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What are we looking for?

U.S.-listed stocks with a proven track record of strong earnings growth.

The second-quarter U.S. earnings season is now upon us. In the first quarter of this year, earnings were mostly positive for stocks in the S&P 500 index, with the biggest earnings surprises in the consumer discretionary, energy, communications and financial sectors.

With markets hovering near or at all-time highs, will we see a continuation of last quarter’s earnings strength?

The screen

In keeping with the earnings trend, we will be using Trading Central Strategy Builder to search for U.S. stocks that show consistent revenue and earnings growth ahead of their earnings releases.

We will start by screening for U.S. stocks with a market capitalization of at least US$20-billion. This will limit our search to the largest and most stable companies, with correspondingly high-quality revenue and earnings streams.

Next, we will look for companies with revenue growth and earnings-per-share growth of at least 20 per cent last quarter versus the same period a year earlier, as well as a five-year historical EPS growth rate of 20 per cent or higher.

Finally, we want stocks with a TC Quantamental Rating of at least five out of 10. This metric ranks stocks on a scale of one to 10, with 10 being the most bullish and one being the most bearish. The TC Quantamental Rating uses a combination of valuation, growth, quality, price momentum and income as key metrics when rating a company.

For informational purposes, we have also included the recent stock price, price-to-earnings ratio, expected earnings announcement date and dividend yield.

More about Trading Central

Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions.

Trading Central’s product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities.

Strategy Builder is available through leading retail brokers in Canada and worldwide.

What we found

Topping our list is KKR & Co. Inc., an investment firm that manages investments in private equity, credit and real assets. The company has the highest revenue growth at 88.6 per cent in the first quarter when compared to the same quarter in 2020, and impressive EPS growth of 170 per cent in the same period.

KKR’s five-year historical EPS growth is at 27.3 per cent. The stock posted a new intraday record high on Tuesday as market prices trended upward. The company is expected to report earnings on Aug. 4.

Second on our list is Best Buy Co. Inc., the consumer electronics retailer, which has the highest TC Quantamental Rating on our list at 7.72. The company’s five-year historical EPS growth rate is 21.7 per cent and it is expected to report earnings on Aug. 25.

Applied Materials Inc., one of the world’s largest suppliers of equipment, services and software to semi-conductor manufacturers, is the best-performing stock on our list, with a year-to-date gain of 57.2 per cent and a one-year gain of 116.9 per cent. The company’s five-year historical EPS growth rate is 28.5 per cent and it is expected to report earnings on Aug. 19.

Trading Central Strategy Builder provides a back-testing capability to evaluate how well an investing strategy would have worked in the past. Using a five-year historical period with quarterly rebalancing, the screen described had an average annual return of 24.3 per cent compared to 11.3 per cent for the S&P 500.

The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.

U.S. stocks with earnings growth 

RankCompanySymbolRecent Price (US$)Market Cap. (US$Bil) Revenue Growth (%Last Qtr.vs.Prior Yr)EPS Growth (%Last Quarter vs. Prior Yr)EPS Growth (%5-Yr Historical)TC Quantamental RatingP/EDiv. Yield (%)YTD Performance (%)1 Yr Performance(%)Expected Report Date
1KKR & Co IncKKR-N58.9151.388.60170.3027.36.97.0145.570.84-Aug
2Best Buy Co IncBBY-N109.9127.535.90280.3021.77.7212.92.610.126.4925-Aug
3Allstate CorpALL-N131.6939.426.2061.6027.95.655.82.519.846.764-Aug
4D.R. Horton IncDHI-N86.7731.243.3094.6025.97.3810.10.925.946.6922-Jul
5KLA CorpKLAC-Q309.1247.326.70632.0028.07.2826.01.219.453.8529-Jul
6Lam Research CorpLRCX-Q617.8888.153.7091.0032.57.0326.10.830.878.5528-Jul
7Applied Materials IncAMAT-Q135.65123.941.1074.4028.56.7928.30.757.2116.919-Aug
8Lowe's Companies IncLOW-N192.74136.224.1082.4023.26.7821.01.720.137.6118-Aug
9ASML Holding NVASML-Q716.51253.078.80244.1021.46.5356.20.546.982.5521-Jul
10Thermo Fisher Scientific IncTMO-N510.78200.059.00198.5026.57.1625.70.29.731.8328-Jul
11NVIDIA CorpNVDA-Q793.66494.083.80106.1044.95.9293.80.15291.2118-Aug
12Franco-Nevada CorpFNV-N149.9728.628.4053.3060.66.9747.90.819.72.2211-Aug
13West Pharmaceutical Services IncWST-N371.4427.436.50101.0028.66.4866.
14Intuit IncINTU-Q505.56138.139.0029.0040.15.764.20.533.177.1625-Aug
15STMicroelectronics NVSTM-N39.1235.635.2085.7058.55.6228.30.65.434.8529-Jul

Source: Trading Central 

Gary Christie is head of North American research at Trading Central in Ottawa.

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