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2 Top-Rated Stocks to Consider Buying Ahead of Earnings

After several Big Tech and Big Oil stocks reported earnings this week, next week’s programming will continue to feature some well-known names in their respective industries.

Let’s take a look at two well-known companies that are currently Zacks Top-Rated Stocks and scheduled to release their quarterly releases next week.

Aflac AFL

Aflac (AFL) is one stock that investors might want to consider. The insurance provider belongs to the financial sector and is expected to release its fourth quarter results on Wednesday, February 1st.

Aflac is a viable investment in the top-rated Insurance, Accident & Healthcare industry, currently in the top 12% of over 250 Zacks industries. Sporting a Zacks Rank #2 (Buy), earnings estimate revisions are trending upward for FY2023 despite a slight decline in FY22 estimates.

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Fourth Quarter Overview: Aflac’s fourth-quarter earnings are expected to be $1.21 per share, which would represent a -5% decline from the fourth quarter of 2021. This would round fiscal 2022 EPS to $5.25 , down -11% from FY21, but FY23 earnings are expected to continue the company’s strong bottom line. growth of the line and increase of 3% to $5.43 per share.

Fourth-quarter sales are expected to reach $4.49 billion, down 17% from the year-ago quarter. Total sales are expected to decline 13% in FY22 and another 4% in FY23, to $18.32 billion. Still, the expected rise in earnings in FY23, with estimates also on the rise, is a good sign that Aflac is effectively managing its operating costs during the broader economic downturn.

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ESP earnings: Zacks’ expected surprise forecast indicates that Aflac could beat fourth-quarter earnings estimates with the Most Accurate Estimate at $1.23 per share and the Zacks Consensus EPS at $1.21.

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Take away: Better-than-expected Q4 results could help Aflac shares recover and it seems entirely possible that the company will be able to provide positive guidance, with earnings estimate revisions for fiscal 2023 at the rise.

Additionally, the market appears to accept Aflac’s slight decline in revenue due to stable earnings despite a challenging operating environment, with ALF stock up +17% over the past year, significantly outperforming the -9% of the S&P 500.

McDonald’s MCD

Another well-known name that investors might consider buying ahead of the Q4 earnings release on Tuesday, January 31 is McDonald’s (MCD), from the retail and wholesale sector.

McDonald’s stock has managed to outperform the broader market over the last year as the company serves as a more affordable fast food option for consumers amid higher inflation. This is expected to continue, with the popular burger chain also sporting a Zacks Rank #2 (Buy), as earnings estimates are slightly higher for the current quarter, FY2022, and FY23.

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Fourth Quarter Overview: McDonald’s EPS for the fourth quarter is expected at $2.45, up 10% from the fourth quarter of 2021. Better yet, this would round FY22 profit to $9.93, an increase of 7% YoY, with FY23 EPS expected to increase by another 6%. Fourth-quarter sales are expected to be $5.70 billion, down -5% from the year-ago quarter. Total sales would be down -1% in FY22, but expected to increase 4% in FY23 to $23.86 billion.

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ESP earnings: McDonald’s is expected to slightly beat bottom line expectations, with the Zacks Consensus for fourth-quarter earnings at $2.45 per share and the Most Accurate Estimate for EPS at $2.44.

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Take away: Despite the possibility of missing fourth-quarter expectations, the upward revisions to fiscal 2023 earnings estimates are a good sign that McDonald’s could offer firmer guidance in its outlook for the year. This could continue to intrigue investors, as MCD stock has risen +6% over the past year to significantly outperform the benchmark.

Conclusion

McDonald’s and Aflac stocks could continue to outperform the broader market this year and the guidance in their fourth-quarter reports will be a broader indicator of that. Despite the slowdown in revenue growth of these well-known companies, investors might consider buying their shares as management has shown the ability to make the most of a more challenging operating environment and a difficult economy, as indicated by the stability of the results.

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