Say Hello To The Value Plays Consistently Crushing Earnings
In the world of finance, earnings is both literally and figuratively ‘the bottom line.' No wonder, then, that a company's earnings performance is possibly the most important factor influencing its stock price.
The world of finance is unanimously infatuated with this quarterly-quoted number. And for good reason!
Strong earnings generally result in a company's share price gaining positive momentum and vice versa. Moreover, quarterly financial reports help investors to get a better grasp of the operational performance of the company in question, along with its near-term growth prospects.
Earnings basically imply profit; it is the money a company makes. Naturally, earnings growth is a healthy indication that a company is on the right track to provide solid returns to investors and cushion their portfolios.
Diamonds In The Rough
Volatility clearly stole the show in the second-quarter earnings season, resulting in poor earnings and revenue performances. Further, the ripple effect of falling oil prices coupled with profound trouble in some of the biggest economies of the world, like China, the Eurozone, Japan and Russia, could be felt in the U.S. stock market.
However, amid all the lows, there still are a few stocks that have consistently outperformed the market and delivered better-than-expected earnings through the past four quarters. Further, these stocks have equally solid value metrics to flaunt.
4 Value Stocks That Crushed Expectations
Here we shortlist four such stocks that have seen an impressive streak of earnings beats, especially when looking at the trailing four quarters (average positive earnings surprise greater than 20 percent).
Moreover, they also possess an attractive Value Style Score of ‘A,' under our new style score system. The Zacks Value Style Score condenses all valuation metrics into one actionable score that helps investors steer clear of ‘value traps' and identify stocks that are truly trading at a discount.
Back-tested results show that stocks with Value Style Scores of ‘A' or ‘B,' when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), offer the greatest investment opportunities.
Moreover, the four stocks we have handpicked for you carry the enviable Zacks Rank #1, which serves as a harbinger of outperformance and signals a strong earnings profile
SkyWest Inc. (NASDAQ: SKYW): The company, through its wholly-owned subsidiary SkyWest Airlines, Inc., operates one of the larger regional airlines in the U.S. SkyWest provides passenger and air freight service and completes over 880 daily flights.
The company has surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an impressive average positive earnings surprise of 338.1 percent. Moreover, this St. George, UT-based company is expected to retain its earnings momentum and deliver strong year-over-year growth, going forward.
Also, SkyWest possesses a P/E of 10.03x and P/S of 0.28x, a discount of 2.1 percent and a huge 56.9 percent over the industry average of 10.24x and 0.65x, respectively.
Moreover, analysts have become increasingly bullish on the company over the past month, with four upward estimate revisions for the company's 2015 earnings. This has led to a sharp spike in the Zacks Consensus Estimate for 2015, which now stands at $1.75, up from $1.30 a month ago.
YRC Worldwide Inc. (NASDAQ: YRCW): Overland Park, KS-based YRC Worldwide is the holding company for a portfolio of less-than-truckload (ETF:LTL) companies. Collectively, YRC Worldwide's companies boasts one of the largest, most comprehensive LTL networks in North America with local, regional, national and international capabilities.
The company has delivered a positive average earnings surprise of 142.6 percent over the last four quarters. Moreover, the company's bottom line is set to grow at an astounding rate of 131.1 percent this year.
Further, a P/S of 0.12x, compared to the industry average of 0.80x, suggests that the company is adequately undervalued compared to many of its peers, at least on the basis of this metric.
Moreover, analysts have great expectations from the company this year and have been revising 2015 earnings estimates upward over the past month. YRC Worldwide has seen 3 positive revisions over the past 4 weeks, resulting in a sharp spike in the Zacks Consensus Estimate for 2015, from 24 cents 30 days ago to $1.04 today – a massive increase of 333.3 percent.
Atlas Air Worldwide Holdings, Inc. (NASDAQ: AAWW): Based in Purchase, NY, Atlas Air Worldwide is principally involved in the airport-to-airport air transportation of heavy freight cargo through its two operating subsidiary airlines – Atlas Air, Inc. and Polar Air Cargo, Inc.
Atlas Air Worldwide possesses a P/E of 8.93x, a massive discount of 41.4 percent over the peer group average of 15.25x.
Moreover, the company's earnings have surpassed the Zacks Consensus Estimate in all the prior four quarters, with an average beat of 36.5 percent. Moreover, for full year 2015, EPS is estimated to grow at 32.5 percent.
Thanks to this success story, recent estimates have been moving higher for Atlas Air Worldwide. The company has seen 4 positive revisions over the past month, resulting in its 2015 estimate climbing from $4.84 to $4.93.
First American Financial Corporation (NYSE: FAF): Santa Ana, CA-based First American Financial provides financial services through its Title Insurance and Services segment and its Specialty Insurance segment.
The company has delivered positive earnings surprises in all of the prior four quarters, with an average beat of 21.2 percent. Further, its earnings are set to grow at a striking 23.2 percent rate in 2015.
Further, a P/S of 0.92x, compared to the industry average of 1.16x, suggests that the company is adequately undervalued compared to many of its peers, at least on the basis of this metric. Not only does the stock have an impressive short-term momentum, it has been witnessing solid activity on the earnings estimate revision front as well. Analysts clearly see good times ahead for the company, as the Zacks Consensus Estimate for 2015 earnings has trended sharply up over the past month, from $2.43 to $2.69 per share, thanks to 5 upward estimate revisions.
The Bottom Line
They say, money doesn't grow on trees and the saying holds true, especially in the current capricious market. However, though volatile markets present enough investment challenges, they also bear opportunities for the smart investor.
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The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.