Some stocks have forward earnings momentum that investors don’t want to overlook, according to Liberum. Joachim Klement, an analyst at the investment bank, screened for S & P 500 stocks that have gotten earnings upgrades over the past one, three and six months. He noted that companies with this momentum outperformed counterparts by 0.2% over the past month. Earnings momentum can be a good sign for a company as it tends to align with growth in revenue, improving margins or cost reductions, or some combination of these factors. Klement noted that earnings per share momentum has a “very chequered past” in the U.S. market. It falls somewhat between Europe, where it has worked great as a predictor of performance, and the U.K., where he said it has been “absolutely dreadful.” In the U.S., he noted that high-momentum names performed well in times of market crisis such as in 2008-09 and 2020, but have lost those outsized gains the years immediately following. This also comes as the broader market has traded near all-time highs , forcing traders to look harder for individual stocks that have more room to run. With those caveats in mind, here are 10 names that passed the screen: Artificial intelligence darling Nvidia made the list, with 25% growth in forward earnings over the past three and six months. The buzzy stock has grabbed even more attention this week as it surpassed $3 trillion in market cap. Nvidia has already run up more than 140% in 2024, building on last year’s monster gain of more than 230%. But despite having a buy rating, the average analyst on Wall Street polled by LSEG expects the share price to pull back by more than 4% over the next year. NVDA YTD mountain Nvidia, year to date It was one of several megacap tech stocks to make the list, with Amazon , Meta and Netflix also passing the screen. This comes as investors have questioned what’s next for the names in this group after being credited with largely helping drive the market higher. Outside of tech, General Motors also made the cut. The automotive stock has seen its forward earnings expectations increase more than 35% in the past six months. General Motors shares have also had a good year, largely outperforming the S & P 500 with a 27% rally. Wall Street sees more upside ahead. The average analyst surveyed by LSEG has a buy rating and price target suggesting about 18.5% in upside. Deutsche Bank research head Tim Rokossa called General Motors “safer than Ford ” last month in a note to clients. As reasons, he cited “lower dealer inventories, having baked in a price cut in its 2024 guidance, and strong signals about larger capital returns to shareholders later this year.”
Buy these stocks with earnings momentum as market trades at all-time high
Jun 7, 2024
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