These companies are likely to beat earnings expectations this season, Bank of America says

Published Tue, Jul 12 202210:30 AM EDTUpdated Tue, Jul 12 202211:40 AM EDT

Even though this quarter's earnings season is largely expected to fall short of expectations, there are still some stocks poised to beat estimates, according to Bank of America. "All of the macro barometers we track that tend to lead earnings results are pointing to a miss — a falling guidance ratio, ailing corporate sentiment, slowing signs in both consumption and industrial activity plus negative economic surprises," Savita Subramanian, equity and quant strategist at Bank of America, wrote in a note Tuesday. "But our analysts' channel checks in Industrials and Software are healthy, and early reporters have beat EPS by a median of 3% — typically early reporters don't fare as well ahead of a disappointing quarter." The firm expects per-share earnings to be in line during the second quarter and that weakening guidance will be a focus of the earnings season. "2023 earnings are at least $20 too high," Subramanian wrote. Still, there are some names that the bank expects will outperform. Bank of America's expectations for these company earnings and sales are above consensus, and all beat on both earnings and sales during last quarter's reporting season. In addition, the firm rates all of these stocks as buy. The Z-score in the table below represents the number of standard deviations that Bank of America's analysts' estimate is above the consensus for EPS and sales. The list includes Coca-Cola , as well as travel stock Booking Holdings and automotive supplier BorgWarner . Industrials is the most represented sector on the list, with United Rentals , Emerson Electric and aerospace company TransDigm Group all included. The energy and materials sectors also have more than one company each on the list. Timing of earnings is important to note for investors picking stocks. "For short-term investors, stock differentiation is heightened during earnings season, particularly the busiest reporting days," she said. This quarter, the busiest reporting days fall during the last week of July, according to Bank of America's analysis. Of those on the positive surprise list, Coca-Cola , Bristol-Myers Squibb , Valero Energy and United Rentals report earnings the last week of July.

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