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The third-quarter 2022 earnings season is gaining pace, with more than 650 companies slated to release their financial numbers this week. This reporting cycle will be of immense importance as U.S. corporates are facing severe challenges on the back of record-high inflation, an extremely hawkish Fed, and threats of a recession.

In addition to revenues and net profit numbers of companies, several metrics of margins, like gross margin, operating margin, and net margin will be closely monitored by market participants. Moreover, the outlook of U.S. corporates will indicate, to a great extent, the health of the U.S. and global economy.

We have identified five large-cap stocks with a favorable Zacks Rank that are set to beat on third-quarter earnings. Investment in these stocks should be fruitful as an earnings beat is expected to drive stock prices going forward.

These companies are — Brown & Brown Inc. (BRO - Free Report), Halliburton Co. (HAL - Free Report), Chipotle Mexican Grill Inc. (CMG - Free Report), Enphase Energy Inc. (ENPH - Free Report), and Hubbell Inc. (HUBB - Free Report).

Q3 At A Glance

Like the first half, the third quarter of 2022 also remained tough for the U.S. economy. Various measures of inflation remained elevated at a 40-year high. The Fed has hiked the benchmark interest rate by 3% so far in 2022. The interest rate was in the range of 3.25% to 3.5% at the end of the third quarter. Moreover, the central bank has started to reduce the size of its $9 trillion balance sheet systematically since June.

Despite these aggressive monetary policies adopted by the Fed, inflation is showing no signs of declining. The complete devastation of the global supply-chain system and the shortage of labor continued to put pressure on businesses in the form of higher input costs and wages.

The lingering war between Russia and Ukraine and the lockdown in China due to the resurgence of COVID-19 infections were the major hindrances to the restoration of the global supply-chain system. Agencies like the IMF, the World Bank, and the OECD have warned of a possible global recession in 2023.

Q3 Earnings Results So Far

Our estimates for third-quarter earnings of the market’s benchmark, the S&P 500 Index, have shown a gradual decline in the past three and a half months. As of Oct. 21, 99 companies of the S&P 500 index have reported results.

Total earnings of these companies are down 4% from the same period last year on 7.3% higher revenues, with 76.8% beating EPS estimates and 64.6% beating revenue estimates. Our current estimate has projected that total earnings of the S&P 500 index are expected to be up 0.9% year-over-year on 9.1% higher revenues.

Our Top Picks

Five large-cap companies will report third-quarter 2022 earnings within the next two days. Each of these stocks carries a Zacks Rank #2 (Buy) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that for stocks with the combination of a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after their earnings releases. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The chart below shows the price performance of our five picks in the last quarter.

Image Source: Zacks Investment Research

Brown & Brown

Brown & Brown has a compelling portfolio along with an impressive growth trajectory driven by organic and inorganic initiatives across all its segments. Buyouts and collaborations enhanced Brown & Brown's existing capabilities and extended its geographic foothold.

Strategic efforts continue to drive commission and fees. BRO’s sturdy performance has driven cash flow, enabling it to deploy capital in shareholder-friendly moves. BRO boasts a strong balance sheet backed by a solid cash position.

BRO has an Earnings ESP of +0.99%. It has an expected earnings growth rate of 5.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 30 days.

Brown & Brown recorded earnings surprises in the last four reported quarters, with an average beat of 7.5%. The company is set to release earnings results on Oct. 24, after the closing bell.

Halliburton

Halliburton provides products and services to the energy industry worldwide. High commodity prices have increased demand for HAL’s services in North America, to which it is heavily exposed. In particular, Halliburton’s key Completion & Production unit margins are likely to improve, with management expecting better pricing leverage going forward. Besides, Halliburton's strong free cash flow generating ability indicates its financial strength.

Its healthy relationship with national oil companies and digitization efforts also bode well. The increasing cloud-based data flow between sites and back office translates into expanded margins for Halliburton.

HAL has an Earnings ESP of +1.13%. It has an expected earnings growth rate of 88% for the current year. The Zacks Consensus Estimate for current-year earnings improved 1% over the last 30 days.

Halliburton recorded earnings surprises in two out of the last four reported quarters, with an average beat of 3.7%. The company is set to release earnings results on Oct. 25, before the opening bell.

Chipotle Mexican Grill

Chipotle Mexican Grill operates quick-casual and fresh Mexican food restaurant chains globally. CMG has been benefiting from its digital efforts, Chipotlane add-ons, and marketing initiatives. These, along with strength in digital sales, rise in menu prices, new restaurant openings, and higher restaurant-level operating margins have been aiding Chipotle.

Also, a solid financial position with no debt is encouraging. CMG continues to focus on the stage gate process, and leverages digital programs to expand access as well as convenience.

CMG has an Earnings ESP of +2.04%. It has an expected earnings growth rate of 28.1% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.2% over the last 30 days.

Chipotle Mexican Grill recorded earnings surprises in the last four reported quarters, with an average beat of 6.2%. The company is set to release earnings results on Oct. 25, after the closing bell.

Enphase Energy

Enphase Energy has revolutionized the solar industry by pioneering a semiconductor-based microinverter, which converts energy at the individual solar module level. ENPH enjoys a strong position as a leading U.S. manufacturer of microinverters.

Enphase Energy is striving to expand in Europe steadily throughout 2022. Such expansion plans may boost its long-term growth in the battery storage market. ENPH has also been making acquisitions to boost its long-term growth. It holds a strong solvency position.

ENPH has an Earnings ESP of +0.31%. It has an expected earnings growth rate of 70.1% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.2% over the last 30 days.

Enphase Energy recorded earnings surprises in the last four reported quarters, with an average beat of 24.5%. The company is set to release earnings results on Oct. 25, after the closing bell.

Hubbell

Hubbell is engaged in the design, manufacture, and sale of electrical and electronic products to commercial, industrial, utility, and telecommunications markets. HUBB’s products include plugs, receptacles, connectors, lighting fixtures, high voltage test and measurement equipment, and voice and data signal processing components. Hubbell operates through two segments — Electrical Solution and Utility Solution.

HUBB has an Earnings ESP of +2.50%. It has an expected earnings growth rate of 23.4% for the current year. The Zacks Consensus Estimate for current-year earnings improved 1% over the last seven days.

Hubbell recorded earnings surprises in two out of the last four reported quarters, with an average beat of 6.9%. The company is set to release earnings results on Oct. 25, before the opening bell.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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