These stocks are most likely to positively surprise this earnings season, Bank of America predicts

Published Mon, Apr 11 20222:46 PM EDTUpdated Mon, Apr 11 20223:03 PM EDT

A new earnings season kicks off this week, which means Wall Street is due for an inside look into how the biggest names grappled with rising inflation, rate hikes and war in the first quarter. Many businesses are expected to report losses or a slowdown in sales, but some companies are better positioned to beat expectations, Bank of America says. Despite a dismal economic picture, companies remain optimistic and Bank of America expects a 4% beat for the quarter. But the win is likely the last big triumph for some time as a slowdown looms. "1Q will likely mark a reset in expectations: beyond 1Q, consensus expectations appear too high," wrote Bank of America's Savita Subramanian on Monday. "Analysts expect record margins in 2Q-4Q, with earnings slated to accelerate into 2023. But history suggests that oil shocks spawn weaker consumption with a 3-4 quarter lag, indicating a 2H slowdown … We are 7% below for 2H22 and 8% below for '23." Amid the changing outlook, the bank shared a list of stocks across sectors most likely to beat expectations given their previous earnings performance, ratings, and current consensus and Bank of America estimates. Here are some of the companies forecast to beat expectations in the first quarter: Advance Auto Parts New and used car prices have skyrocketed amid rising inflation and supply chain shortages. Even as these macro conditions unfold, some auto retailers are better situated to weather the storm. In its recent quarterly earnings, Advance Auto Parts beat analysts' estimates but saw profit shrink over the previous year. Despite inflationary headwinds, the auto parts retailer has been able to "price to cover inflation" and expects to continue to do so, CEO Tom Greco told CNBC's " Squawk on the Street " in February. "We do believe we have pricing power and we're going to invest in our brands to enable that," Greco said. Delta Air Lines and Southwest Airlines Airline stocks have seesawed in recent weeks as investors assess the impact of rising fuel prices and an upsurge in Covid-19 cases on travel demand. While shares of Southwest Airlines and Delta Air Lines are down this year, Bank of America thinks the airlines could surprise shareholders with earnings beats. Based on recent data from Bespoke Investment Group reviewed by CNBC Pro , Delta tends to beat earnings 69% of the time, and when they do, shares rise 1.54% on average. Garmin Garmin shares have fallen 17% since the start of the year and lost 5.7% this month, but Bank of America thinks the stock is situated for a comeback. In March, analyst Ronald Epstein upgraded the consumer electronics company to a buy from neutral and said the company is cheap and will continue to grow from its pandemic gains. "As Covid evolves into an endemic we do not think the growth story for GRMN is over," Epstein wrote. "Instead, we believe GRMN's unique, differentiated and new product offerings, coupled with its enthusiast-consumer base will continue to drive growth." Mosaic Fertilizer prices have hit record highs as the war between Russia and Ukraine rages on. Both countries are some of the largest suppliers of agricultural components used in fertilizer, so ongoing disruptions could result in steep price increases and production costs. Shares of fertilizer maker Mosaic have benefited from the trend, soaring about 88% this year and jumping 10% this month.

A new earnings season kicks off this week, which means Wall Street is due for an inside look into how the biggest names grappled with rising inflation, rate hikes and war in the first quarter.

Many businesses are expected to report losses or a slowdown in sales, but some companies are better positioned to beat expectations, Bank of America says.