These stocks beat earnings and should outperform, Wolfe Research says
Wall Street is in the thick of earnings season, and some companies that have already reported could outperform going forward, Wolfe Research found. More than 40% of S & P 500 companies have already reported their latest quarterly results. Nearly 76% of those have posted an earnings surprise to the upside, according to FactSet. On revenue, 60% of companies have beaten expectations. “Price action trends saw a reemergence last quarter as companies beating on the top and bottom-lines saw outsized relative performance. With 3Q reporting season coinciding with the U.S. election, we’re closely watching whether this trend continues,” Wolfe said. “Our sense is that companies beating on the top- and bottom-lines in addition to having positive price action around their reports should have an increased chance of outperforming their peers in the months ahead,” according to Wolfe. With that in mind, the firm shared a basket of S & P 500 stocks that have exceeded earnings and revenue expectations and have seen strong moves higher on the back of those reports. Here were some names from Wolfe’s list: One stock on the list is Goldman Sachs , which has soared 36% this year. Most analysts covering the name are bullish on the stock, with 16 of the 24 analysts covering it assigning a buy or strong buy rating, per LSEG. Following the bank’s latest earnings report on Oct. 15, Wells Fargo reiterated its overweight rating on shares of Goldman Sachs. “Goldman Sachs is undergoing a transition to become a more stable firm, with greater contributions from durable revenue streams,” Wells Fargo analyst Mike Mayo wrote. “GS also looks to expand its addressable market in areas of strength such as investment banking and lending to corporate clients.” Molina Healthcare also made the list. Shares rallied nearly 18% on Thursday after the health-care company posted earnings and revenue beats. Molina Healthcare earned an adjusted $6.01 per share, while the LSEG consensus estimate called for $5.81 in earnings per share. Revenue of $10.34 billion also exceeded the forecast $9.91 billion. Most analysts covering the name have assigned it a hold rating, according to LSEG. That said, the average price target signals approximately 16% upside. Shares of Molina Healthcare are down 11% on the year. Software company ServiceNow also moved 5% higher on Thursday after posting third-quarter results. ServiceNow’s third-quarter adjusted earnings of $3.72 per share topped Wall Street’s estimate of $3.46 per share, according to LSEG, while its $2.80 billion in revenue also exceeded the $2.74 billion forecast Following this earnings beat, Bank of America reiterated ServiceNow as one of its top stock picks . “Solid execution and end customer demand across the broad ServiceNow application suite drove another solid beat and raise quarter,” analyst Brad Sills wrote. ServiceNow shares are up more than 35% year to date.
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