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5 Stocks With Immense Earnings Growth Prospects in 2022
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The hardships faced in the past two years, be it the spread of COVID-19 in 2020 or the resurgence of the Delta variant and supply-chain mishaps in 2021, have prepared investors for all possible situations. As investors look forward to 2022, their investments will be focused on the recovering sectors. Investors will bank on the stocks that not only have the potential to benefit from the accelerating economic recovery but also are capable of withstanding the newer COVID-related disruptions, including the rise of the Omicron variant.
The overall outlook for the markets remains good for 2022, with strong growth seen throughout 2021, as most companies rebound from the lockdown-led declines of 2020. Notably, the S&P 500 raked in 23.2% growth in the past year, the Dow Jones grew 14.6% and Nasdaq rose 21.3%. The mass inoculation drive, stimulus payments, improved labor market, the Federal Reserve’s (“Fed”) accommodative monetary policy and the resumption of business activities did the magic for the markets after slowed growth in early 2021.
However, investors will be mindful of factors that may threaten their portfolios, including inflation and Fed’s policies. Inflation is likely to be a significant drawback in 2022, as the Fed’s low-rate policies are expected to fade, with a rate hike expected soon. Amid the current supply-chain woes and rising inflation, companies are expecting to maintain their earnings growth scores with price increases. Therefore, companies with strong earnings growth potential can be good investment options.
How Can a Focus on Earnings Benefit?
Even if the economic dynamics go south, companies with earnings growth potential are expected to be lucrative picks. Notably, earnings growth has been remarkably high in 2021 than the pandemic-driven 2020. Per the latest Zacks Earnings Trends report, the S&P 500 index’s earnings are estimated to increase 45.4% year over year, whereas it witnessed a 13% earnings decline in 2020.
Companies have benefited from the reopening of businesses and offices with the rollout of vaccines, resulting in smoother economic recovery in most sectors. Robust earnings growth in 2021 resulted in strong shareholder returns as the markets continued to pick up.
The Zacks Earnings Trend report suggests the S&P 500 index’s earnings growth of 8.7% for 2022 on a 7.4% increase in revenues.
As the government withdraws the stimulus payments that made life easier for people amid the pandemic, experts expect slowed economic growth in 2022. However, the recovery is likely to be driven by tailwinds like the strong cash position of consumers and pent-up demand. Not to mention, businesses are expected to benefit from high liquidity and lower debt levels along with the gradual easing of supply bottlenecks as 2021 comes to an end. These factors are anticipated to aid earnings growth of companies to a large extent.
Our Picks
Given the current tricky environment, investors will need to be vigilant in picking stocks that position their portfolios for growth in 2022. At this time, investing in stocks with more resiliency in terms of earnings growth could be beneficial.
With the help of the Zacks Stock Screener, we have selected a few stocks with a Zacks Rank #1 (Strong Buy) or #2 (Buy) that have robust earnings growth projections for 2022. To narrow down the list, we have taken those stocks with a market cap of more than $100 million and a Growth Score of A or B.
Tesla Inc. (TSLA - Free Report) , with a market capitalization of $1,071.6 billion, has shifted from developing niche products for affluent buyers to making more affordable EVs for the masses. The electric vehicle (“EV”) leader’s three-pronged business model approach of direct sales, servicing and charging its EVs sets it apart from the other carmakers. Tesla is the market leader in battery-powered electric car sales in the United States, owning around 60% of the market share. The company’s strong earnings prospects are based on continued growth in automotive revenues as well as gains in energy generation and storage revenues.
Tesla delivered an earnings surprise of 25.4%, on average, in the trailing four quarters. The Zacks Consensus Estimate for TSLA’s 2022 earnings reflects growth of 30.5% from the 2021 predicted level. The company currently sports a Zacks Rank #1. It has rallied 64.2% in a year. TSLA has a 3-5 year expected earnings growth rate of 37.5% and a Growth Score of A.
Costco Wholesale Corporation (COST - Free Report) has a market cap of $244.1 billion. The company, based in Issaquah, WA, is one of the largest warehouse club operators in the United States. COST’s strategy to sell products at heavily discounted prices has helped it remain on a growth track as cash-strapped customers reckon Costco as a viable option for low-cost necessities. Costco’s growth strategies, improved price management, decent membership trends and increasing penetration of the e-commerce business have been contributing to its performance.
The Zacks Consensus Estimate for Costco’s next fiscal year’s earnings mirrors a rise of 9.7% from the current year’s expected level. The company delivered an earnings surprise of 8.3%, on average, in the trailing four quarters. COST currently carries a Zacks Rank #2. The company has risen 51.2% in a year. It has a 3-5 year expected earnings growth rate of 8.8% and a Growth Score of A.
