Earnings: 3 ‘Strong Buy’ Stocks to Watch Monday


There’s no sense denying the fact that investors are relieved by the results so far in Q3 earnings season. Through the summer there were growing signs of a general slowdown in the global economy, and market watchers had expected Q3 results to come in below par. So far, that hasn’t happened – results are good.

To date, 341 S&P 500 companies have released their quarterly performance. While aggregate earnings are down 0.6%, that is more than balanced by 4.9% gain in revenues. Of the companies that have reported so far, 60% beat the revenue forecasts and 74% showed EPS beats. These results are generally in-line with Q2, and the percentage of companies beating estimated revenue and EPS is close to the historical average.

We’ve taken a dive into TipRanks’ Best Stocks to Buy tool to find three buy-rated large-cap stocks that are reporting earnings today after market close. Are these the right investments for you? We’ll give you the lowdown on them, and you can decide for yourself.

Uber Technologies (UBER)

At this point, Uber doesn’t really need an introduction. This Silicon Valley tech company has disrupted the ride-for-hire market, making inroads against traditional taxi services by bringing the on-demand model to both the driver and passenger ends of the ride sharing market. Drivers can work at their own convenience, and passengers can use the app to call for rides when they need it. It makes a nice fit to meet a real need.

Unfortunately, Uber management has not been particularly effective at telling the company story in the markets, or at investor relations. The stock is down 30% since the IPO back in May, and like many new tech companies, Uber operates at a net loss. At the same time, the EPS forecast for today’s Q3 report is for a loss of 83 cents per share – a far better performance than the $4.72 loss reported in Q2. Uber’s cumulative loss is over $6 billion for the current fiscal year.

So why is this stock a Strong Buy? Uber burned through nearly $2 billion in calendar Q1 and Q2, but as pointed out, market watchers expect that the company will narrow its losses. Free cash flow will be a key metric in the quarterly report. It’s expected that a 16% increase in revenues will improve the FCF situation.

Wedbush analyst Daniel Ives sums up the bull case on UBER: “The brand loyalty of Uber is hard to dispute as the company continues to attract drivers and consumers illustrating an impressive formula to go after a $5.7 trillion opportunity globally on transportation which swells to $7-$8 trillion when including third-party food delivery and freight/logistics. A core tenet of our bull thesis on Uber is around the company’s ability to morph its unrivaled ridesharing platform into a broader consumer engine with Uber Eats, Uber Freight, and autonomous initiatives “just scratching the surface” on the full monetization potential of this platform over the next decade.”

Ives rates UBER stock a Buy along with $58 price target, which implies about 85% upside from current levels. (To watch Ives’ track record, click here)

Writing from Guggenheim, 5-star analyst Jake Fuller initiated coverage of UBER with a $40 price target. He said, “Rising prices in the U.S. should fuel a strong 2H for UBER, potentially highlighting the leverage in the model and bringing more aggressive EBITDA scenarios into focus. Challenges remain for sure, but we see UBER at a potential turning point.” His price target indicates a 27% upside to the stock.

Net net, most of the Street have not given up on the company just yet, as TipRanks analytics showcase UBER as a Strong Buy. Out of 25 analysts polled in the last 3 months, 20 are bullish on the  stock, while 5 remain sidelined. With a potential upside of 63%, the stock’s consensus target price stands at $51.17. (See Uber stock analysis on TipRanks)

Nutrien (NTR)

This company is a major player in the agricultural industry. It was formed from a merger of PotashCorp and Agrium, and started doing business as Nutrien in January 2018. The new company, based in Saskatoon, Canada, is now the world’s manufacturer of largest potash and nitrogen fertilizer, filling a vital niche for big agribusiness. Nutrien has a market cap of $27.7 billion, and management estimates that the merger deal cut expenses by $500 million.

