The fallen leaves and pumpkins adorn the neighborhood streets. Yes, it’s that time of year— third-quarter earnings season. Approximately 20 S&P 500 companies are slated to get the ball rolling during this week.
According to Factset, the widely followed benchmark is expected to deliver 27.6% year-over-year earnings growth in Q3 which would be one of the highest rates of the past decade.
Analysts have been tepidly adjusting their earnings estimates in recent weeks amid a mixed bag of economic data and evolving pandemic headlines. Some have been raised, but many have been lowered.
Companies that have seen some of the biggest upward revisions are often good candidates for short-term earnings plays. Here are three stocks likely to rise in the wake of their Fall reports.
Will Domino’s Pizza Beat Q3 Earnings Estimates?
Domino’s Pizza (NYSE:DPZ) had one of the biggest second-quarter earnings rallies. A convincing top and bottom-line beat sparked a 17% gap up on July 22nd after the stock had slipped in the six days prior. There’s a good chance the dough will rise again when Domino’s reports third-quarter results on Thursday morning.
As an appetizer, Domino’s stock has trended lower since hitting a record high of $548.72 on July 22nd. It’s down 12% since that big move despite increased third-quarter earnings estimates from sell-side analysts. The latest I/B/E/S estimate from Refinitiv has the pizza chain delivering Q3 EPS of $3.11. This has trended higher since the start of the quarter when the consensus was $2.89.
The latest estimate implies 25% year-over-year profit growth and a major acceleration from the 4% EPS growth recorded in Q2. Whether Domino’s hits this mark will largely depend on the impact of higher food costs on margins. Strong revenue in the U.S. business overcame this pressure last quarter and will likely do so again. Remodeled locations with electronic carryout order tracking, enhanced digital ordering options, and even driverless pizza delivery service along with international expansion should drive another satisfying earnings beat at Domino’s.
Will Kinder Morgan Stock Go Up After Q3 Earnings?
Kinder Morgan (NYSE:KMI) operates one of the largest energy infrastructure networks in North America. Its vast pipeline labyrinth transports natural gas, oil, petroleum, and carbon dioxide to customers throughout the U.S. and Canada. The company makes money when shippers are moving more energy resources through its pipes which generally coincides with higher end-customer demand.
Activity around Kinder Morgan’s interstate and intrastate pipelines has been on the rise during the economic recovery. After both declined last year due to pandemic slowdown, revenue and profits are on track to be up sharply in 2021.
Much of the expected growth relates to the company’s Permian Highway Pipeline (PHP) which recently began transporting natural gas to the Gulf Coast. This is a region that is in dire need of affordable heating and power sources after being hit by multiple storms this year. Kinder Morgan has already locked up long-term agreements for the PHP which bodes well for revenue stability and growth.
The 12 firms that cover Kinder Morgan stock have collectively boosted their third-quarter earnings estimate by 20% since the start of the quarter. Although the current expectation for EPS of $0.24 represents only 13% growth, there is a good chance of a sizeable beat.
That’s because the range of analysts’ Q3 estimates is the widest it has been in the post-pandemic era. One analyst thinks Q3 EPS could be as high as $0.40 while the most pessimistic analyst expects EPS of $0.18. When such disparity exists, it increases the likelihood of a big earnings beat (or miss)—and a more volatile post-earnings stock price reaction.
Is Steel Dynamics Stock a Buy Ahead of Q3 Earnings?
Steel Dynamics (NASDAQ:STLD) rode the wave of surging metals prices to an all-time intraday high of $74.37 in August. The stock has since corrected 20%. Yet with the supply-demand dynamics of the steel market still supportive of strong growth and analysts upwardly revising their Q3 earnings estimates, Steel Dynamics is once again looking like a steal.
One of the top steel producers in the country, Steel Dynamics makes a wide assortment of specialty steel products from ferrous scrap metals at its six steel mills. The products are sold to customers in the automotive, construction, manufacturing, and transportation industries all of which have sprung back to life this year. Increased demand for goods like cars, household appliances, and construction piping ultimately translates to higher order volumes at Steel Dynamics.
In conjunction with rising steel demand, steel supplies have tightened. This relates to the surging price of coal which is a key input in steel production. Higher input costs have led many would-be steel producers to close plants or limit capacity. Steel prices skyrocketed to record highs during the third quarter which may mean another blowout quarter is ahead for Steel Dynamics.
Last quarter Steel Dynamics reported EPS that were more than seven times the prior-year result. Within a few weeks, the stock climbed $20 to a record high. This time around, the Street is forecasting EPS to be nine times what they were a year ago. The Q3 EPS estimates have gone from $4.10 to $4.57 and price targets have been raised into the $90’s. Mondays have been tough days for the market lately but expect a dynamic report from Steel Dynamics on October 18th.
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