We are in the middle of the third-quarter 2022 earnings season. So far, corporate America has shown mixed results. Although the earnings growth rate has declined systematically, margin pressures has been less than expected.
This earning season is of immense importance as U.S. corporates are facing severe challenges on the back of record-high inflation, an extremely hawkish Fed and threats of a recession.
Unlike large-cap stocks, most of the mid-caps gained in the last quarter. The mid-cap-centric S&P 500 Index was up 6% in third-quarter 2022. We have identified five mid-cap stocks with a favorable Zacks Rank that are set to beat third-quarter earnings estimates. Investment in these stocks should be fruitful as an earnings beat is expected to drive stock prices going forward.
These companies are — Tripadvisor Inc. TRIP, Five9 Inc. FIVN, FS KKR Capital Corp. FSK, Lyft Inc. LYFT and Playtika Holding Corp. PLTK.
Q3 Earnings Results So Far
Our estimates for third-quarter earnings of the market’s benchmark, the S&P 500 Index, has shown a gradual decline in the past three and a half months. As of Nov 4, 429 companies of the S&P 500 Index have reported results.
Total earnings of these companies are up 2.2% from the same period last year on 11.4% higher revenues, with 70.9% beating EPS estimates and 67.8% beating revenue estimates. Our current estimate has projected that total earnings of the S&P 500 Index are expected to be up 1.6% year over year on 11.3% higher revenues.
Our Top Picks
We have chosen five mid-cap companies that will report third-quarter earnings results this week. Each of these stocks carries a Zacks Rank #2 (Buy) 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 (Hold) 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 our five picks in the last quarter.
Image Source: Zacks Investment Research
Tripadvisor is benefiting from increasing consumer travel demand owing to the continued relaxation of government restrictions. Strong recovery across the Tripadvisor Core, Viator and TheFork segments, well-performing experience offerings, and growing bookings likely to act as a major tailwind. Further, strengthening momentum across TripAdvisor-branded hotels and the TripAdvisor-branded display and platform are constantly driving top-line growth of the company.
TRIP has an Earnings ESP of +9.69%. It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last 30 days. TRIP is set to release earnings results on Nov 7, after the closing bell.
Five9 provides cloud software for contact centers. FIVN offers software products such as workforce management, speech recognition, predictive dialer, and voice applications. Five9 serves customers in various industries, including banking and financial services, business process outsourcers, consumer, healthcare, and technology.
FIVN has an Earnings ESP of +7.04%. It has an expected earnings growth rate of 23.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.9% over the last 30 days.
FIVN recorded earnings surprises in the last four reported quarters, with an average beat of 46.7%. Five9 is set to release earnings results on Nov 7, after the closing bell.
Lyft is benefiting from continued improvement in ride volumes. An increase in Active Riders is driving the LYFT’s top line. Rise in driver supply is supporting Lyft’s ride volumes. For the third quarter, LYFT expects revenues of $1040-$1060 million, which indicates a sequential rise of 5-7%.
Improvement in Lyft’s adjusted EBITDA is an added positive. EBITDA is anticipated in the $55-$65 million range. This means that adjusted EBITDA margin in third-quarter 2022 is likely to be in the 5-6% range.
LYFT has an Earnings ESP of +21.95%. It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.9% over the last 60 days.
Lyft recorded earnings surprises in the last four reported quarters, with an average beat of 201.7%. The company is set to release earnings results on Nov 7, after the closing bell.
FS KKR is a business development company specializing in investments in debt securities. FSK provides customized credit solutions to private middle-market U.S. companies. FS KKR invests primarily in the senior secured debt and, to a lesser extent, the subordinated debt of private middle market U.S. companies.
FSK has an Earnings ESP of +2.07%. It has an expected earnings growth rate of 7.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.9% over the last 90 days.
FSK recorded earnings surprises in the last four reported quarters, with an average beat of 5.5%. The company is set to release earnings results on Nov 7, after the closing bell.
Playtika Holding develops mobile games in the United States, Europe, the Middle East, Africa, the Asia Pacific, and internationally. PLTK owns a portfolio of casual and casino-themed games.
Playtika distributes its games to the end customer through various web and mobile platforms, such as Apple, Facebook, Google, and other web and mobile platforms and its own proprietary platforms.
PLTK has an Earnings ESP of +8.86%. The Zacks Consensus Estimate for current-year earnings has improved 1.3% over the last seven days. Playtika is set to release earnings results on Nov 8, before the opening bell.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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TripAdvisor, Inc. (TRIP): Free Stock Analysis Report
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Lyft, Inc. (LYFT): Free Stock Analysis Report
Playtika Holding Corp. (PLTK): Free Stock Analysis Report
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