So Far, So Good for Earnings Season

The first full week of earnings season is in the books… and its been OK for the most part.

That’s not exactly a glowing review, especially when compared to previous seasons. Nonetheless, its pretty encouraging after months of estimate cuts and recession concerns. 

According to the latest Earnings Preview from Sheraz Mian, nearly 80% of S&P companies that have reported so far have beaten EPS estimates. And a little more than 54% have topped revenue expectations.

“This is hardly a celebratory showing, but it isn’t doom and gloom either,” said Mian. 

We knew this earnings season was going to be softer-than-usual, but we hoped that these lowered expectations would make it easier for stocks to outperform. So far, so good! However, its still really early with a majority of companies left to report. 

The major indices ended this low volume, holiday-shortened week with gains, which continued the pattern of bouncing between slight advances and slight declines. Stocks were sluggish in the morning, but climbed to the plus side by the close due to the decent start to earnings season along with a solid retail sales report for March (+1.6%) and the successful IPOs of Pinterest (PINS) and Zoom (ZM).

The Dow finished higher by 0.42% (or 110 points) to 26,559.54, marking a weekly advance of 0.6%. The S&P spent its fifth day above 2900 after increasing 0.16% today to 2905.03, but the index was down slightly for the week by 0.1%.

The NASDAQ spent most of the session in the red, but managed to finish with a gain of 0.02% to 7998.06. It was up 0.2% over the past four days, marking its fourth straight week on the plus side.  

It's been a boring week. Two of the major indices barely moved. But we’ll take it! It’s much better than the earnings recession that we’ve been hearing about. 

If earnings season can continue to largely outperform the lowered expectations, then we may have a set of new highs rather soon.

Today's Portfolio Highlights:

Healthcare Innovators: The sudden pullback in healthcare stocks has Kevin finding tons of opportunities that he can’t resist. Yesterday he added two names… and today he’s back with two more. The editor bought GW Pharmaceuticals (GWPH) and Edwards Lifesciences (EW) on Thursday. GWPH gives the portfolio its first exposure to the medical cannabis market with the only FDA-approved marijuana drug, Epidiolex, for the treatment of pediatric epilepsy. Sales for GW's pipeline should soar to $500 million in the next 18 months, as it already has an MS treatment approved in the UK. And EW is the heart valve replacement Innovator that has previously been a nice winner for the portfolio -- twice. The editor thinks EW can do it again as it moves above $200 this year. Read the full write-up for more on today’s moves.

Marijuana Innovators: Numerous analysts are now initiating coverage on marijuana producers as the environment changes state to state… and one of their favorite plays at the moment is HEXO Corp. (HEXO). The company is a cannabis grower that markets to both the recreational and medical sides. Even though oversupply might hurt wholesale prices for the raw product, Dave likes this stock and thinks it will continue to be a leader as the industry further evolves. He added it to the portfolio on Thursday. Read the full write-up for more.

TAZR Trader: Healthcare is where the bargains are this week as the “single-payer panic” has clipped the sector 5%, opening up great opportunities for investors who aren’t rattled by the political wrangling. Kevin is one such investor and today he picked up Centene (CNC). In addition to the panic, this stock is also being pressured by its recent $17.3 billion take-over bid for WellCare. Given these two factors, Kevin thinks CNC is “well oversold and offers both a fundamental value and technical opportunity." He added the stock on Thursday with a 7% allocation. Read the complete commentary for more.

Surprise Trader: The portfolio capped off a week of buying on Thursday by picking up a 12.5% allocation in Silgan Holdings (SLGN). This Zacks Rank #2 (Buy) is a leading supplier of rigid packaging for consumer goods products. The company has a positive Earnings ESP of 1.3% for the quarter coming on Thursday April 24th before the bell. Dave likes that SLGN’s earnings trend appears to be strengthening again along with its estimates. Read the full write-up for more on this new pick.

Have a Great Easter Weekend!
Jim Giaquinto