Accenture Plc (ACN - Free Report) has evolved as a trusted and viable consulting services provider through years of investment in digital, cloud and security strategy. The company has been steadily gaining traction in its outsourcing and consulting businesses, backed by high demand for services that can improve operating efficiencies and save costs. The company has been strategically enhancing its cloud and digital marketing suite through buyouts and partnerships.
Accenture, with a market cap of $255 billion, delivered an earnings surprise of 5.3%, on average, in the trailing four quarters. The Zacks Consensus Estimate for ACN’s next fiscal year’s earnings indicates year-over-year growth of 10.5%. The company currently carries a Zacks Rank #2. It has rallied 61.2% in the past year. ACN has a 3-5 year expected earnings growth rate of 10% and a Growth Score of B.
McDonald’s Corp. (MCD - Free Report) , with a market cap of $198.7 billion, is a leading fast-food chain that currently operates more than 39,000 restaurants in above 100 countries. Robust drive-thru presence, and its investments in delivery and digitization over the past few years have aided the company in countering the pandemic. Robust digitalization will help McDonald’s drive long-term growth and capture market share.
The Zacks Consensus Estimate for MCD’s 2022 earnings reflects growth of 7.3% from 2021’s anticipated level. McDonald’s delivered an earnings surprise of 6.8%, on average, in the trailing four quarters. MCD currently carries a Zacks Rank #2. It has increased 26.1% in a year. The company has a 3-5 year expected earnings growth rate of 11.4% and a Growth Score of B.
With a market cap of $176.5 billion, Advanced Micro Devices (AMD - Free Report) has strengthened its position in the semiconductor market on the back of its evolution as an enterprise-focus company from a pure-bred consumer-PC chip provider. AMD is benefiting from strong sales of its Ryzen and EPYC server processors, owing to the increasing proliferation of AI and Machine Learning in industries like cloud, gaming and supercomputing domains. The growing clout of 7-nanometer (nm) products in the data center vertical, driven by work-from-home and online learning trends, is a key catalyst.
Advanced Micro Devices delivered an earnings surprise of 14%, on average, in the trailing four quarters. The Zacks Consensus Estimate for AMD’s 2022 earnings indicates year-over-year growth of 24.4%. The company currently carries a Zacks Rank #2. It has rallied 70.4% in the past year. The company has a 3-5 year expected earnings growth rate of 46.2% and a Growth Score of A.
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5 Stocks With Immense Earnings Growth Prospects in 2022
The hardships faced in the past two years, be it the spread of COVID-19 in 2020 or the resurgence of the Delta variant and supply-chain mishaps in 2021, have prepared investors for all possible situations. As investors look forward to 2022, their investments will be focused on the recovering sectors. Investors will bank on the stocks that not only have the potential to benefit from the accelerating economic recovery but also are capable of withstanding the newer COVID-related disruptions, including the rise of the Omicron variant.
The overall outlook for the markets remains good for 2022, with strong growth seen throughout 2021, as most companies rebound from the lockdown-led declines of 2020. Notably, the S&P 500 raked in 23.2% growth in the past year, the Dow Jones grew 14.6% and Nasdaq rose 21.3%. The mass inoculation drive, stimulus payments, improved labor market, the Federal Reserve’s (“Fed”) accommodative monetary policy and the resumption of business activities did the magic for the markets after slowed growth in early 2021.
However, investors will be mindful of factors that may threaten their portfolios, including inflation and Fed’s policies. Inflation is likely to be a significant drawback in 2022, as the Fed’s low-rate policies are expected to fade, with a rate hike expected soon. Amid the current supply-chain woes and rising inflation, companies are expecting to maintain their earnings growth scores with price increases. Therefore, companies with strong earnings growth potential can be good investment options.
How Can a Focus on Earnings Benefit?
Even if the economic dynamics go south, companies with earnings growth potential are expected to be lucrative picks. Notably, earnings growth has been remarkably high in 2021 than the pandemic-driven 2020. Per the latest Zacks Earnings Trends report, the S&P 500 index’s earnings are estimated to increase 45.4% year over year, whereas it witnessed a 13% earnings decline in 2020.
Companies have benefited from the reopening of businesses and offices with the rollout of vaccines, resulting in smoother economic recovery in most sectors. Robust earnings growth in 2021 resulted in strong shareholder returns as the markets continued to pick up.
The Zacks Earnings Trend report suggests the S&P 500 index’s earnings growth of 8.7% for 2022 on a 7.4% increase in revenues.
As the government withdraws the stimulus payments that made life easier for people amid the pandemic, experts expect slowed economic growth in 2022. However, the recovery is likely to be driven by tailwinds like the strong cash position of consumers and pent-up demand. Not to mention, businesses are expected to benefit from high liquidity and lower debt levels along with the gradual easing of supply bottlenecks as 2021 comes to an end. These factors are anticipated to aid earnings growth of companies to a large extent.
