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Bank of America says these 12 under-owned stocks are the most likely to smash expectations during this 'blowout' earnings season

Published by Business Insider on Wed, 14 Jul 2021

<p><img src="https://static1.businessinsider.com/image/5efb8f95f0f419369f212fa9-2400/gettyimages-1203661486.jpg" border="0" alt="trader" data-mce-source="JOHANNES EISELE/AFP/Getty Images"></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><p>Corporations are back in the spotlight as the second quarter earnings season arrives, and the pressure to perform is as intense as ever in the face of Wall Street's sky-high expectations.</p><p>Earnings this quarter will soar 79% year-over-year, Bank of America strategists led by Savita Subramanian wrote in a July 11 note, which would shatter records and come in at 11% over the Street's lofty consensus. Companies are set to pole-vault over an unusually low bar of prior-year comparisons, which were disproportionately affected by pandemic-induced lockdowns.</p><p>Continued momentum from a surprisingly strong first quarter, where earnings topped expectations by a record 23%, will inspire confidence in the economic recovery and lift value stocks, the note read. The S&amp;P 500 has <a href="https://markets.businessinsider.com/index/s&amp;p_500">advanced 17%</a> this year amidst the positive news and a successful economic reopening.</p><p>Early reports and macroeconomic indicators hint at an earnings beat of between 3% and 20%, according to the note. But investors still have reasons to be wary.</p><p>"Strong earnings doesn't always mean a strong market," Subramanian wrote. "Historically, 60% of down quarters [since 1996] transpired amid earnings beats."</p><p>An unforgiving market could dismiss record earnings growth and look for signs of a slowdown. Even if corporate earnings match the Street's consensus and climb 61% from Q2 2020, that would be up just 9% from 2019, which is far lower than the 25% improvement over 2019 that stocks enjoyed in Q1, Subramanian wrote. Bank of America expects 21% growth from 2019 in Q2 2021.</p><p>And a litany of challenges could cause Q2 earnings to underwhelm. Subramanian wrote that the market will keep a close eye on "the three C's": CapEx, China, and Covid.&nbsp;</p><p>Business investment remains tempered but a sharp return could be in store, which would spark the next stage of the recovery, the note read. Skepticism about the strength of China's economic recovery has emerged in recent weeks, so the Street will listen to how corporations describe business conditions in the nation. Finally, the <a href="https://www.businessinsider.com/us-recorded-20000-daily-covid-19-cases-delta-variant-spreads-2021-7">COVID-19 Delta variant</a> is well worth monitoring.</p><p>Additionally, inflation will be top of mind for investors after mentions on Q1 earnings calls rose 900% year-over-year, according to Bank of America. However, steady price increases have boosted earnings so far, the note read.</p><p>Bank of America noted that three sectors look attractive ahead of the Q2 earnings season: <strong>Industrials, Materials</strong>, and <strong>Technology</strong>. Two sectors to stay away from based on indicators the bank tracks are <strong>Consumer</strong> <strong>Staples</strong> and<strong> Utilities</strong>.</p><p>The firm also listed 12 stocks under-owned by fund managers that are most likely to trounce expectations in Q2. Each is listed below along with ticker, sector, industry, expected earnings report date, and weight in fund holdings relative to the S&amp;P 500, where a mark of 1 is equal weight.</p><h3>1. Allegion PLC</h3><img src="https://static3.businessinsider.com/image/60edeb45a8d8c00019b02f7b-400-300/1-allegion-plc.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/alle-stock">ALLE</a></p><p><strong>Sector</strong>: Industrials</p><p><strong>Industry</strong>: Building Products</p><p><strong>Expected report date</strong>: 7-22</p><p><strong>Rel. wgt. to S&amp;P 500 in fund holdings</strong>: 0.67</p></p><br/><br/><h3>2. Teledyne Technologies Inc.</h3><img src="https://static3.businessinsider.com/image/60edeb47a8d8c00019b02f7e-400-300/2-teledyne-technologies-inc.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/tdy-stock">TDY</a></p><p><strong>Sector</strong>: Industrials</p><p><strong>Industry</strong>: Aerospace &amp; Defense</p><p><strong>Expected report date</strong>: 7-22</p><p><strong>Rel. wgt. to S&amp;P 500 in fund holdings</strong>: 0.68</p></p><br/><br/><h3>3. IQVIA Holdings Inc.