS to deploy capital through buyouts and dividends.
Discover Financial Services has an ESP on revenue of +4.74%. The Zacks consensus estimate for current year earnings has improved 0.4% over the past 7 days. DFS has recorded earnings surprises over the past four reported quarters, averaging 34.7%. Discover Financial Services is expected to report results on January 19, after the closing bell.
American Airlines Group attracted heavy traffic during the Thanksgiving holiday season. As air travel demand continues to recover in the United States despite the threat posed by the omicron variant, American Airlines’ passenger revenue grew 56.1% year-over-year over the past nine first months of 2021.
AAL’s debt reduction efforts are also impressive. Management aims to reduce its debt by $15 billion by 2025. America Airlines’ codeshare deal with Indian low-cost carrier, IndiGo, is an added bonus.
AAL has an ESP on wins of +7.40%. It has an expected profit growth rate of 96.8% for the current year. It has recorded earnings surprises in the last four reported quarters, averaging 3.3%. America Airlines is expected to release its results Jan. 20, before the opening bell.
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