Longtime readers know that earnings season is my favorite time of the year.
This is when companies must open their books and share their latest quarterly results with Wall Street. Companies that post strong earnings and sales results are typically rewarded, while companies that miss expectations are usually punished.
So, I couldn’t be more excited that the fourth-quarter earnings season is finally here. We’re still in the early innings – only 10% of the S&P 500 companies have released their results so far – but earnings are working… especially for my Growth Investor stocks.
Case in point: PACCAR, Inc. (PCAR).
PACCAR primarily develops light-, medium- and heavy-duty trucks under three main brands: DAF, Kenworth and Peterbilt. The company’s products are sold in more than 100 countries through more than 2,200 dealerships worldwide.
I’m bringing PCAR to your attention today because it popped more than 2% to a new 52-week high in the wake of its positive fourth-quarter earnings results this morning.
Total revenue increased 11.7% year-over-year to $9.08 billion, which topped estimates for $8.35 billion. Fourth-quarter earnings jumped 54% year-over-year to $1.42 billion, or $2.70 per share, up from $921.3 million, or $1.76 per share, in the same quarter a year ago. Analysts expected earnings of $2.22 per share, so PACCAR posted a 21.6% earnings surprise.
So, PCAR was rewarded for its better-than-expected earnings results.
I should also add that PCAR’s quarterly report is all the more impressive when we consider what the analyst community expects from the S&P 500 in the fourth quarter: They are forecasting S&P 500 earnings to decline 1.7% and for revenue to rise an average 2.9%, according to FactSet. This is down from previous estimates for a 0.3% earnings decline a week ago.
Now, as analysts continue to lower their guidance, it is important to stay focused on a stock with strong fundamentals this earnings season. The reality is stocks that post positive earnings should bounce like tennis balls, while stocks that post weak earnings should fall like rocks.
You don’t want to invest in the “rocks” of Wall Street, so in today’s Market 360, I’ll share 10 stocks my Portfolio Grader found that have weak fundamentals that are unlikely to fare well this earnings season. Then, I’ll share how you can set up your portfolio to prosper during earnings season.
This Week’s Ratings Changes
After taking a closer look at the latest institutional buying pressure and each company’s financial health, I decided to revise my Portfolio Grader for 85 big blue chips. Of these 85 stocks, 19 were downgraded from a B-rating (Buy) to a C-rating (Hold), and 25 stocks were downgraded from a C-rating to a D-rating (Sell).
I’ve listed the first 10 stocks to sell below, but you can find the full list – including the stocks’ Fundamental and Quantitative Grades – here.
Chances are that you have at least one of these stocks in your portfolio, so you may want to give this list a skim and adjust accordingly.
|America Movil SAB de CV Sponsored ADR Class B
|BHP Group Ltd Sponsored American Depositary Receipt Repr 2 Shs
|Coupang, Inc. Class A
|Discover Financial Services
|EOG Resources, Inc.
|Grab Holdings Limited Class A
Now, the best defense for your portfolio is a strong offense made up of fundamentally superior stocks. This is why you need to focus on companies with strong earnings and sales growth that are also experiencing persistent institutional buying pressure (i.e., money is flowing into the stock).
With thousands and thousands of stocks to invest in, it can be hard to finding fundamentally superior stocks set to prosper during earnings season.
That’s where my Growth Investor service can help.
Currently, my Growth Investor stocks are characterized by 14.3% annual sales growth, 166.5% annual earnings growth, an 8.5% earnings surprise and a median fiscal 2024 price-to-earnings ratio of 16.7.
So, if you want to your portfolio to be filled with the crème de la crème of stocks, then join me at Growth Investor today. You’ll receive instant access to all my Buy List stocks, as well as all my Growth Investor Monthly Issues, Weekly Updates, Special Market Podcasts – and much more.
And your timing couldn’t be more perfect. On Friday, I will be releasing three new buys in my Growth Investor Monthly Issue for February. If you want the names as soon as they’re released, then become a member of Growth Investor now and I’ll be in touch as soon as they’re published on the Growth Investor website.
(Already a Growth Investor subscriber? Click here to log in to the members-only website now.)
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
PACCAR, Inc. (PCAR)