Earnings revisions can have a major impact on stock prices, a relevant subject as first-quarter-earnings season heats up.
Evercore has put together a list of underrated stocks with higher revisions of earnings estimates and a list of overrated stocks with lower earnings estimate revisions.
The first list includes stocks in the Russell 1000 that have market capitalizations of at least $10 billion.
The stocks are in the bottom 25% of index performers year to date, despite being in the top 25% for 2022 earnings-per-share revisions. The stocks stand to outperform, Evercore says.
The roster includes:
· Semiconductor company Nvidia (NVDA)
· Home improvement chain Lowe’s (LOW)
· Banking- and financial-services provider SVB Financial (SIVB)
· Private equity company Apollo Global Management (APO)
· Real estate information company Zillow (ZG)
The list of overrated stocks with lower earnings revisions also includes companies in the Russell 1000 Index with at least $10 billion in market cap.
The stocks have outperformed the index year to date, despite resting in the bottom 25% for 2022 EPS revisions. These stocks stand to underperform, Evercore said.
The list includes:
· Farm equipment company Deere (DE)
· Cruise line Royal Caribbean (RCL)
· Foods producer Hormel Foods (HRL)
· Cybersecurity company Norton LifeLock (NLOK)
· Media company Fox (FOXA)
Morningstar analyst Jaime Katz likes Lowe’s too.
“With continued focus on retail fundamentals (merchandising excellence, operational efficiency, supply chain improvements, and customer engagement), Lowe's has been able to better leverage expenses while maintaining its low-cost position,” she wrote in a February commentary.
“The firm retains some of the cost savings it achieves and passes the rest on to its customers through everyday low prices. These competitive advantages support a wide economic moat.”
Katz puts fair value for the stock at $203, compared with a recent quote of $198.73
Meanwhile, Morningstar analyst Abhinav Davuluri likes Nvidia, assigning it a wide economic moat. But he says it’s overvalued.
“Nvidia is the top designer of discrete graphics processing units that enhance the visual experience on computing platforms,” he wrote in a February commentary.
“The firm's chips are used in a variety of end markets, including high-end personal computers for gaming and data centers.”
Davuluri puts fair value at $200, compared with a recent quote of $213.93.
