5 Stocks for the Rest of the Year - Investment Ideas

Stocks have experienced a nice rally for the last six weeks, due in large part to robust second-quarter earnings reports. Over two-thirds of the companies in the S&P 500 have reported results for the second quarter. Those companies had a combined earnings growth of 45%, with nearly 80% of those companies beating earnings estimates. And most of the companies beating expectations gave bullish guidance for the second half of the year.

Results were so strong that fears of the U.S. falling into a double-digit recession have largely disappeared. Still, the recent stream of lackluster economic reports suggests that overall economic growth is decelerating. While GDP forecasts have been declining, economists are now looking for economic growth in the 2% to 3% range. That isn’t great, but isn’t bad either..

What That Means for Investors

It means that there are still opportunities for investors who pick the right stocks. Specifically, investors should look for stocks with strong earnings growth and a good chance of beating earnings estimates over the next few quarters. These stocks should perform well in the second half of the year, rewarding shareholders who hang on for the ride.

This week’s stocks are all Zacks #1 Rank (Strong Buy) stocks with market caps greater than $1 billion and rising EPS estimates in the last month.

Here are five stocks that I like for the second half of the year:

Caterpillar (CAT)

Caterpillar manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines worldwide.

The company reported second-quarter earnings of $0.99 per share, topping the Zacks Consensus by 14 cents, or 16.5%. Caterpillar has beaten the Zacks Consensus in the last five quarters by an average of 230%.

In the last month, the Zacks Consensus Estimate for 2010 is up 46 cents, or 14.2%, to $3.69 per share. The Zacks Consensus Estimate for 2011 is up 35 cents, or 7.6%, to $5.06.

CAT has a Zacks #1 Rank, and its shares trade at 20x 2010 EPS estimates and 14x 2011 EPS estimates.

Cummins (CMI)

Cummins designs, manufactures, distributes and services diesel and natural gas engines, electric power generation systems, and engine-related component products worldwide.

For the second quarter, Cummins earned $1.25 per share, topping the Zacks Consensus by 36 cents, or 40.5%. In the last five quarters, CMI has beaten the Zacks Consensus Estimate by an average of 61.3%.

In the last month, the Zacks Consensus Estimate for 2010 has increased 70 cents, or 18.1%, to $4.57 per share. The Zacks Consensus Estimate for 2011 has climbed 62 cents, or 11.5%, to $6.02.

CMI is a Zacks #1 Rank stock. It trades at 18x 2010 consensus estimates and 14x 2011 consensus estimates.

Deckers Outdoor (DECK)

Deckers Outdoor engages in the design, production, marketing and brand management of footwear and accessories for outdoor activities and everyday casual lifestyle use. The company is known for its extremely popular UGG brand footwear.

Deckers had second-quarter EPS of $0.23, soaring past the Zacks Consensus Estimate of $0.10. In the last five quarters, Deckers has topped the Zacks Consensus Estimate by an average of 124%.

In the last month, the Zacks Consensus Estimate for 2010 is higher by 19 cents, or 5.6%, to $3.53 per share, and the Zacks Consensus for 2011 is higher by 25 cents, or 6.8%, to $3.95.

DECK is a Zacks #1 Rank stock that trades at 14x the 2010 Zacks Consensus and 13x the 2011 Zacks Consensus.

Las Vegas Sands (LVS)

Las Vegas Sands develops multi-use integrated resorts worldwide. It owns and operates The Venetian, The Palazzo and The Sands in Las Vegas, Nevada. In Macau, LVS owns and operates the Sands Macao, The Venetian Macao and the Four Seasons Hotel Macao.

The company had earnings of $0.17 per share in the second quarter. This easily beat the Zacks Consensus by 9 cents, or 88.9%.

In the last month, the Zacks Consensus Estimate for 2010 is up 27 cents, or 69.2%, to $0.66 per share. The Zacks Consensus Estimate for 2011 is up 22 cents, or 29.3%, to $0.97.

LVS is a Zacks #1 Rank stock. It trades at 44x 2010 consensus EPS estimates and 30x 2011 consensus EPS estimates.

Packaging Corporation of America (PKG)

PKG produces containerboard and corrugated products in the United States. Its corrugated packaging products include conventional shipping containers used to protect and transport manufactured goods.

PKG reported Q2 earning per share of $0.38 per share, topping the Zacks Consensus Estimate by 7 cents, or 22.6%.

In the last 30 days, the Zacks Consensus Estimate for 2010 has climbed 14 cents, or 9.2%, to $1.67 per share. The Zacks Consensus Estimate for 2011 has increased 17 cents, or 7.9%, to $2.33.

PKG is a Zacks #1 Rank stock that trades at 15x 2010 earnings estimates and 10x 2011 EPS estimates.
 
CATERPILLAR INC (CAT): Free Stock Analysis Report
 
CUMMINS INC (CMI): Free Stock Analysis Report
 
DECKERS OUTDOOR (DECK): Free Stock Analysis Report
 
LAS VEGAS SANDS (LVS): Free Stock Analysis Report
 
PACKAGING CORP (PKG): Free Stock Analysis Report
 
Zacks Investment Research