5 broker-favorite stocks to watch closely

The unprecedented volatility that gripped the US market is an understatement. Factors such as rising costs and skyrocketing inflation prompted the Fed to aggressively tighten monetary policy. Additionally, soaring oil prices, primarily due to supply issues stemming from the protracted war between Russia and Ukraine, also contributed to the market rout this year. Due to the market chaos, the S&P 500 – considered one of the best reflections of the stock market as a whole – is down 15.7% so far this year.

However, erratic market behavior does not mean investors should avoid equities. So what is the way forward? One way is to follow the action of brokers, who are considered experts in the field of investing. In this regard, actions like American airlines AAL, FirstSource Builders BLDR, wedges CAL, Casey General Stores CASY and Metal trading company CMC should be on the Investor Watch List.

Brokers review minute details of publicly available financial documents in addition to attending company conference calls and other presentations. Because brokers track the stocks covered by their coverage in detail, they revise their earnings estimates after carefully considering the pros and cons of an event for the company involved. Estimate revisions serve as an important indicator in determining the stock price. Naturally, paying attention to such well-researched information is a prudent choice for individual investors, as they want to generate handsome returns from their stock portfolio, regardless of the surrounding market conditions.

To take care of earnings performance, we designed a screen based on improving analyst recommendations and upward revisions to estimates over the past four weeks.

Revenue performance not to be overlooked

According to many market watchers, a drop in revenue is more creditable to a company than just outperformance in earnings. Therefore, high-level performance should also be considered when formulating a winning strategy. We have included in our screen the price-to-sales ratio, which serves as a strong complementary evaluation metric.

Selection criteria

# (High-Low ranking)/ Total (4 weeks) =Top #75: This lists the top 75 companies that have witnessed net upgrades in the last 4 weeks.

% change of Q(1) is. (4 weeks) = Top #10: This gives the top 10 stocks that have seen earnings estimate revisions in the past 4 weeks for the upcoming quarter.

To ensure that the strategy is a winner, covering all bases, we have added the following filter settings:

Price to sales ratio = Bot %10: The lower the ratio the better, companies meeting this criterion are in the bottom 10% of our universe of over 7,700 stocks against this ratio.

Price above 5: A stock trading below $5 is unlikely to generate significant interest for most investors.

Average daily volume greater than 100,000 shares over the last 20 trading days: Volume must be large to ensure these are easily traded.

Market Value ($millions) = Top #3000: This gives us stocks that are in the top 3000 as judged by market capitalization.

Com/ADR/Canadian = Com: This eliminates ADR and Canadian stocks.

Here are five of the 10 stocks that have passed the screen:

American airlines is based in Fort Worth, Texas. The gradual increase in demand for air transport (especially for leisure) helps AAL. However, high fuel costs hurt the bottom line.

Over the past 60 days, AAL stock has seen the Zacks consensus estimate for 2022 earnings revised up 61.1%. AAL currently carries a Zacks Rank #3 (Hold).

FirstSource Builders, based in Dallas, TX, manufactures and supplies building materials. BLDR has benefited for some time from its focus on cost management practices, strategic acquisitions and robust demand, driven by strong housing and repair and renovation activity.

Builders FirstSource continues to focus on investing in innovations and improving digital solutions for its customers. BLDR currently carries a Zacks rating of 3. The Zacks consensus estimate for BLDR’s earnings for the current year has been revised up 19.4% in the last 60 days.

wedges : Caleres, which currently sports a Zacks #1 (Strong Buy) ranking, is a leading footwear retailer and wholesaler in the United States, China, Canada, China and Guam. CAL operates through Famous Footwear and Brand Portfolio segments. The Saint Louis, Missouri-based player regularly benefits from positive consumer demand trends and an accelerating shoe market recovery, which continue to support its sales. The momentum of the Famous Footwear brand should contribute significantly to sales growth.

Caleres has a great history of surprise with its earnings having exceeded the Zacks consensus estimate in each of the past four quarters, averaging 62.6%. You can see the full list of today’s Zacks #1 Rank stocks here.

Casey General Stores is one of the leading convenience retailers in the United States with a strong physical footprint. The acquisition of Buchanan Energy, completed last year, is an added bonus as it added 94 retail stores and 79 outlets to CASY’s business. CASY’s self-distribution model and its strength in the prepared food sector also bode well.

Casey’s is currently ranked No. 3 from Zacks. Shares of CASY have gained 11.2% over the past three months. The Zacks consensus estimate for CASY’s current quarter earnings has been revised up 7.48% over the past 60 days.

Trade metals currently has a Zacks rank of 1 and an expected earnings growth rate of 147.9% for the current fiscal year. CMC’s consensus earnings estimate for the current quarter has been revised up 7.5% in the past 60 days.

Commercial Metals’ earnings have exceeded the Zacks consensus estimate in three of the past four quarters while missing the target once. CMC has a four-quarter earnings surprise of about 16%, on average. CMC shares have gained about 20% over the past six months.

You can get the rest of the stocks on this list by signing up for your free 2-week trial to Research Assistant now and start using this screen in your own trading. Moreover, you can also create your own strategies and test them before diving into investing.

The research assistant is a great starting point. It’s easy to use. Everything is in plain language. And it’s very intuitive. Start your search assistant trial today. And the next time you’re reading an economic report, open up the research assistant, plug in your findings, and see what gems come out.

Click here to sign up for a free trial of Research Assistant today.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in the options mentioned herein. An affiliated investment adviser may hold or have shorted securities and/or hold long and/or short positions in options mentioned herein.

Disclosure: Information on the performance of Zacks portfolios and strategies is available at: https://www.zacks.com/performance.

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Builders FirstSource, Inc. (BLDR): Free Stock Analysis Report

Commercial Metals Company (CMC): Free Stock Analysis Report

American Airlines Group Inc. (AAL): Free Inventory Analysis Report

Casey’s General Stores, Inc. (CASY): Free Inventory Analysis Report

Caleres, Inc. (CAL): Free Stock Analysis Report

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