As the financial quarter draws to a close, the anticipation surrounding earnings reports begins to mount, particularly for publicly traded companies in the S&P 500 index. Next week’s earnings announcements could serve as a tipping point for many of these firms, especially since the preliminary results for the third quarter indicate a robust performance relative to analyst expectations. Data from FactSet reveals that of the small subset of companies that have already reported—around 14%—a noteworthy 79% exceeded earnings estimates, and 64% surpassed revenue expectations. With approximately 22% of S&P 500 companies prepared to unveil their financials, there is a ripe opportunity for investors to discern which stocks might benefit significantly from favorable earnings results.
In assessing potential investments for the upcoming earnings reports, it’s crucial to filter companies that exhibit strong earnings momentum and positive analyst sentiment. CNBC Pro undertook this evaluation utilizing specific criteria to create a focused list of potential winners. The stocks in this screen had to meet several benchmarks: they must have recorded at least 10 upward revisions to earnings estimates in the past three months, experienced a minimum 5% increase in consensus earnings estimates over the past three and six months, and seen an average analyst price target rise by at least 10% during the last quarter.
Among the stocks on the radar is Seagate Technology, a data storage company that has experienced a substantial shift in analyst forecasts. Over the last six months, consensus earnings estimates for Seagate have surged by nearly 54%, positioning it as a standout in this analytical screen. Notably, Morgan Stanley analyst Erik Woodring has voiced bullish sentiments, maintaining an overweight rating and projecting a price target of $133—indicating a potential upside of about 19% from its recent trading levels. Woodring’s assessment revolves around the belief that the market is underestimating the company’s gross margins, projecting a significant improvement to 37% by the end of FY25. This optimistic outlook suggests that Seagate could present significant earnings growth in the upcoming quarters, particularly for its scheduled earnings report on Tuesday.
Another sector showing promise is healthcare, with Universal Health Services and HCA Healthcare receiving increasingly favorable analyst coverage. HCA Healthcare’s consensus earnings estimates have been adjusted upward by approximately 11% over the last three months, along with a noteworthy price target increase from TD Cowen, which anticipates the stock could rise by approximately 8%. This uptick comes on the heels of substantial gains—over 53%—in HCA’s stock value since the start of the year. Meanwhile, Universal Health Services is also enjoying positive momentum, with a marked 20% increase in earnings estimates from analysts and an upward adjustment of its price target, suggesting it may also see a significant rise in stock value.
The role of state-directed Medicaid payments is critical in underpinning the financial growth prospects for these healthcare companies. TD Cowen’s recent elevation in both HCA and UHS’s price targets stems from expectations that these entities could experience a performance boost due to higher reimbursements from Medicaid. This financial support can play an essential role in stabilizing and expanding healthcare services, further positioning these stocks as attractive options for investors surveying the landscape ahead of next week’s earnings reports.
As investors prepare for the forthcoming earnings announcements, understanding the context of analyst expectations and market dynamics is paramount. Companies like Seagate Technology, HCA Healthcare, and Universal Health Services not only reflect strong financial metrics but also demonstrate the potential for growth against a backdrop of positive analyst sentiment. With a selective focus on stocks exhibiting heightened earnings momentum and favorable downgrades, investors may well find lucrative opportunities amidst the upcoming flurry of earnings reports. The financial landscape is primed for shifts, and discerning investors can position themselves advantageously for what could be a pivotal week in the markets.