Earnings Resilience Through Smart Cost Management: Top Stock Calls from Zacks Research

The latest research output from Zacks Investment Research reveals how leading companies are navigating the delicate balance between earnings growth and cost pressures. Released in late February 2026, the comprehensive research review analyzed 16 major stocks, focusing on how executives are managing rising operational expenses while maintaining earnings momentum. This analysis breaks down the key findings on Costco Wholesale Corp. (COST), Roche Holding AG (RHHBY), Lam Research Corp. (LRCX), and several emerging opportunities in the microcap space.

Big-Cap Earnings Drivers: Navigating Cost Pressures and Scale

Costco’s Disciplined Approach to Margin Protection

Costco shares appreciated 5.2% over the past six months, trailing the Zacks Retail - Discount Stores industry’s +12.5% gain, yet the company continues to demonstrate how strong operational discipline addresses cost challenges. As a consumer defensive stock, Costco has weathered market volatility by leveraging its membership model to generate stable, recurring earnings. The company’s pricing discipline—a critical tool for managing cost inflation—remains intact despite input-cost pressures and tariff headwinds.

What makes Costco’s earnings story compelling is management’s proactive sourcing diversification strategy. By spreading supply chains across multiple regions, the company cushions the impact of tariff escalation and material cost increases. The Kirkland Signature private label brand continues strengthening margins, delivering premium earnings contributions without proportional cost increases. With e-commerce momentum accelerating and digital fulfillment services gaining adoption, Costco’s omnichannel expansion is driving traffic while distributing operational costs more efficiently across sales channels.

Strong cash flow generation and balance-sheet flexibility position Costco to weather economic cycles without compromising earnings quality. Management’s proven execution track record suggests the company can continue delivering steady earnings growth while managing input costs effectively.

Roche’s Earnings Challenged by Biosimilar Competition and FX Headwinds

Roche’s stock outperformed its industry cohort substantially (+49.5% vs. Zacks Large Cap Pharmaceuticals +27.8%), yet earnings growth faces structural pressures. The pharmaceutical giant’s recent results showcased solid operational performance from key growth drivers—Ocrevus for multiple sclerosis, Vabysmo for ophthalmology, and emerging performers like Hemlibra and Phesgo for hemophilia and breast cancer treatments—but legacy drug erosion remains a persistent earnings headwind.

The company faces dual cost pressures: biosimilar competition eroding revenues from older treatments (Avastin, Herceptin, MabThera, Actemra) combined with unfavorable foreign-exchange dynamics. Weakness in the U.S. dollar significantly impacted international earnings translations, compressing overall profitability metrics. To offset declining legacy product earnings, Roche is pursuing strategic acquisitions and collaborations to diversify its portfolio, though recent pipeline setbacks have tempered investor enthusiasm about near-term earnings visibility.

Lam Research Rides Earnings Wave from Chip Complexity

Lam Research delivered exceptional performance, up 140.9% over six months versus the Zacks Electronics - Semiconductors industry’s +25.5% return. The semiconductor equipment maker’s earnings momentum stems from rising design complexity in 3D DRAM and advanced packaging—technologies that demand higher etch and deposition intensity per wafer. This technical inflection point translates directly into stronger earnings potential as chipmakers invest in next-generation fabs.

System business recovery, fueled by improving memory spending, provides an earnings tailwind. The company’s strategic R&D investments position it to capitalize on projected higher capital spending across foundry, logic, DRAM, and NAND segments. Strong demand for high-bandwidth memory chips supports Lam’s earnings visibility. However, mature-node spending softness and escalating U.S.-China trade tensions create earnings headwinds that warrant monitoring.

Microcap Earnings Potential: Weighing Cost Constraints Against Expansion

Spruce Power’s High-Margin Recurring Earnings Model

Spruce Power Holding Corp. (SPRU) stands out as a microcap play with distinctive earnings characteristics. The company operates 85,000 residential solar systems under long-term contracts, generating predictable, recurring revenue streams spanning over a decade. Third-quarter 2025 revenues reached $30.7 million (+44% year-over-year), translating to $26.2 million in operating EBITDA—a strong earnings metric for a company of its size.

The SREC monetization strategy represents high-margin earnings expansion, including a $10 million hedged deal extending through 2029. Spruce’s asset-light model avoids costly installations while leveraging acquisitions and proprietary technology to scale profitably. Management has implemented cost-cutting initiatives targeting $20 million in annual savings, directly supporting earnings growth. Since 2018, disciplined M&A activity added 67,000+ systems to the portfolio, compounding earnings potential. Valuation remains modest at 4.12X EV/sales, suggesting earnings upside if execution continues. However, a $184 million refinancing facility due April 2026 poses refinancing risk, and high leverage constrains financial flexibility and earnings stability.

IDT’s Margin Expansion Offsetting Revenue Headwinds

IDT Corp. (IDT), another microcap, faced earnings pressure recently, with shares declining 21% versus industry gains of +5.2%. Despite macro headwinds—remittance working-capital volatility, advertising softness, fee pressure, and regulatory uncertainty—IDT is repositioning its earnings mix toward higher-margin growth segments.

The company’s Net Retail Services division is scaling a payments-led model with 22% revenue growth and 35% operating income expansion, demonstrating how strategic cost management drives outsized earnings growth. BOSS Money’s digital operations (84% of transactions) achieved 160 basis points in margin expansion and 97% operating income growth despite modest fee compression. net2phone’s vertical solutions and AI integration are lifting per-user earnings metrics (ARPU) while legacy Communications continues generating stable cash earnings to fund growth initiatives. The valuation suggests limited downside with potential multiple expansion if higher-margin segment scaling continues lifting consolidated earnings.

Earnings Divergence: Upgrades and Downgrades Reflect Cost Management Ability

Stocks Benefiting from Cost Efficiency and Earnings Momentum

Garmin Ltd. (GRMN) advanced on solid demand for adventure watches and wearables, driving Outdoor and Fitness segment earnings. TechnipFMC’s record $16 billion backlog from Subsea and Surface Technologies ensures strong earnings visibility and margin improvement potential. Watts Water benefited from acquisition synergies, with projected incremental revenues over $130 million adding to future earnings streams.

Stryker Corp.'s strong organic earnings growth stems from robotics leadership and innovative product launches, offsetting tariff pressures and cost headwinds. Nice Systems gained from cloud strength and AI-powered customer experience solutions, fueling earnings expansion across its user base.

Downside Pressures from Rising Costs and Earnings Challenges

Conversely, Insperity faced earnings pressure due to escalating technology investments and competitive intensity in the Professional Employer Organization sector. Lazard Financials confronted persistent net outflows compressing assets under management and earnings potential, while concentration risk in Financial Advisory revenues limits diversification of earnings sources.

The Bottom Line: Earnings Growth Requires Strategic Cost Navigation

The research consensus from Zacks Investment Research emphasizes that 2026 earnings performance hinges on management’s ability to navigate concurrent cost pressures. Winners like Costco and Lam Research leverage operational excellence and technology adoption to absorb input costs while sustaining margins. Mid-tier performers like Roche face structural earnings headwinds from biosimilar competition and currency dynamics. Emerging microcaps like Spruce Power and IDT demonstrate how margin discipline and portfolio optimization can unlock outsized earnings growth despite size constraints.

Investors seeking exposure to earnings growth should prioritize companies with demonstrated cost discipline, diversified revenue streams, and strategic capital allocation. The research output underscores that in 2026’s uncertain macro environment, companies that successfully manage the earnings-cost equation will likely outperform.