Best Stocks: How to trade 3 top names on the list reporting earnings this week

Ritholtz Wealth Management identifies BlackRock (BLK), Interactive Brokers (IBKR), and Netflix (NFLX) as key stocks to monitor during earnings season, acknowledging the inherent volatility for trend-following strategies. This occurs amidst major indices nearing all-time highs, yet Q2 S&P 500 EPS estimates have declined 4.2%, exceeding the historical average, with energy, discretionary, and materials sectors seeing the largest cuts. While analysts project strong top and bottom-line growth for all three—notably BLK's pro-cyclical asset gathering, IBKR's robust account growth, and NFLX's continued outperformance—the article suggests potential for profit-taking or better entry points post-results for the latter two.

Analysis

The market is approaching earnings season with major indices near all-time highs, yet this is juxtaposed with a notable 4.2% decline in Q2 S&P 500 EPS estimates, a larger downward revision than the 15-year average of 3.2%. This suggests either a lowered bar for earnings beats or heightened analyst concern over corporate profitability, particularly within the energy, discretionary, and materials sectors which saw the largest estimate cuts. Against this backdrop, several companies with strong technical and fundamental profiles are highlighted. BlackRock (BLK) is positioned as a pro-cyclical beneficiary of rising asset values, with revenue expected to grow 13.8% YoY, though its chart is extended far above its 200-day moving average. Interactive Brokers (IBKR) is showing technical strength, emerging from a cup-and-handle pattern, with its key account growth metric being a critical catalyst to watch, following a 32% YoY increase in Q1. Netflix (NFLX) is expected to report robust growth, with a 15.5% revenue and 45.2% EPS YoY increase anticipated, but its recent 7% drawdown from highs suggests the stock may be technically vulnerable to a post-earnings pullback despite its strong fundamental momentum.

Key Decisions for Investors

• Given the heightened volatility of earnings season and larger-than-average downward EPS revisions, consider waiting for reports to be released before initiating new positions, as even fundamentally strong stocks may offer better entry points on post-announcement profit-taking.
• For BlackRock, which is technically extended, a prudent strategy would be to monitor its earnings report and look for buying opportunities on any pullback, provided the stock maintains support above the $1,000 level.
• Investors should watch Interactive Brokers' new account growth figures closely; a strong result could confirm its bullish technical pattern and trigger a breakout above the $60 resistance level, presenting a potential entry or add-on point.
• For Netflix, which has already seen a 7% pullback, investors without a position should consider waiting for a potential 'sell the news' reaction post-earnings, which could provide a more favorable entry near its 50-day moving average support.
• Steer clear of initiating new long positions in stocks showing technical weakness ahead of earnings, such as Kinder Morgan (KMI), Abbott Labs (ABT), and Cintas (CTAS), which have been flagged for threatening to breach their uptrends.