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Don’t Miss Out on These Leading Stocks Before Earnings Don’t Miss Out on These Leading Stocks Before Earnings

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By Ronald Tech

Top-Rated Stocks Ahead of Earnings

The anticipation surrounding earnings week is building up, and as the market gears up for significant reports from heavyweights like Microsoft and Netflix next week, there are a couple of standout companies set to announce quarterly results before that. 1ST Source and Fastenal are two companies that demand attention ahead of their fourth-quarter reports on Thursday, January 18.

Fastenal Q4 Preview & Overview

Fastenal, a national wholesale distributor of industrial and construction supplies, remains one of the most appealing retailers in the current market climate. With continued strength in infrastructure and construction-related activities such as homebuilding, Fastenal’s stock has surged by an impressive 32% over the last year, easily outperforming the Zacks Building Products-Retail Markets’ 10% and the S&P 500’s 20%.

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For the fourth quarter, Fastenal’s earnings are expected to witness a 4% year-over-year increase to $0.45 per share, with sales projected to grow by 3% to $1.75 billion. The entire fiscal year of 2023 is expected to culminate in annual earnings growing by 6% to $2.00 per share and total sales increasing by 5% to $7.34 billion. Furthermore, Fastenal is anticipated to maintain its growth trajectory in FY24, with another 6% increase in its top and bottom lines, making it an intriguing option for growth. Investors are also drawn to Fastenal’s generous 2.20% annual dividend yield.

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1st Source Q4 Preview & Overview

1ST Source, a regional bank with branches spread across Indiana and Michigan, is experiencing positive earnings estimate revisions. Despite a 5% decline in its stock over the past year, the company’s 12.3X forward earnings multiple is quite attractive, reflecting a valuation near the Zacks Banks-Midwest Industry average of 10.6X and well below the S&P 500’s 20X. Additionally, 1ST Source’s 2.63% annual dividend yield further bolsters its appeal from a valuation standpoint.

See also  Wealth Tax: Debating the Top Tax Bracket Debate Over the Wealth Tax

Are the wealthy getting away with not paying their fair share of taxes, or are they carrying an unfair burden? The debate over the top tax bracket rages on as concerns about income inequality and the concentration of wealth at the top of the economic ladder continue to make headlines. Senators Bernie Sanders and Elizabeth Warren have both proposed a wealth tax on the ultra-rich, while even multi-billionaire Warren Buffett has vocally expressed support for the idea, suggesting that it is fair for wealthy Americans to be taxed at a higher rate.

Currently, the top federal income tax rate stands at 37%, applicable to incomes of $539,000 and higher for single taxpayers and $647,850 and higher for couples filing jointly. However, historical data reveals that the top marginal tax rate has been significantly higher in previous eras. In 1944 and 1945, it peaked at a staggering 94%, and in the late 1980s, it hit a low of 28% under former President Ronald Reagan.

Historical Context and Present Day

The taxation of the wealthy has fluctuated significantly throughout U.S. history, demonstrating both higher and lower levels of taxation than the current status. This historical perspective adds complexity to the ongoing debate regarding whether the rich are paying their fair share of taxes. Despite the disputes, recent data from the IRS sheds light on the current tax scenario.

Top 1% Tax Contributions

In 2020, the top 1% of taxpayers—those earning $561,351 or more—contributed a significant 42.3% of the total tax revenue collected. This translates to the top 1% paying more income taxes than the bottom 90% combined. Astonishingly, the top 1% paid a staggering $723 billion in income taxes, while the bottom 90% collectively contributed $450 billion.

State-Level Analysis

Examining the tax burden on the wealthiest individuals at the state level yields interesting findings:

Alabama Minimum income to be considered 1%: $404,560 Average income of the 1%: $1,107,769 Average income tax paid by the 1%: $263,845 Average tax rate of the 1%: 23.82% Alaska Minimum income to be considered 1%: $466,905 Average income of the 1%: $999,772 Average income tax paid by the 1%: $253,754 Average tax rate of the 1%: 25.38% Arizona Minimum income to be considered 1%: $485,146 Average income of the 1%: $1,464,848 Average income tax paid by the 1%: $369,426 Average tax rate of the 1%: 25.22% Arkansas Minimum income to be considered 1%: $387,666 Average income of the 1%: $1,483,925 Average income tax paid by the 1%: $313,266 Average tax rate of the 1%: 21.11% California Minimum income to be considered 1%: $726,188 Average income of the 1%: $2,430,790 Average income tax paid by the 1%: $655,180 Average tax rate of the 1%: 26.95% Colorado Minimum income to be considered 1%: $609,919 Average income of the 1%: $1,799,148 Average income tax paid by the 1%: $465,284 Average tax rate of the 1%: 25.86% Analysis of Minimum Income of the Wealthiest 1% and Average Tax Rates by State Analysis of Minimum Income of the Wealthiest 1% and Average Tax Rates by State

While 1ST Source’s stock has seemingly factored in the forecasted dip in Q4 earnings by 10% year-over-year to $1.12 per share, with sales expected to decline by 4% to $91.2 million, annual earnings for FY23 are still projected to rise by 4% to $5.02 per share. However, a dip to $4.20 per share in FY24 is predicted. It’s worth noting that over the last 60 days, FY24 earnings estimates have shown a 3% increase, while FY23 EPS estimates have risen by 6%. Total sales are now expected to rise by 4% in FY23 and then dip by 3% this year to $356.7 million.

Key Takeaway

Both Fastenal and 1ST Source have the potential to rally if they deliver favorable Q4 results and offer optimistic guidance. Currently, 1ST Source is adorned with a Zacks Rank #1 (Strong Buy) in line with its attractive valuation and rising earnings estimates, while Fastenal’s stock proudly holds a Zacks Rank #2 (Buy), making it a highly intriguing option for potential growth.

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