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Good Start To Q2’17 Earnings Season
The market has been pleasantly surprised after two weeks of companies reporting Q2’17 earnings. According to Zacks Investment Research, earnings and revenue growth are tracking below Q1’17 results but the number of companies that have beat their estimates so far is notably above historical levels. As a result, all major indices are trading near their all-time highs.
A few notable constituents of the Dow Jones Industrial Average that most recently beat both earnings and revenue estimates include McDonald’s Corporation MCD 1.61%, Caterpillar Inc CAT 0.89% and E I Du Pont De Nemours And Co DD 0.8%. All three stocks are trading near their all-time highs following their earnings announcement. All three companies also happen to operate in three completely separate sectors (consumer discretionary, industrials and materials). This may indicate a healthy economic environment which would bode well for companies that have yet to report their Q2’17 figures.
The following stocks could all trade significantly higher following an earnings beat next week.
Five Undervalued Stocks Reporting Next Week
There are 1,048 companies expected to report earnings next week (7/31 – 8/4) where finbox.io calculates a fair value estimate and only a handful appear to be fundamentally undervalued. Our intrinsic value data from this stock screen highlights five companies with 20% or more upside: Spirit Aerosystems SPR 0.36%, Viacom, Inc. VIAB 1.83%, Ingredion Inc INGR 0.39%, ARRIS International plc ARRS 1.06% and Archer Daniels Midland Company ADM 0.6%.
Spirit Aerosystems designs and manufactures commercial aero structures worldwide. The company is expected to report earnings next Wednesday, August 2nd and currently has a finbox.io fair value of $79.21 that implies 30% upside.
Although Spirit trades near its 52-week high, its valuation multiples generally trade at a discount to its peers: Rockwell Collins, Inc. COL 0.16%, L-3 Communications Inc LLL 1.01% and Huntington Ingalls Industries Inc HII 0.06%. The company’s LTM EBITDA multiple of 8.6x is below COL (15.3x), LLL (13.2x) and HII (9.7x).
Viacom operates as media brand worldwide and is expected to report its Q2’17 figures next Thursday, August 3rd. Ten separate valuation models calculate an average intrinsic value of $46.65 for the stock which implies 29% upside. This is slightly above the average Wall Street price target of $44.27.