As the fourth-quarter earnings season approaches, investors are keenly observing how major companies performing under the S&P 500 will fare. This week, 90 companies in the S&P 500, including eight from the Dow Jones Industrial Average, are set to disclose their quarterly results. Given the diversity in sectors represented, insights from these reports will shed light on the prevailing health of the U.S. consumer, offering valuable information for making investment decisions.
Earnings momentum is the driving force behind stock price movements, reflecting a company’s earnings performance relative to expectations over time. When companies display upward trends in earnings forecasts, they not only attract investor attention but also foster confidence in their potential for growth. This week’s reports will feature a variety of companies that analysts regard as having robust earnings momentum, providing investors with opportunities to capitalize on positive market sentiment.
In particular, a selection of criteria defines whether a stock showcases earnings momentum worth noting. An important benchmark is analyst ratings; companies that receive “buy” ratings from at least 55% of analysts are often seen as having substantial potential. Additionally, if an average analyst price target suggests a minimum upside of 10%, it signals that the stock could be undervalued. Furthermore, companies that have experienced upward revisions in earnings of at least 15% over the past three and six months indicate sustained growth prospects.
One standout company poised to benefit from earnings momentum is Amazon. The e-commerce giant, recognized as a member of the “Magnificent Seven,” has seen its shares soar approximately 25% over the last three months. Notably, nearly 80% of analysts covering Amazon have rated it as a “buy.” As expectations rise, the average price target presents a potential upside of 31%.
Recent remarks from JPMorgan analyst Doug Anmuth emphasize Amazon’s promising future, linking its anticipated growth to progress in Amazon Web Services (AWS) along with notable improvements in operational margins. Additionally, Anmuth highlighted a focus on cost discipline and increasing free cash flow, even with expected capital expenditures growing significantly until 2025. The integration of Generative AI into AWS indicates Amazon is leveraging innovative technologies to maintain a competitive edge.
Scheduled to release their latest earnings report next Thursday, Amazon’s results could provide insight into how the company plans to navigate evolving consumer demands and market dynamics.
Similarly, Visa, a dominant player in digital payments and credit processing, is gaining traction with investors. Over the past six months, Visa’s stock has appreciated by 29%, reflecting analysts’ optimism—approximately 61% of those covering the company recommend it as a “buy.” The average price target indicates a potential rise of 16% from current trading levels.
Morgan Stanley analyst James Faucette recently depicted Visa as a top pick for the payments sector heading into 2025, underlining the company’s attractive valuation. With the revitalization of travel and increased value-added services, along with easing regulatory concerns, Visa appears positioned to capitalize on favorable market trends.
Visa’s earnings report is due on Tuesday, and it is likely to reveal key metrics supporting its ongoing expansion in a rapidly digitizing finance landscape.
Another noteworthy contender is Synchrony Financial, which also presents impressive earnings momentum. The financial services provider has demonstrated a remarkable 41% increase in stock value over the past six months and 85% in the past year. With a buy rating from nearly 61% of analysts, Synchrony is viewed favorably in the market, as the consensus price target suggests a 24% upside.
Analyst Terry Ma from Barclays recently upgraded Synchrony’s rating, citing cheaper valuation metrics as a contributing factor to favorable investor sentiment. Synchrony’s approach to mitigating losses through enhanced revenue strategies, such as raising annual percentage rates and introducing incremental fees, is projected to yield results as early as the latter half of the fiscal year 2024.
With Synchrony set to release its earnings report on Tuesday, market watchers will anxiously wait to see if the actual results align with the positive revisions from analysts.
As the week unfolds with critical earnings reports from these companies, the intersection of strong analyst support and tangible upside potential illustrates an exciting moment for investors. By leveraging insights from earnings momentum, savvy investors can position themselves to make informed decisions and potentially capitalize on the evolving landscape of these influential companies in the American economy.
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