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With the first six months done and dusted, it’s good to know that we have managed to avoid a recession to date. That’s despite the fact that the Fed has been raising interest rates at the fastest pace in over 40 years, despite the fact that housing prices had been declining for nearly a year before they managed to claw back a bit, despite the couple of banks that ran into trouble before a banking crisis was averted and despite the wage inflation that is now gradually moderating. Oil prices remain low so that crisis also looks under control. Despite all our trepidations, the supply chain is also limping back to normal.
The real challenge, of course, is in the months ahead. U.S. Manufacturing PMI dropped below 50 in November and remains in contraction, according to ISM. The S&P Global US Manufacturing PMI rose briefly above 50 in April before dropping back down. The overall outlook is not too bright with new orders, inventories and prices all falling while employment continued to increase.
Therefore, what we’re seeing is more of the same. Nobody feels optimistic, neither producers nor consumers, but the talent gap is leading to continued hires, which is ensuring that people keep buying.
However, the yield curve inverted (long-term yields falling faster than short-term yields) roughly a year ago, and historically, there has always been a recession within 18 months of this happening.
The thinking on the street is that estimates need to come down more to reflect a recession. So that is what we should be looking for as the current earnings season gets into full swing in a couple of weeks from now. If estimates start coming down a lot, it will mean that even more experts/analysts believe that a recession is on the way.
In the meantime, it makes sense to see what these experts are rooting for today. Here are three stocks that analysts are extremely bullish about. Each of these carries a Zacks #1 (Strong Buy) rank and belongs to one of the top 50% of industries classified by Zacks. As many of us already know, that’s a good combination that increases the odds of capital appreciation. And here, we have the sell-side analysts thinking alike. Now let’s look at a few more details:
Franklin Covey belongs to the Consulting Services industry (top 20%).
It is expected to grow its revenues 8.1% this year and 11.5% in the next. The earnings picture is a little less exciting. Analysts currently expect a 4.7% decline this year followed by a strong rebound with 29.3% growth in the next. The 2023 estimate has increased 14.2% in the last seven days while the 2024 estimate increased 6.8%.
The surprise history is not without blemishes. The company beat estimates in three of the last four quarters, averaging a positive surprise of 34.8%. In the last quarter, it beat by 88.2%.
Therefore, as far as this stock goes, analysts are positive about its prospects, even if there’s a slight recession.
Regal Rexnord belongs to the Manufacturing – Electronics industry (top 8%).
Analysts expect the company to report revenue growth of 18.2% in 2023 and 8.7% in 2024. Earnings are expected to drop less than a percentage point this year and grow 17.2% in the next. The 2023 estimate has increased 16.2% in the last 60 days while the 2024 estimate increased 6.8%. Both June and September quarter expectations have been lowered in the same time period.
The last quarter’s surprise was 0.9%. The four-quarter average surprise is 5.3%. The next earnings date is in August. Therefore, the current quarter’s results and outlook can give us some pointers.
Analysts currently have a Strong Buy rating on the stock and so does Zacks.
SPX Tech belongs to the Technology Services industry (top 44%).
In 2023, the company is expected to grow its revenue and earnings by a respective 17.0% and 28.7%. This is expected to be followed by 4.7% revenue growth and 12.8% earnings growth in 2024. In the last 60 days, estimates for the two years have increased 14.3% and 15.4%, respectively. The June quarter estimate has not moved during this time although the September quarter estimate increased 5%.
In the last quarter, SPX beat estimates by 55%. The four-quarter average surprise is 28.4%.
Analysts have a Strong Buy rating on this stock. Clearly, they’re not expecting the recession to hit them yet. But we’ll know more when the company reports in August.
One-Month Price Performance
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3 Strong Buy Stocks to Beat the Market This Year
With the first six months done and dusted, it’s good to know that we have managed to avoid a recession to date. That’s despite the fact that the Fed has been raising interest rates at the fastest pace in over 40 years, despite the fact that housing prices had been declining for nearly a year before they managed to claw back a bit, despite the couple of banks that ran into trouble before a banking crisis was averted and despite the wage inflation that is now gradually moderating. Oil prices remain low so that crisis also looks under control. Despite all our trepidations, the supply chain is also limping back to normal.
The real challenge, of course, is in the months ahead. U.S. Manufacturing PMI dropped below 50 in November and remains in contraction, according to ISM. The S&P Global US Manufacturing PMI rose briefly above 50 in April before dropping back down. The overall outlook is not too bright with new orders, inventories and prices all falling while employment continued to increase.
Therefore, what we’re seeing is more of the same. Nobody feels optimistic, neither producers nor consumers, but the talent gap is leading to continued hires, which is ensuring that people keep buying.
However, the yield curve inverted (long-term yields falling faster than short-term yields) roughly a year ago, and historically, there has always been a recession within 18 months of this happening.
The thinking on the street is that estimates need to come down more to reflect a recession. So that is what we should be looking for as the current earnings season gets into full swing in a couple of weeks from now. If estimates start coming down a lot, it will mean that even more experts/analysts believe that a recession is on the way.
In the meantime, it makes sense to see what these experts are rooting for today. Here are three stocks that analysts are extremely bullish about. Each of these carries a Zacks #1 (Strong Buy) rank and belongs to one of the top 50% of industries classified by Zacks. As many of us already know, that’s a good combination that increases the odds of capital appreciation. And here, we have the sell-side analysts thinking alike. Now let’s look at a few more details:
Franklin Covey Co. (FC - Free Report)
Franklin Covey belongs to the Consulting Services industry (top 20%).
It is expected to grow its revenues 8.1% this year and 11.5% in the next. The earnings picture is a little less exciting. Analysts currently expect a 4.7% decline this year followed by a strong rebound with 29.3% growth in the next. The 2023 estimate has increased 14.2% in the last seven days while the 2024 estimate increased 6.8%.
The surprise history is not without blemishes. The company beat estimates in three of the last four quarters, averaging a positive surprise of 34.8%. In the last quarter, it beat by 88.2%.
Therefore, as far as this stock goes, analysts are positive about its prospects, even if there’s a slight recession.
Regal Rexnord Corp. (RRX - Free Report)
Regal Rexnord belongs to the Manufacturing – Electronics industry (top 8%).
Analysts expect the company to report revenue growth of 18.2% in 2023 and 8.7% in 2024. Earnings are expected to drop less than a percentage point this year and grow 17.2% in the next. The 2023 estimate has increased 16.2% in the last 60 days while the 2024 estimate increased 6.8%. Both June and September quarter expectations have been lowered in the same time period.
The last quarter’s surprise was 0.9%. The four-quarter average surprise is 5.3%. The next earnings date is in August. Therefore, the current quarter’s results and outlook can give us some pointers.
Analysts currently have a Strong Buy rating on the stock and so does Zacks.
SPX Technologies, Inc. (SPXC - Free Report)
SPX Tech belongs to the Technology Services industry (top 44%).
In 2023, the company is expected to grow its revenue and earnings by a respective 17.0% and 28.7%. This is expected to be followed by 4.7% revenue growth and 12.8% earnings growth in 2024. In the last 60 days, estimates for the two years have increased 14.3% and 15.4%, respectively. The June quarter estimate has not moved during this time although the September quarter estimate increased 5%.
In the last quarter, SPX beat estimates by 55%. The four-quarter average surprise is 28.4%.
Analysts have a Strong Buy rating on this stock. Clearly, they’re not expecting the recession to hit them yet. But we’ll know more when the company reports in August.
One-Month Price Performance
Image Source: Zacks Investment Research