While only a quarter of S&P 500 companies have reported 3rd quarter earnings so far, the number of companies beating EPS estimates is near record highs. And, for the most part, investors are rewarding these companies – particularly if they are signaling earnings growth into next year.
My many years working with William O'Neil has ingrained in me the fact that earnings are the primary driver of a stock's upward move. And, when you combine strong earnings with an attractive chart, you're well on your way to choosing a winning stock.
Today, I'm going to share with you 2 stocks that have reported strong earnings, are poised for continued growth into next year and have attractive charts.
Chipotle Mexican Grill (CMG) reported 3rd quarter results that were above estimates, and it was the company's 202% increase in digital sales that really wowed Wall Street. This ability to shift to online sales, while also increasing menu prices to offset delivery costs, is one of many initiatives CMG has made over the last 2 quarters to help improve growth.
With analysts calling for 94% earnings growth for 2021, the company is one of the few that's on track to emerge from the pandemic stronger than before it.
DAILY CHART OF CHIPOTLE MEXICAN GRILL, INC. (CMG)
CMG stock dropped immediately after its 3rd quarter report as same-store sales were a bit lower than elevated expectations; however, a brief break of the stock below its 50-day moving average bought a slew of buying, and the stock bullishly closed the day back above this key moving average.
CMG also bullishly closed the week back above its shorter-term 10-day moving average on volume. A base breakout above $1,385 would be even more positive for Chipotle.
DAILY CHART OF QUEST DIAGNOSTICS INC. (DGX)
Quest Diagnostics (DGX) posted record earnings and sales for their 3rd quarter, as the maker of COVID-19 tests has performed the most tests of any provider. The good news is that the company raised guidance for the remainder of this year, primarily because of the recovery in their non-COVID-related businesses.
Last month, the company announced a partnership with Walmart (WMT) to test drone delivery of COVID-19 tests, which is in addition to innovations in their testing methods that have allowed students to return to the classroom and workers to return to work. The stock is poised to break out of a 3-month base, and a break above $132 would be quite bullish for DGX.
Next week, earnings season really heats up, with most of the major FAANMG stocks due to report their 3rd quarter results. The earnings releases of these heavyweight stocks can have quite an impact on the markets and you'll want to be closely watching results.
Two of these mega-cap FAANMG stocks look very bullish going into next week and I anticipate adding them to my MEM Edge Report Suggested Holdings List should their results be positive. If you'd like to be alerted to these stocks, as well as receive detailed insights into the market's current position, take a 4-week trial of my bi-weekly report for a nominal fee.
We're seeing rotation taking place in the markets and you'll want to get in early as it's setting up to continue beyond the elections. See what sectors we're favoring now as well as market insights not found elsewhere. Use this link to see a sample report!
Mary Ellen McGonagle - MEM Investment Research