</h3><img src="https://static6.businessinsider.com/image/60edeb4861b8600019f16e35-400-300/3-iqvia-holdings-inc.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/iqv-stock">IQV</a></p><p><strong>Sector</strong>: Healthcare</p><p><strong>Industry</strong>: Life Sciences Tools &amp; Services</p><p><strong>Expected report date</strong>: 7-22</p><p><strong>Rel. wgt. to S&amp;P 500 in fund holdings</strong>: 0.61</p></p><br/><br/><h3>4. M&T Bank Corporation</h3><img src="https://static6.businessinsider.com/image/60edeb4661b8600019f16e33-400-300/4-mt-bank-corporation.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/mtb-stock">MTB</a></p><p><strong>Sector</strong>: Financials</p><p><strong>Industry</strong>: Banks</p><p><strong>Expected report date</strong>: 7-21</p><p><strong>Rel. wgt. to S&amp;P 500 in fund holdings</strong>: 0.32</p></p><br/><br/><h3>5. Allstate Corporation</h3><img src="https://static5.businessinsider.com/image/60edeb47a8d8c00019b02f7d-400-300/5-allstate-corporation.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/all-stock">ALL</a></p><p><strong>Sector</strong>: Financials</p><p><strong>Industry</strong>: Insurances</p><p><strong>Expected report date</strong>: 8-4</p><p><strong>Rel. wgt. to S&amp;P 500 in fund holdings</strong>: 0.36</p></p><br/><br/><h3>6. IDEXX Laboratories, Inc.</h3><img src="https://static6.businessinsider.com/image/60edeb4861b8600019f16e36-400-300/6-idexx-laboratories-inc.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/idxx-stock">IDXX</a></p><p><strong>Sector</strong>: Healthcare</p><p><strong>Industry</strong>: Healthcare Equipment &amp; Supplies</p><p><strong>Expected report date</strong>: 7-30</p><p><strong>Rel. wgt. to S&amp;P 500 in fund holdings</strong>: 0.40</p></p><br/><br/><h3>7. Dentsply Sirona, Inc.</h3><img src="https://static3.businessinsider.com/image/60edeb48a8d8c00019b02f7f-400-300/7-dentsply-sirona-inc.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/xray-stock">XRAY</a></p><p><strong>Sector</strong>: Healthcare</p><p><strong>Industry</strong>: Healthcare Equipment &amp; Supplies</p><p><strong>Expected report date</strong>: 8-5</p><p><strong>Rel. wgt. to S&amp;P 500 in fund holdings</strong>: 0.59</p></p><br/><br/><h3>8. Deere & Company</h3><img src="https://static6.businessinsider.com/image/60edeb47a8d8c00019b02f7c-400-300/8-deere-and-company.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/de-stock">DE</a></p><p><strong>Sector</strong>: Industrials</p><p><strong>Industry</strong>: Machinery</p><p><strong>Expected report date</strong>: 8-20</p><p><strong>Rel. wgt. to S&amp;P 500 in fund holdings</strong>: 0.84</p></p><br/><br/><h3>9. Mosaic Company</h3><img src="https://static6.businessinsider.com/image/60edeb4661b8600019f16e32-400-300/9-mosaic-company.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/mos-stock">MOS</a></p><p><strong>Sector</strong>: Materials</p><p><strong>Industry</strong>: Chemicals Interactive</p><p><strong>Expected report date</strong>: 8-2</p><p><strong>Rel. wgt. to S&amp;P 500 in fund holdings</strong>: 0.11</p></p><br/><br/><h3>10. Twitter, Inc.</h3><img src="https://static4.businessinsider.com/image/60edeb4961b8600019f16e37-400-300/10-twitter-inc.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/twtr-stock">TWTR</a></p><p><strong>Sector</strong>: Communication Services</p><p><strong>Industry</strong>: Media &amp; Services</p><p><strong>Expected report date</strong>: 7-22</p><p><strong>Rel. wgt. to S&amp;P 500 in fund holdings</strong>: 0.61</p></p><br/><br/><h3>11. West Pharmaceutical Services, Inc.</h3><img src="https://static5.businessinsider.com/image/60edeb4961b8600019f16e38-400-300/11-west-pharmaceutical-services-inc.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/wst-stock">WST</a></p><p><strong>Sector</strong>: Healthcare</p><p><strong>Industry</strong>: Healthcare Equipment &amp; Supplies</p><p><strong>Expected report date</strong>: 7-23</p><p><strong>Rel. wgt. to S&amp;P 500 in fund holdings</strong>: 0.64</p></p><br/><br/><h3>12. Synchrony Financial</h3><img src="https://static2.businessinsider.com/image/60edeb4861b8600019f16e34-400-300/12-synchrony-financial.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/syf-stock">SYF</a></p><p><strong>Sector</strong>: Financials</p><p><strong>Industry</strong>: Consumer Finance</p><p><strong>Expected report date</strong>: 7-20</p><p><strong>Rel. wgt. to S&amp;P 500 in fund holdings</strong>: 0.40</p></p><br/><br/>
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