Nutrien reported $1.58 EPS in Q2, and the forecast for Q3 is $0.36. The reduction is not cause for worry – looking at the company’s earnings history, Q2 is their big report, while the other three quarters show lower results. As long as the company’s earnings conform to the pattern, investors will take it in stride.

The markets have put headwinds in Nutrien’s way, especially in regard to the US-China trade dispute. North American soybean farmers were hit hard by the trade war, and that led to reduced demand for fertilizers. Rough weather and a difficult growing season last year also hurt the bottom line. At the same time, farmers can’t do without Nutrien’s product, and the stock is up 2.7% year-to-date. It’s nothing spectacular, but it is a gain.

It’s fitting that RBC Capital – Canada’s major investment bank – takes a bullish view on this Canadian company. Andrew Wong gives NTR shares a $60 price target and a 24% upside potential, saying, “We think Nutrien remains an attractive investment with strong cash generation and solid financials, despite this year’s weather-related ag challenges in the US and near-term potash price weakness. We believe the set-up for ag fundamentals in 2020 is constructive and significant potash industry curtailments should support prices.” (To watch Wong’s track record, click here)

CIBC’s Jacob Bout is also bullish here, seeing a 45% upside to NTR and setting a $70 price target. Bout writes, “We continue to believe 2020 will see a meaningful improvement, driven by a larger U.S. crop and potentially normalized weather patterns, resulting in a rebound in North American fertilizer demand. We reaffirm our Outperformer rating, expecting NTR to generate strong FCF through the cycle…”

These analysts are not the only fans of the Canadian fertilizer maker on Wall Street, as TipRanks analytics exhibit NTR as a Strong Buy. Based on 8 analysts polled in the last 3 months, 6 rate a Buy on Nutrien stock while 2 maintain a Hold. The 12-month average price target stands at $60.92, marking a 26% upside from where the stock is currently trading. (See Nutrien stock analysis on TipRanks)

Hartford Financial Services (HIG)

You’ve probably heard of The Hartford – this major insurance company has been for 25 years the official underwriter for the auto and home policies provided through the AARP. With over 38 million members, the AARP, representing senior citizens, is one of the largest special interest lobbying groups in the country; Hartford’s arrangement with them gives the insurer a massive customer base.

Overall, Hartford is the ninth largest property and casualty insurance company in the US. The company mainly sells policies through a network of agents and brokers, and has divisions offering insurance, group benefits, and mutual funds. The company has a market cap of nearly $21 billion, and brings in over $17 billion in annual revenues. Even better, from an investor’s perspective, HIG’s $1 billion-plus in annual net profits allows the company to maintain a 2.09% dividend yield, paying out $1.20 per share annualized.

This is a solid company. Looking ahead at the earnings forecast, analysts expect HIG to report $1.26 EPS, a 9.5% gain year-over-year. It’s important to note that HIG has exceeded the EPS forecast in each of the last eight quarters.

Paul Newsome, 5-star analyst with Sandler O’Neill, sees this stock a buying proposition. He sets a $68 price target, indicating confidence in an 18% upside. Newsome says simply, “We value shares of The Hartford by applying a roughly 140% multiple to our expected one-year forward (4Q20) book value of $48.11. We continue to believe HIG’s shares are attractive at 9.9x forward earnings.” (To watch Newsome’s track record, click here)

Weighing in from Evercore ISI, analyst David Motemaden boosted his price target from $62 to $65. He writes of HIG shares, “We think HIG has less EPS risk than the industry given very little favorable PYD/reserve releases embedded in consensus estimates despite a redundant workers comp book that we think provides cushion to offset pressure from other lines of business and we think could still result in upside to estimates should the reserves develop in line with our expectations.” Motemaden’s new price target suggests an upside of 13% for this stock.

Overall, this financial player stands as a ‘Strong Buy’ name among Wall Street analysts. In the last three months, HIG has won three bullish recommendations. With a return potential of close to 20%, the stock’s consensus price target lands at $69. (See Hartford stock analysis on TipRanks)

 

 

 

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