Some 87% of analysts covering XPO stock rate the shares at Buy.
Courtesy of XPO
Sometimes it pays to zig when others are zagging. And not every stock that blows up after reporting its results has a grim future. Sometimes a share-price dip after numbers are reported is an opportunity for investors.
Wall Street research can offer clues to the key question of which blowups are the ones to buy. Barron’s found six large-capitalization stocks with strong analyst support despite disappointing third-quarter results.
The six are as follows, in no particular order: satellite communications provider Viasat (ticker: VSAT), database company Teradata (TDC), real-estate information provider Costar (CSGP), tax solutions provider Avalara (AVLR), truck brokerage and shipping company XPO Logistics (XPO), and Ally Financial (ALLY), a bank.
Those are six out of 883 companies in the Russell 1000 large-capitalization index that had reported quarterly numbers through Tuesday evening. Those six dropped an average of about 10% the day after earnings. The average stock-price move of the 883 after earnings this quarter was a decline of about 0.1%.
Going Where Others Fear to Tread
Wall Street still like these six stocks that dropped big after earnings
| Company / Ticker | Post Earnings Stock Slide | Recent Price | Street Price Target | Upside | Buy-Rating | 2022 PE Ratio |
|---|---|---|---|---|---|---|
| Viasat / VSAT | -16.9% | $54.52 | $81.40 | 49% | 67% | 102.6 |
| Teradata / TDC | -14.2 | 49.70 | 65.25 | 31 | 60 | 27.5 |
| CoStar / CSGP | -10.0 | 83.72 | 104.92 | 25 | 85 | 61.3 |
| Avalara / AVLR | -8.8 | 161.08 | 212.17 | 31 | 92 | n/a |
| XPO Logistics / XPO | -7.6 | 77.11 | 102.05 | 32 | 87 | 16.4 |
| Ally Financial / ALLY | -5.1 | 50.21 | 67.25 | 34 | 90 | 6.8 |
Source: Bloomberg
Earnings misses didn’t drive the six lower; all of them actually earned more than analysts expected. But earnings outperformance isn’t always enough to drive stocks higher, given that investors always expect good news. In fact, about 75% of the 883 companies have beaten analyst estimates.
What separates these six from the rest of the 883 stocks, including the 360-plus that dropped post earnings, is potential.
Analysts still like the stocks and Wall Street’s price targets have held their ground, or risen, after the earnings. Even though investors freaked out, a little, analysts just don’t see reason for alarm.
The average Buy-rating rating ratio for the six is about 75%, well above the figure of about 55% for stocks in the S&P 500.
The average price targets imply gains of 26% to 48% for the six stocks. The average gain implied by analyst price targets for the S&P 500 is typically less than 10%.
What is more, the average price target for the six is up, by about 1% on average, since the numbers came out. Wall Street feels as good, or better, about each of the six than it did before the earnings hiccups.
Only the average price target for XPO is down—by 25 cents—but the average call on the stock price is still about $102 a share, implying gains of more than 30%. And 87% of analysts covering XPO stock rate the shares at Buy.
All of the six stocks have reasons for the post-earnings drop. Some, like Viasat, were up a lot year to date, giving investors reason to take profits. Others, like CoStar, might have tempered expectations for coming quarters, scaring off investors.
Many things are possible and each stock is its own story. A stock screen like this one only offers a starting point for more research, but the bottom line is that all six beaten-up stocks still have support from the Street.
Write to Al Root at [email protected]
