We all want to be rid of the coronavirus, of course – and when it fades, the general economy is expected to bounce back. Getting to specifics, Credit Suisse Chief U.S. Equity Strategist Jonathan Golub sees economic momentum moderating post-pandemic, and sets a one-year target for the S&P 500 of 4,050, or 10.5% above current levels.
Considering what investors can expect, Golub writes, “As we look toward 2022, the virus will be a fading memory, the economy robust, but decelerating, the yield curve steeper and volatility lower, and the rotation into cyclical largely behind us.”
In the meantime, investors want to know where to put their money now – which means Wall Street’s analysts are also busy finding the stocks that are primed for gains in the next 12 months.
Using the Investing Insights platform, we’ve pulled the details on three stocks with a Perfect 10 from the Smart Score — a single-digit amalgamated score based on the collated data. These are stocks that have impressed the analysts – and show strong signs of near- to mid-term gains based on the data analysis algorithms.
Nomad Foods (NOMD)
We’ll start in the food industry, the basic necessity we cannot do without. Nomad Foods (NYSE:NOMD) is a UK-based distributor in the frozen foods niche, which has become a vital part of the modern food chain. Frozen foods offer variety, freshness, and relatively easy storage – all of which has brought Nomad over $2.4 billion in annual revenues.
The COVID crisis prompted the public to eat at home more, and that was good for the grocery industry generally and frozen foods specifically. The company’s Q3 earnings, at 35 cents per share, are up 25% from one year ago. The company posted 576 million Euros (US$685 million) on the top line, implying a 12% yoy growth.
Writing from BTIG, 5-star analyst Peter Saleh says, “[We] believe the company will continue to build on its lead in Western Europe’s frozen food market. We expect recent lock downs could fuel a resurgence in organic sales growth as it did in 2Q20 and to a lesser extent in 3Q20. Looking ahead, we expect the company to lean into its plant-based offering to attract new customers while investing in marketing initiatives to retain customers that it gained during the pandemic.”
Saleh rates NOMD a Buy, and sets a $30 price target to indicate his belief in a 26% upside for the next year.
Overall, Nomad has 6 recent reviews, breaking down in a 5-to-1 split of Buy versus Hold. This makes the analyst consensus view a Strong Buy. The average price target is $28.33, for a 19% one-year upside from the current share price of $23.84. (See NOMD stock analysis)
Next up is Cleveland-Cliffs (NYSE:CLF), an Ohio based mining company. Cleveland-Cliffs specializes in iron production, and has four active mines in Minnesota and Michigan. The company focuses on mining, beneficiating, and pelletizing the ore, a process that produces iron pellets in a variety of grades fit for blast furnace smelting, steelmaking, and alloying. Cleveland-Cliffs is capable, on its own, of producing more than 40% of the total US capacity in iron pellets. It also produces flat-rolled carbon, stainless steel, and electrical steel products.
As the economy ramps back up, recovering from the deepest coronavirus hits, Cleveland-Cliffs’ revenues have been rising. The company’s top line has grown since the first quarter of 2020, posting sequential gains in both Q2 and Q3. The third quarter number, at $1.65 billion, was in line with analyst expectations, and came in far ahead of the $555.6 million posted in the year-ago quarter.
The share price has mirrored this recovery. The stock hit bottom back in mid-March, at just $3.14 per share. Since then, it has shown impressive growth. The shares have fully recouped those mid-winter losses, and are now trading up 32% year-to-date.
GLJ Research analyst Gordon Johnson sees Cleveland-Cliffs gaining as the pandemic draws back and its customers resume normal economic activity. To this end, the analyst upgraded CLF from Hold to Buy, and his $15.80 price target suggests it has a 46% upside in the coming year.
“US automotive production has rebounded to pre-pandemic levels, a clear positive for Cliffs, as ~27% of its (soon-to-be) steel demand comes from that sector. Even oil/gas rig counts, while still down sharply y/y, appear to have turned a corner in terms of growth. Moreover, our checks indicate potential delays to supply additions. As we see it, these dynamics, which have sent US HRC prices to near $734/short ton last week, have the potential to keep … price levels sustained into 2021,” Johnson stated.
Overall, the Moderate Buy consensus rating on CLF is based on an even split; the stock has 3 Buys and 3 Holds on record. (See CLF stock analysis)
EQT Corporation (EQT)
Last but not least is EQT Corporation (NYSE:EQT), an energy player in the natural gas market. In fact, it’s the largest natural gas producer in the US, with operations in the Appalachian Basin in the states of Ohio, West Virginia, and Pennsylvania. The company holds lease and exploration rights more than 1 million acres, and has nearly 20 trillion cubic feet in proven reserves.
Unfortunately, low energy prices have taken a toll here. Except for 1Q20, EQT has been posting net losses since the second quarter of last year. The most recent report, for Q3 2020, showed a net EPS loss of 15 cents per share. While the loss was less than expected by the analysts, it was deeper than the year-ago quarter.
Despite the recurring quarterly losses, EQT shares are up an impressive 34% so far this year – and there are still 5 weeks left. The gains have completely erased losses taken at the start of the corona crisis, and reflect investor confidence in the gas industry as a vital utility.
Among the bulls is Wells Fargo analyst Tom Hughes who wrote, “While northeast gas differentials continue to struggle in the shoulder season and weighed on 4Q20 guidance for realizations ahead of a potentially bullish backdrop for the commodity in 2021, EQT’s solid operational update for 3Q20 should help buoy investor confidence that the operational improvements at EQT since Mr. Rice and his team took over last year still have momentum.”
“EQT continues to work on its operating and financial metrics ahead of what should hopefully be a constructive macro environment,” the analyst concluded.
Accordingly, Hughes rates EQT shares an Overweight (i.e. Buy), and sets a price target of $21. This represents a 31% upside from current levels.
EQT is another company with a unanimous Strong Buy analyst consensus rating, this one based on 6 positive reviews. The stock is trading now for $14.49, and its $19.25 average price target suggests ~33% one-year upside potential. (See EQT stock analysis)
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