In a market that is getting pricey, earnings will be the only thing going forward that will allow companies to trade higher, as positive and higher earnings will also allow multiples to rise. While stocks are still probably the best place to be invested, and the U.S. market probably the best market, any failure by companies when it comes to earnings could be met with a severe reaction.
A new RBC research note makes the case that earnings for this year so far are relatively stronger than some anticipated, and it notes that companies that did come in with positive earnings surprises were treated well by investors. RBC also points out that companies that missed got spanked to the tune of 10% and more. They highlighted four top companies that beat earnings. These may be outstanding buys now, with good data as a tailwind.
This stock has been a Wall Street favorite for years and is a top pick this week. Arris International PLC (NASDAQ: ARRS) provides media entertainment and data communications solutions in the United States and internationally. It operates through two segments. The Customer Premises Equipment segment offers various product solutions, including set-top boxes, gateways, digital subscriber lines and cable modems, and embedded multimedia terminal adapters and voice/data modems that enable service providers to offer voice, video and high-speed data services to residential and business subscribers.
The Network & Cloud segment provides cable modem termination system, converged cable access platform, multichannel video programming distributors, programmer equipment, ad insertion technologies and equipment in the ground or on transmission poles, as well as equipment used to initiate the distribution of content-carrying signals.
While some of the Wall Street concern over the set-top box arena is valid, many now feel that it will be years before demand slows. Trading at a low eight times estimated 2017 earnings, the stock is cheap at current levels. The company reported $1.73 billion in top-line sales for the second quarter, a 37% year-over-year leap resting on the acquisition of industry peer Pace, which closed earlier this year.
The Wall Street consensus price target for the stock is $35.43. Shares closed most recently at $27.20.
Not only is this company the top pick in the sector and has remained a favorite at RBC for some time, but it also is a top momentum pick. Amphenol Corp. (NYSE: APH) is one of the world’s largest designers, manufacturers and marketers of electrical, electronic and fiber optic connectors, interconnect systems, antennas, sensors and sensor-based products and coaxial and high-speed specialty cable.
Amphenol designs, manufactures and assembles its products at facilities in the Americas, Europe, Asia, Australia and Africa and sells its products through its own global sales force, independent representatives and a global network of electronics distributors. The company has a diversified presence as a leader in high-growth areas of the interconnect market, including: automotive, broadband communications, commercial aerospace, industrial, information technology and data communications, military, mobile devices and mobile networks.
RBC notes that the company’s IT/ Data Communication division is 19% of total revenue, and the company does 4% or so of its total business with Cisco.
Shareholders are paid a 0.93% dividend. The consensus price target is at $63.36, and shares closed Monday at $59.90.