Earnings Edge: Biden’s Infrastructure Plan Will Help 2 Stocks
Last week, we got the details on the massive infrastructure plan to help rebuild America’s roads, bridges, ports and more.
The total package comes to more than $2 trillion in taxpayer funds.
But we can’t expect all of that money to flow into infrastructure companies.
That’s because a much smaller amount, just $621 billion, is directed towards rebuilding America’s infrastructure.
It will be another Band-Aid on the massive rebuilding of our infrastructure needs.
And it means there are fewer funds for companies like Schnitzer Steel Industries (Nasdaq: SCHN).
But, the broad spending bill, totaling more than $2 trillion, will help boost jobs around the country in different industries, which could boost a stock like Paychex Inc. (Nasdaq: PAYX), a staffing and employment company.
Both companies are set to report earnings this week so let’s take a look at what we can expect from each.
Earnings Edge Stock No. 1: Paychex Inc.
Earnings Announcement Date: April 6, before the open.
Expectations: Earnings at $0.92 per share. Revenue at $1.1 billion.
Average Analyst Rating: Hold.
Paychex has thrived since the pandemic, climbing more than 250%. It specializes in small- to medium-sized companies — the ones benefiting the most as the economy bounces back. And with another stimulus package on the way, the infrastructure package, it’s going to help boost the economy even more.
Paychex’s earnings this week will shed some light on that economic recovery and how demand has been for payroll processing services.
Reporting for the first quarter, the results cover December, January and February, and expectations are for the highest earnings and revenue numbers since the pandemic hit.
That makes it a pivotal announcement for the company with PAYX trading around the new all-time highs.
Based on the price chart, shares have formed a rising wedge pattern, and the stock is at the high end of this price range.
PAYX Surges Higher
That’s a long-lasting support line in green that I don’t expect to be broken this week. But the resistance is vulnerable. The high where the red line starts was its last earnings announcement.
The stock tried to jump on the good earnings but turned lower as investors stayed nervous about sluggish growth over the previous two quarters.
Now that the stock is finally back to this price range, I expect more bullish news for the company. And that could even be a positive commentary on the infrastructure. We’ll see if it can keep up the momentum with a positive earnings report.
Earnings Edge Stock No. 2: Schnitzer Steel Industries
Earnings Announcement Date: April 7, before the open.
Expectations: Earnings at $0.99 per share. Revenue at $597 million.
Average Analyst Rating: Hold.
Schnitzer Steel Industries recycles scrap metals and manufactures steel products around the world. It’s easy to see how a pure infrastructure bill would boost the prospects for the company.
But that’s where the smaller portion being attributed to infrastructure in the infrastructure bill may have it a bit down this earnings season.
It still doesn’t erase the fact we need more money for infrastructure spending, but they are not going to get the biggest opportunity as this plan is currently portrayed.
This week the company is set to announce earnings where we will likely get some commentary on its thoughts from what it has seen.
Its last earnings report was on January 7, and SCHN surged heading into the announcement — up 30% in the four days leading to the earnings release.
This time around, the stock is stuck in a wedge pattern with a breakout looking imminent — likely on this earnings announcement.
SCHN’s Breakout Is Imminent
Shares didn’t surge heading into the earnings announcement this time around. Investors are using a wait-and-see approach, which sets up a better-than-expected report that could boost the stock.
$620 billion in the infrastructure plan is still enough to boost the stock and help the economy, so I see it as an overall winning scenario for Schnitzer Steel. We just need to see if the executives at the company agree with us.
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Chad Shoop is a Chartered Market Technician and options expert for Banyan Hill Publishing. He is the editor of three leading newsletters: Quick Hit Profits, Automatic Profits Alert and Pure Income. His content is frequently published on Investopedia and Seeking Alpha. Check out his YouTube Channel to see his latest market insights.
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Investing has consumed my life since college. While double majoring in finance and economics at the University of North Carolina at Greensboro, I founded the university’s economics club, joined the finance club and participated in the Chartered Financial Analyst research competition to represent our school.