A bottle of Diet Coke is pulled for a quality control test at a Coco-Cola bottling plant in Salt Lake City, Utah.
George Frey | Getty Images
With earnings season now in full swing, Wall Street analysts are advising clients there are plenty of buying opportunities.
So far over 15% of companies in the S&P 500 have reported earnings. According to FactSet, 79% of those companies have posted a better-than-expected profit.
CNBC did a deep dive through the most recent Wall Street research to find stocks that analysts say are “top picks” heading into their earnings reports.
They include names such as Coca-Cola, Willis Towers Watson, Diamondback Energy, Northrop Grumman, and Alibaba.
Willis Towers Watson, a risk management and multinational advisory company, was recently upgraded by Wells Fargo analysts to outperform.
“Insurance broker stocks tend to outperform during hurricane season,” they said. “Stronger organic revenue is coming against the backdrop that insurance broker stocks tend to outperform during wind season.”
Wells said it liked the company’s “strong price performance” with the stock up 29% year to date.
Willis Towers Watson will report earnings on July 31.
Chinese multinational e-commerce giant Alibaba continues to see robust online sales in China and analysts at Raymond James say that positions the company well when it reports earnings in mid to late August.
“We reiterate our Strong Buy rating on Alibaba shares and $280 price target given our expectation for solid June quarter results given strong China eCommerce sales data and strong 6.18 festival sales,” they said. “Alibaba remains our top large cap pick.”
Shares of the company are up over 3% on the week.
Coca-Cola will report its earnings on Tuesday and remains a “top U.S. staples pick” for analysts at Morgan Stanley.
“Despite an expected muted Q2, KO remains our top US Staples pick, as we believe the market will look past near-term weather-induced weakness and focus on the solid FY and LT topline outlook and an EPS/FCF growth inflection in 2020 and beyond.”
Shares Coke were down 0.67% on the week.
Here’s what analysts are saying about their top picks heading into earnings:
Morgan Stanley: Coca-Cola, overweight rating
“Muted Stock Reaction to the Quarter, But Still Top US Staples Pick: We expect a muted stock reaction to KO’s Q2 results, which we expect to be softer than the prior four quarters given unfavorable weather in the US/Europe, confirmed by scanner data trends. Despite an expected muted Q2, KO remains our top US Staples pick, as we believe the market will look past near-term weather-induced weakness and focus on the solid FY and LT topline outlook and an EPS/FCF growth inflection in 2020 and beyond.”
According to TipRanks, Coca-Cola is a Moderate Buy consensus with an average analyst price target of $52 (0.9% upside potential).
Wells Fargo: Willis Towers Watson, outperform rating
“Even with the strong price performance to start the year (up 29%, versus the S&P up 19%) we like the set up for the Willis shares here. Heading into the Q2 we believe Willis is positioned to see both: (1) organic revenue growth exceed expectations, and (2) raise its EPS outlook for the year as we do not believe the street is accurately modeling in the TRANZACT deal this year (our 2019 estimate is the high on the street)….Insurance broker stocks tend to outperform during hurricane season…Stronger organic revenue is coming against the backdrop that insurance broker stocks tend to outperform during wind season.”
According to TipRanks, Willis Towers Watson is a Strong Buy consensus with an average analyst price target of $219 (12% upside potential).
Williams Capital: Diamondback Energy, buy rating
“FANG remains a Top Pick as it continues to screen with an attractive valuation coupled with tremendous free cash flow generation at peer leading growth which supports its total return strategy with plans to steadily grow its dividend and execute on its $2.0 billion buyback program.”
According to TipRanks, Diamondback is a Strong Buy consensus with an average analyst price target of $153 (50% upside potential).
Credit Suisse: Northrop Grumman, outperform rating
“NOC and LHX remain our top picks in defense. We are increasing our TP for NOC to $364 (from $310), reflecting our view that NOC should trade at a premium to its peers owing to its superior long-term positioning, upside potential from OA (revenue/cost/w/c synergies), less relative pension in its cash flow stream (as compared to LMT/RTN), strong FCF/share growth.”
According to TipRanks, NOC is a Moderate Buy consensus with an average analyst price target of $341 (6% upside potential).
Raymond James: Alibaba, strong buy rating
“We reiterate our Strong Buy rating on Alibaba shares and $280 price target given our expectation for solid June quarter results given strong China eCommerce sales data and strong 6.18 festival sales. As such, we remain comfortable with our expectation for high 20’s core marketplace revenue growth in the June quarter. Alibaba remains our top large cap pick.”
According to TipRanks, Alibaba is a Strong Buy consensus with an average analyst price target of $221 (27% upside potential).
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