As the earnings season gets on and companies start reporting their results from Q4 2019, Wall Street’s analysts are taking note and declaring the winners. It’s not hard to determine which stocks are getting the seal of approval – those companies forecasting or reporting strong earnings.
We’ve used TipRanks’ Daily Stock Ratings tool to take a closer look at three companies which have just seen ratings upgrades from top analysts. An upgrade is an important signal for investors to note – it shows that the stock in question has deeply impressed the reviewing analyst.
The three companies on this list are Buy-rated, with medium to large market caps, and boast upwards of 15% upside growth potential. Let’s dive in and find out why they earned coveted upgrades.
General Electric Company (GE)
First up is a long-time stalwart of the Dow Jones Industrial Average. General Electric is a multinational manufacturing conglomerate, with segments in aviation, digital industry, finance, power, renewable energy, and venture capital, to name just a few. The company saw over $121 billion in revenues for fiscal 2018, and employs over a quarter of a million people worldwide. Despite various industry and financial headwinds that pushed share prices down in 2018 and 2019, GE remains a blue-chip stock and a staple of the markets.
The fourth quarter of 2019, reported just last week, marked a possible turnaround for the company. Earnings and revenues both beat the forecasts. The top line number, at $26.2 billion, was 2.6% better than expected, while the 21-cent EPS beat the estimates by over 16%. An important metric, the company reported free cash flow of $2.3 billion for the year, beating its own guidance by 1.5%. The strong quarterly release has pushed GE shares to a 13% gain year-to-date.
Andrew Obin, 4-star analyst from Merrill Lynch, was pleased with GE’s results. He wrote, “The company has undergone a significant reinvestment cycle, positioning it well from a competitive standpoint. The improving FCF trajectory should be supportive for shares.”
Obin bumped up his rating on GE from Neutral to Buy, and raised the price target from $12 to $16, suggesting a robust 27% upside potential. (To watch Obin’s track record, click here)
With 15 analyst ratings given recently, including 10 Buys, 4 Holds, and a single Sell, GE stock gets a Moderate Buy from the analyst consensus. Shares are priced low, at just $12.58, but the $14.23 average price target indicates room for 13% upside growth in the coming 12 months. (See General Electric stock analysis on TipRanks)
Micron Technology, Inc. (MU)
Micron is a major player in the semiconductor chip industry, with its $31.8 billion in sales in 2018 making it the fifth largest chip maker. Like much of the industry, Micron has been heavily pressured by the US-China trade tensions – the company’s manufacturing and supply lines are highly dependent on the free movement of goods, materials, components, and completed products between the US and China. The recent positive developments on that front, including the signing of the Phase 1 agreement between the US and Chinese governments, has relieved some of that pressure.
The pressure, however, has been real. MU’s earnings are down significantly from a year ago. The company responded by lowering guidance on fiscal Q1 2020. In the recent report for that quarter, MU beat the lower guidance as well as the Street’s estimates on revenues and earnings – it was a good sign for Micron. Revenues were reported at $5.14 billion, 2.5% above expectations, and EPS, at 48 cents, edged out the forecast by 2%.
Micron is an industry leader in the DRAM chip segment, which bodes well for the company as 5G networks expand and demand increases for compatible chips. In addition to its strong positioning for 5G, Micron is also strongly ensconced in the gaming and data center segments, giving it a diverse customer base.
Morgan Stanley analyst Joseph Moore likes Micron’s market position, citing the increased need for memory chips. He wrote, “Channel checks make it clearer that customers are building real conviction that memory will tighten [more demand versus supply] over the course of 2020, which is leading them to put more inventory into place…”
Moore declined to set a price target on MU shares, but he did upgrade his stance from Neutral to Buy. (To watch Moore’s track record, click here)
Overall, MU shares have a Moderate Buy analyst consensus rating, based on an impressive 20 Buys, along with 4 Holds and 2 Sells. The $65.61 average price target suggests a premium of 18% from the current share price of $55.50. (See Micron stock analysis on TipRanks)
Generac Holdings, Inc. (GNRC)
With our third stock, we enter the realm of backup power generation. For better or worse, our world runs on electricity, and so ensuring a steady supply is essential – in industry, tech, and even in your home. Generac offers an array of backup electric generators for the residential, light commercial, and industrial markets, ranging in output from 800 watts to 9 megawatts. The company manufactures its products in the state of Wisconsin, and does over $2 billion in business annually.
In its last four reported quarters, Generac has beaten expectations every time. Earnings consistently rose through 2019, with the last reported quarter, Q3, showing revenues of $601.14 million and EPS of $1.43. The company’s average quarterly beat in 2019 was over 9%. Q4 results will be released on February 13, but analysts are optimistic that the company will show similarly positive results. Not to mention GNRC shares gained an impressive 102% in 2019.
5-star analyst Christopher Glynn, of Oppenheimer, sums up the upbeat outlook on GNRC in his recent note on the stock. He writes, “We see solid prospects for revenue upside and improving visibility to long-term scaling… The sustained strength in core standby demand fundamentals coupled with emergence of the California market and launch into clean energy support an estimated 11% 2020 residential growth.”
In line with his outlook, Glynn upgraded GNRC from Neutral to Buy, and set a price target of $125. This target suggests room for 20% share appreciation this year. (To watch Glynn’s track record, click here)
Generac is not a cheap stock; it is priced at $104.28. Glynn’s is the most recent review on the company, but a stock with this potential is likely to attract more analyst love; this is definitely one to watch. (See Generac stock-price forecast on TipRanks)