Our Picks
Given the current tricky environment, investors will need to be vigilant in picking stocks that position their portfolios for growth in 2022. At this time, investing in stocks with more resiliency in terms of earnings growth could be beneficial.
With the help of the Zacks Stock Screener, we have selected a few stocks with a Zacks Rank #1 (Strong Buy) or #2 (Buy) that have robust earnings growth projections for 2022. To narrow down the list, we have taken those stocks with a market cap of more than $100 million and a Growth Score of A or B.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Tesla Inc. (TSLA - Free Report) , with a market capitalization of $1,071.6 billion, has shifted from developing niche products for affluent buyers to making more affordable EVs for the masses. The electric vehicle (“EV”) leader’s three-pronged business model approach of direct sales, servicing and charging its EVs sets it apart from the other carmakers. Tesla is the market leader in battery-powered electric car sales in the United States, owning around 60% of the market share. The company’s strong earnings prospects are based on continued growth in automotive revenues as well as gains in energy generation and storage revenues.
Tesla delivered an earnings surprise of 25.4%, on average, in the trailing four quarters. The Zacks Consensus Estimate for TSLA’s 2022 earnings reflects growth of 30.5% from the 2021 predicted level. The company currently sports a Zacks Rank #1. It has rallied 64.2% in a year. TSLA has a 3-5 year expected earnings growth rate of 37.5% and a Growth Score of A.
Costco Wholesale Corporation (COST - Free Report) has a market cap of $244.1 billion. The company, based in Issaquah, WA, is one of the largest warehouse club operators in the United States. COST’s strategy to sell products at heavily discounted prices has helped it remain on a growth track as cash-strapped customers reckon Costco as a viable option for low-cost necessities. Costco’s growth strategies, improved price management, decent membership trends and increasing penetration of the e-commerce business have been contributing to its performance.
The Zacks Consensus Estimate for Costco’s next fiscal year’s earnings mirrors a rise of 9.7% from the current year’s expected level. The company delivered an earnings surprise of 8.3%, on average, in the trailing four quarters. COST currently carries a Zacks Rank #2. The company has risen 51.2% in a year. It has a 3-5 year expected earnings growth rate of 8.8% and a Growth Score of A.
Accenture Plc (ACN - Free Report) has evolved as a trusted and viable consulting services provider through years of investment in digital, cloud and security strategy. The company has been steadily gaining traction in its outsourcing and consulting businesses, backed by high demand for services that can improve operating efficiencies and save costs. The company has been strategically enhancing its cloud and digital marketing suite through buyouts and partnerships.
Accenture, with a market cap of $255 billion, delivered an earnings surprise of 5.3%, on average, in the trailing four quarters. The Zacks Consensus Estimate for ACN’s next fiscal year’s earnings indicates year-over-year growth of 10.5%. The company currently carries a Zacks Rank #2. It has rallied 61.2% in the past year. ACN has a 3-5 year expected earnings growth rate of 10% and a Growth Score of B.
McDonald’s Corp. (MCD - Free Report) , with a market cap of $198.7 billion, is a leading fast-food chain that currently operates more than 39,000 restaurants in above 100 countries. Robust drive-thru presence, and its investments in delivery and digitization over the past few years have aided the company in countering the pandemic. Robust digitalization will help McDonald’s drive long-term growth and capture market share.
The Zacks Consensus Estimate for MCD’s 2022 earnings reflects growth of 7.3% from 2021’s anticipated level. McDonald’s delivered an earnings surprise of 6.8%, on average, in the trailing four quarters. MCD currently carries a Zacks Rank #2. It has increased 26.1% in a year. The company has a 3-5 year expected earnings growth rate of 11.4% and a Growth Score of B.
With a market cap of $176.5 billion, Advanced Micro Devices (AMD - Free Report) has strengthened its position in the semiconductor market on the back of its evolution as an enterprise-focus company from a pure-bred consumer-PC chip provider. AMD is benefiting from strong sales of its Ryzen and EPYC server processors, owing to the increasing proliferation of AI and Machine Learning in industries like cloud, gaming and supercomputing domains. The growing clout of 7-nanometer (nm) products in the data center vertical, driven by work-from-home and online learning trends, is a key catalyst.
Advanced Micro Devices delivered an earnings surprise of 14%, on average, in the trailing four quarters. The Zacks Consensus Estimate for AMD’s 2022 earnings indicates year-over-year growth of 24.4%. The company currently carries a Zacks Rank #2. It has rallied 70.4% in the past year. The company has a 3-5 year expected earnings growth rate of 46.2% and a Growth Score of A.