The financial landscape is brimming with excitement as a number of prominent companies prepare to disclose their earnings in the coming week. Notably, the third-quarter financial results have been beating analyst forecasts, igniting discussions among investors about the implications for the stock market. As of now, approximately 14% of the S&P 500 index has reported results, and the figures are encouraging, with 79% of these companies surpassing earnings expectations and 64% exceeding revenue projections, according to data compiled by FactSet. With another 22% of companies set to announce earnings next week, anticipation is mounting.
The current season has showcased a favorable trend in corporate earnings, which are crucial for investor sentiment and market stability. To better assess which companies might outperform expectations, CNBC Pro has leveraged FactSet’s data to filter through possible candidates. Particular focus was placed on companies with robust earnings momentum and analyst support, which indicates a higher likelihood of positive performance.
The criteria utilized for this analysis were stringent: companies had to experience at least ten upward adjustments in earnings estimates over the last three months, and their consensus earnings estimates had to increase by a minimum of 5% over the previous three and six months. Additionally, the average analyst price target for these companies needed to rise by at least 10% within the same timeframe. This rigorous selection process reveals the underlying optimism regarding certain stocks and may help investors pinpoint winners as earnings announcements approach.
One noteworthy company poised for attention is Seagate Technology, which has recently seen analyst expectations soar. According to FactSet, consensus earnings estimates for Seagate have witnessed a significant increase of approximately 54% over the past six months. This surge is backed by a bullish reiteration from Morgan Stanley’s Erik Woodring, who has maintained an overweight rating and a price target of $133 for Seagate. Such an evaluation suggests that the stock has the potential for an upside of around 19% from its current position, which is particularly attractive given the stock’s impressive growth of about 31% year-to-date.
Woodring elaborates that there may be a fundamental miscalculation among analysts concerning the company’s gross margins, predicting that they will reach 37% by the close of fiscal year 2025. He believes that enhanced gross margins will be pivotal in driving earnings per share (EPS) performance in both the September and December quarterly results. With earnings slated for release shortly after the market closes on Tuesday, investor interest in Seagate is bound to intensify.
Within the healthcare sector, two companies have shown promising trends: Universal Health Services and HCA Healthcare. Analysts have notably increased their earnings estimates for HCA Healthcare by around 11% and 9% in the last three and six months, respectively. The anticipation for HCA’s earnings on October 25 is fostered by a remarkable 53% increase in the company’s stock value this year, signaling robust investor confidence.
Moreover, Universal Health Services has experienced a notable uptick in analyst sentiment, with earnings estimates climbing approximately 20% over the past three months. The price target for Universal Health Services has expanded considerably, more than any other company in the filtered results. TD Cowen recently recalibrated its expectations, raising the price target on HCA to $450 with an implication of 8% upside potential, while simultaneously elevating Universal Health Services’ target to $283, hinting at a promising 20% gain.
Both HCA and Universal Health Services have demonstrated impressive growth, with stock increases of $54% and 55%, respectively, this year, showcasing the healthcare sector’s resilience and adaptability amid ongoing economic shifts.
As the earnings reporting season continues to unfold, the anticipated results will likely shape market trends and investor sentiment in significant ways. Companies like Seagate Technology, HCA Healthcare, and Universal Health Services stand out as potential leaders based on their upward revisions and positive analyst sentiments. Investors will be keenly watching these developments, as positive surprises could catalyze further stock appreciation, thereby influencing broader market dynamics. With careful scrutiny and strategically informed decisions, stakeholders can position themselves advantageously in a rapidly changing economic environment.