With much of the U.S. economy shutting down during the coronavirus pandemic, it’s no surprise that S&P 500 companies’ second-quarter earnings saw one of the largest year-over-year declines in recent history, diving 32% from 2019 levels.
The good news is such losses are expected to narrow for the coming months. Wall Street expects
companies to post an aggregate $32 in per-share for the third quarter—about 23% below the year-ago period’s levels.
But this doesn’t mean all stocks are bound to suffer losses. Some S&P 500 stocks are expected to see earnings growth in the third quarter, and that could give those names a year-end boost if such expectations are met later in the reporting season.
Barron’s screened for stocks that are expected to see at least 20% growth in third-quarter earnings as compared with 2019, along with more than 10% upside in stock prices as of Wednesday’s close. All stocks on the list were trading below 25 times forward earnings—leaving out stocks that might have rallied too high and too fast already. Of course, companies with negative earnings expectations were excluded.
This leaves 15 stocks spanning from the technology to health care, financial, energy, and consumer sectors.
(ticker: ATVI), for example, is expected to more than double its third-quarter earnings from last year and lift its share price from the recent $84 to $96. Activision had crushed Wall Street expectations during the three months from April to June, with many people stuck at home by the pandemic and spending lots of time—and money—on videogames.
As investors embraced gold as a hedge against inflation and other risky assets amid the Covid-19 pandemic and low interest rates, the price of the precious metal has rallied to record highs, sending shares of gold miners like
(NEM) soaring. The company is also expected to more than double its earnings from last year in the third quarter, and analysts’ average target price sits 16% higher than recent prices.
Insurance company MetLife (MET) has a different story. The stock was hit hard this year, losing as much as half its value during the March selloff. But that makes it a good bargain for those seeking value. While second-quarter earnings were significantly pressured by higher volume of claims related to Covid-19, analysts expect the insurer to bounce back sharply in the fall and even outpace the year-ago period.
On the other hand,
(EBAY) offers a bid for the future of online retail, as more small businesses look for ways to cope with the pandemic and move their operations online. The company has recently sold its ticketing business StubHub and plans to sell its classified-advertising unit as well. That should bring in billions of dollars in cash, and a more-focused business for eBay. The stock has rallied around 50% year to date, but still trades below its five-year average valuation. Third-quarter earnings are expected to grow by 28% from last year.
Write to Evie Liu at [email protected]