The earnings season continues to move stocks higher as big names deliver their quarterly performance reports one by one. As a result, analysts are updating their models with the latest numbers, resulting in rating changes for these companies.
As the US indices struggle to find a specific direction in today’s trading, some stocks are clearly on an upward trajectory. We unearthed these stocks by looking at the recent earning reports, analyst upgrades, and the earnings calendar. To come up with the list of 5 stocks gaining on analyst expectations, we only considered stocks with a market cap of at least $75 billion.
5. 3M Company (NYSE:MMM)
3M Company is a technology services provider that operates through safety & industrial, transportation & electronics, and consumer segments. Financial services firm Wells Fargo’s analysts upgraded 3M from Equal Weight to Overweight and raised its target price from $140 to $170.
MMM received an upgrade because analysts believe that the company is expected to report increasing profits as well as increased shareholder value through buybacks. According to the analysts, the company is well-positioned to start seeing the rewards of the biggest restructuring plan in its history. If sales gain momentum, the company will thrive. If they don’t, the improved structure will help it grow profits. In both cases, investors should be able to see a better stock performance than in the past.
Taking a look into the Q4 earnings of the company announced earlier this week, adjusted EPS came in at $1.68 which was higher than Wall Street analysts’ estimates of $1.54. Management estimates demonstrate a 0.5% to 1.5% growth in sales with an adjusted EPS of $7.60 to $7.90 for the next year.
4. United Parcel Services Inc. (NYSE:UPS)
United Parcel Services Inc. is a package delivery company that provides contract logistics, transportation & delivery, airfreight, and other services. Evercore ISI increased the target price of UPS to $147 and added it to its Outperform list just before the release of its quarterly financial report.
Analysts believe that the stock can bounce back from poor one-year returns. The company is working on cost reduction and according to the management, UPS’ cost-saving measures could save as much as $3 billion by 2028. Margins are likely to jump with the help of these cost-reduction activities and improved stock performance will then only be a matter of when, not if. Once investors realize this shift, the stock may not be available at the current depressed levels anymore.
3. The Charles Schwab Corporation (NYSE:SCHW)
The Charles Schwab Corporation is a savings and loan holding company that provides financial advisory, banking, wealth management, and other services. The bank was upgraded by Wells Fargo from Equal Weight to Overweight with the target price raised from $89 to $93.
According to the analysts, SCHW’s operating margins and net interest margins are likely to grow going forward. The balance sheet is solid and will only get stronger in 2025, with the stock buyback program adding more shareholder value. Overall the company is also anticipated to report better organic growth.
On the recent upgrade, EPS estimates were also revised from $3.28 to $4.15 for 2025. The stock followed an upward trend in the past year with a gain of over 20%. The company is focused on AI implementation, product expansion, and capacity for growth which makes it a compelling candidate for growth-oriented investors.
2. Netflix Inc. (NASDAQ:NFLX)
Netflix is a streaming giant offering movies, TV series, games, and other services. It recently hit an all-time high of $999 right after the Q4 financial results were released. Earnings were higher than estimates and the company increased its revenue expectations by $500 million for 2025.
After its strong Q4 performance, JP Morgan maintained an Overweight rating and raised its target price to $1,150. The research firm expects a healthy double-digit growth in the next two years.
NFLX is starting this year in a strong form due to extremely engaging content, increasing prices in key markets like the US, and growing its ad business. Bank of America, Barclays, and other analysts also showed similar optimism about the company which isn’t surprising as the beloved stock of many continues to scale new heights.
1. Shopify Inc. (NYSE:SHOP)
Shopify provides an e-commerce platform to people who want to sell products online. The company’s platform and services have been a global hit ever since the COVID-19 period. However, the stock has disappointed many after its fall in 2022, still trading 33% below its all-time highs.
While that disappointment is unlikely to change soon, there is reason to believe that the existing bull run, which has paused since November, could continue. The company’s earnings are expected to come out on the 11th of February and RBC Capital Markets analysts are optimistic about an earnings beat.
Analysts have confirmed that third-party data suggests an earnings beat on the back of improved margins. There is one warning sign though, and it has to do with the guidance. Shopify has a history of disappointing Q1 guidance with the stock declining 17% on average after Q4 earnings. We believe this risk is already priced in as the stock is trading at exactly the same level as on the day of Q3 earnings. The sideways movement during the last 2 months suggests investors are prepared for poor guidance and have therefore priced it in.
Shopify is not on our latest list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 56 hedge fund portfolios held SHOP at the end of the third quarter which was 56 in the previous quarter. While we acknowledge the potential of SHOP as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as SHOP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
