Promising Stocks with Attractive Valuations Ahead of Earnings Season
The upcoming third-quarter earnings season brings opportunities for investors as certain stocks are trading at appealing valuations. Notable companies like Delta Air Lines, Infosys, and Domino's Pizza are scheduled to report earnings this week. Additionally, major players in the financial sector, including JPMorgan Chase, Citigroup, Blackrock, PNC Financial Services, and Wells Fargo, will release their results on Friday.
Challenging Earnings Landscape
According to FactSet data, 76 companies in the S&P 500 have already issued negative earnings per share guidance for the third quarter, while only 42 companies have announced positive per-share earnings guidance. Overall, the broad market index is projected to experience a 0.4% decline in earnings compared to the same period last year. This marks the fourth consecutive quarter of year-over-year earnings declines for companies in the broad market index.
Identifying Undervalued Stocks
Considering the challenging earnings landscape, CNBC Pro conducted a screening process to identify stocks with growing earnings that are trading at a discount. The selected stocks met specific criteria: a current P/E ratio at a discount of 20% or greater to its average P/E over the last five years, earnings per share growth of more than 20% in the past 12 months, and a consensus rating of "buy" from analysts with price targets indicating an increase of 20% or more.
Promising Stocks on the List
Among the stocks meeting the criteria, major U.S. airlines Delta and United Airlines stood out. Both companies are trading at significant discounts, with Delta at 87.7% and United at 89.8%. Delta's earnings have surged by an impressive 370.7% over the past 12 months, and analysts expect its shares to rally by 57% going forward. However, Delta's stock performance has been trailing behind the year-to-date gains of the S&P 500.
Other Stocks to Watch
Oil producer Devon Energy is also trading at a substantial discount of over 72%. With a trailing twelve months P/E ratio of 6.3, significantly lower than its five-year average P/E of 22.61, analysts estimate a 31.1% rally in the company's shares from Monday's close. Semiconductor giant Qualcomm is another stock trading at an attractive valuation, with shares at a 30.4% discount and per-share earnings growth of 45.1% over the past 12 months.
In conclusion, as earnings season approaches, investors can explore undervalued stocks that show potential for growth. However, it is crucial to conduct thorough research and consider analysts' insights before making investment decisions.
The Impact of Earnings Season on New Business Formations
Attractive Valuations and the Earnings Season
The third-quarter earnings season presents potential investment opportunities as several stocks are trading at appealing valuations. Companies like Delta Air Lines, Infosys, and Domino's Pizza, along with significant players in the financial sector, are set to report their earnings. The scenario offers a unique landscape for new businesses, especially those considering public trading or seeking investment opportunities.
A Challenging Earnings Landscape
The current earnings landscape, however, poses challenges. FactSet data indicates that a majority of companies in the S&P 500 have issued negative earnings per share guidance for the third quarter. This situation could influence new businesses' strategies, particularly those in their early stages of growth or planning to enter the public market.
Opportunities in Undervalued Stocks
Despite the challenging landscape, certain stocks with growing earnings are trading at a discount. Companies like Delta and United Airlines, which are trading at significant discounts, could represent potential investment opportunities for new businesses. Delta's impressive earnings growth and the analysts' positive outlook could be particularly appealing.
Exploring Other Investment Opportunities
Beyond the airline industry, other sectors also offer promising opportunities. Devon Energy, an oil producer, is trading at a substantial discount, and analysts predict a significant rally in the company's shares. Similarly, Qualcomm, a semiconductor giant, is trading at an attractive valuation, with strong per-share earnings growth.
In essence, the upcoming earnings season could significantly impact new business formations. It presents both challenges and opportunities, underscoring the need for new businesses to be strategic, adaptable, and informed in their decision-making processes.
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