Time flies and how. It seems as if we had just stopped discussing the fourth quarter of 2015 and now it’s almost time to gear up for the next earnings season. However, not much has changed about the financial markets, which have been quite volatile so far this year.

With the first-quarter 2016 earnings season around the corner, most investors are perplexed about where to invest, given the mixed economic signals. On the one hand, macroeconomic worries like jaded Chinese growth, soft energy markets, subdued Euro zone recovery and the strengthening U.S. dollar continued to plague the market. Again on the brighter side, investors are somewhat cheerful thanks to the rebound in oil prices, along with boosters like strong jobs and manufacturing data that injected some confidence into an otherwise drab economy.

Hence, at this juncture, even the most stoic investor would be jittery about his investment strategy. Further, the Federal Reserve’s stance on interest rate hike remains a wait and watch story.

The Winning Strategy

To emerge as a winner amid such volatility, one could look at stocks that have the potential to beat earnings estimates in their upcoming releases. An earnings beat should raise investors’ confidence in these stocks, leading to rapid price appreciation.

Selecting stocks with earnings beat potential could be quite a difficult task unless one knows the right method. One way of doing so is to choose stocks that have the combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy) or #2 (Buy) – and a positive Earnings ESP.
 
Earnings ESP is our proprietary methodology for identifying stocks that have the best chance to surprise with their upcoming earnings announcements. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Our research shows that for stocks with this combination, chances of a positive earnings surprise are as high as 70%.

Apart from this, many investors like to look for growth stocks and fortunately, with the help of our new style score system, we have identified the key statistics to pay close attention to and thus, estimate which stocks might be the best for growth investors in the near term.

Our Growth Style Score condenses all the essential metrics from the company’s financial statements to get a true sense of the quality and sustainability of its growth. Our research shows that stocks with Growth Style Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or #2 offer the best opportunities in the growth investing space.

4 Key Picks

All said, we have zeroed in on four stocks with the help of the Zacks Stock Screener – with a Growth Style Score of 'A', a favorable Zacks Rank and an Earnings ESP of at least +1.

Michael Kors Holdings Limited (KORS - Analyst Report)

Headquartered in London, U.K., Michael Kors is a global luxury lifestyle company, founded by designer Michael Kors. The company with a Growth Style Score of ‘A,’ produces a diverse assortment of products including handbags, watches, accessories, jewelry and fragrance products as well as footwear.

Possessing a Zacks Rank #2, the stock has seen a sharp spike in the Zacks Consensus Estimate for 2016, which now stands at $4.42 per share, up from $4.32 a couple of months ago. This was backed by 12 upward revisions in this company’s estimates. Michael Kors has been delivering positive earnings surprises for three straight quarters now. Additionally, it possesses an Earnings ESP of +1.03%, which makes it a solid bet.  

Kellogg Company (K - Analyst Report)

With a Zacks Rank #2, Kellogg manufactures and markets ready-to-eat cereals and convenience foods (including cookies, crackers, toaster pastries, cereal bars, fruit-flavored snacks, frozen waffles and veggie foods), and savory snacks. Founded in 1906 and headquartered in Battle Creek, MI, the company currently has an Earnings ESP of +4.30%.

Further, Kellogg delivered positive earnings surprises in all the four quarters of 2015, with an average beat of 3.8%. Also, analysts see solid prospects for the company, as the Zacks Consensus Estimate for 2016 has trended up over the past two months, from $3.67 to $3.69 per share, thanks to six upward estimate revisions. Lastly, the company’s Growth Style Score of ‘A’ further underscores its solid future potential.

The Goodyear Tire & Rubber Company (GT - Analyst Report)

If you’re still hankering for more, this Akron, OH-based company with a Zacks Rank #2 can satiate your appetite. Goodyear Tire has seen its Zacks Consensus Estimate for 2016 jump 5.2% to $3.84 per share, over the past 60 days. Also, the company flaunts a Growth Style Score of ‘A’ and an Earnings ESP of +5.71%, which bode well.

Goodyear Tire is one of the world’s largest tire manufacturing companies that sells tires, undertakes automotive repairs and provides other services through 1,100 tire and auto service centers. It runs manufacturing operations at 49 facilities in 22 countries. It is difficult to stay away from this stock which has outperformed the Zacks Consensus Estimate in seven out of the past eight quarters.   

Inogen, Inc. (INGN - Analyst Report)

Last but not the least, one must take a look at this Zacks Rank #2 stock, which has seen its Zacks Consensus Estimate for 2016 jump to 59 cents per share today from 54 cents over the past 30 days. Based in Goleta, CA, Inogen develops, manufactures and markets portable oxygen concentrators (POC).

Further, this medical technology company boasts a Growth Style Score of ‘A’ and also possesses an impressive earnings history. Lastly, Inogen’s Earnings ESP of +9.09% will most likely instill confidence among investors.

The Bottom Line

So we can safely say that a sneak peek at these outperformers with solid attributes, impressive earnings history and strong future potential, could be a great idea for investors to gain from this earnings season. Their strong fundamentals blended with bullish analyst interest could just have unveiled stocks that might march in full steam, going forward.