Investing

Top-Rated Stocks to Consider Buying as Earnings Approach

Shaun Pruitt

Published: July 31, 2023 11:33 pm

Last Updated: August 1, 2023 10:36 am

Tech stocks will continue to highlight this week’s earnings lineup with some industrial products companies standing out as well.

Here are a few top-rated stocks among both respective sectors that investors may want to consider going into their second-quarter reports on Tuesday, August 1.

Computer & Technology Sector

Chip stocks are eating up most of the headlines, but Paycom Software (PAYC) and Rockwell Automation (ROK) are appealing among the Zacks Computer & Technology sector as well. Both stocks sport a Zacks Rank #2 (Buy) ahead of their Q2 reports tomorrow and are expecting robust quarterly growth.

Paycom Software: As a provider of cloud-based human capital management (HCM) software, Paycom’s growth remains intriguing. Paycom offers its software as a service solution for both employee records and talent management processes.

Second-quarter earnings are expected to climb 27% year over year at $1.60 per share with sales forecasted to jump 25% to $398.20 million. Notably, Paycom stock has an “A” Zacks Style Scores grade for Growth and offers a modest 0.41% dividend yield at $1.50 a share in a space where most companies don’t offer a payout to shareholders.

Rockwell Automation: In addition to its growth potential as a worldwide provider of industrial automation and information, Rockwell also offers a 1.42% dividend yield with most of its peers focused on expansion rather than a payout.

Furthermore, Rockwell is benefitting from the strengthening outlook of many of its end markets which include automotive, semiconductor, warehousing, and logistics.

To that point, Rockwell’s second-quarter earnings are projected to jump 20% YoY at $3.19 per share compared to EPS of $2.66 in Q2 2022. Sales for Q2 are projected to be up 16% to $2.30 billion.

Industrial Products Sector

Among the Industrial Products sector, Caterpillar (CAT) and Dublin-based Eaton Corporation (ETN) are very attractive with their stocks sporting a Zacks Rank #2 (Buy). Both companies also belong to very highly rated Zacks industries ahead of their Q2 reports.

Caterpillar: It’s very notable that Caterpillar’s Manufacturing-Construction and Mining Industry is currently in the top 1% of over 250 Zacks industries. Of course, Caterpillar stands to benefit as the largest global construction and mining equipment company.

Now looks like a good time to buy Caterpillar stock with Q2 earnings expected to soar 42% YoY at $4.51 per share compared to EPS of $3.18 in the prior-year quarter. On the top line, Q2 sales are anticipated to rise 16% to $16.50 billion.

It’s also noteworthy that Caterpillar stock offers a respectable 2% dividend yield and currently has an overall “A” VGM Zacks Style Scores grade for the combination of Value, Growth, and Momentum.

Eaton: The Manufacturing-Electronics Industry is in Zacks top 11% and Eaton’s stock is intriguing as a diversified power management company and global technology leader in electrical components and systems.

To that point, Eaton’s Q2 EPS is expected at $2.11 per share and up 13% from a year ago with sales forecasted to rise 10% to $5.74 billion. In addition to the strong quarterly growth and strengthening outlook, Eaton’s 1.69% dividend yield is still respectable.

Bottom Line

Buying these tech and industrial products stocks has become very compelling leading up to their Q2 reports. Strong results accompanied by favorable guidance would certainly reconfirm it’s time to buy and that there should be more upside from here.

Rockwell Automation, Inc. (ROK): Free Stock Analysis Report

Paycom Software, Inc. (PAYC): Free Stock Analysis Report

Caterpillar Inc. (CAT): Free Stock Analysis Report

Eaton Corporation, PLC (ETN): Free Stock Analysis Report

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