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Best Buy, Visa, Seagate Make BofA's 'Positive Surprise Screen'

This screen is made up of companies that BofA strategists think will beat fourth-quarter earnings expectations.
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Best Buy  (BBY) - Get Best Buy Co., Inc. Report, Visa  (V) - Get Visa Inc. Class A Report and Seagate Technology  (STX) - Get Seagate Technology Holdings PLC Report made Bank of America’s “Positive Surprise Screen” of companies most likely to beat fourth-quarter earnings expectations.

But the bank cautioned that the screen “isn’t a recommended list either individually or as a group of stocks.” All the stocks carry a buy rating from BofA.

The fourth-quarter earnings season begins this week, and BofA strategists, led by Savita Subramanian, expect S&P 500 earnings to top consensus forecasts by 3% overall, in line with the historical average.

That’s based on “better-than-expected economic data, early reporter results, solid proprietary BofA card data and early indications of stronger-than-expected holiday sales,” the strategists wrote in a commentary. 

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They anticipate fourth-quarter earnings will rise 24% from last year. But their future outlook isn’t so rosy. 

“We continue to see downside risks in 2022, where analysts expect margins to improve to record levels by the second quarter,” the strategists said. “Widening dispersion, weakening guidance and revision ratios, and corporate sentiment all point to downside risks in earnings.

"[Omicron] so far, first-quarter sales estimates for Covid laggards (airlines, restaurants, etc.) have been revised lower by 1% since omicron news (versus up 0.3% for the S&P 500),” the strategists said. “But the recent slowdown in services spending per BofA card data suggests more downside risks.”

Other stocks that the bank expects to beat fourth-quarter earnings expectations include HCA Healthcare  (HCA) - Get HCA Healthcare Inc Report, D.R. Horton  (DHI) - Get D.R. Horton, Inc. Report, Marathon Petroleum  (MPC) - Get Marathon Petroleum Corporation Report, Nasdaq  (NDAQ) - Get Nasdaq, Inc. Report and U.K. chemicals company Linde  (LIN) - Get Linde plc Report.