The many experts who were extremely bearish on stocks in May and June predicted the second-quarter earnings season would be a total disaster. In fact, the earnings season, boosted by the resilience of many middle-class and wealthy American consumers, has been pretty good. 75% of the S&P 500’s companies that reported their results as of Aug. 5 beat analysts’ average earnings per share, or EPS, estimates. Because the Street remains overly pessimistic about a majority of the companies that beat bottom-line expectations by wide margins, many of these firms’ shares are excellent stocks to buy for investors.
Of course, it also makes sense to accumulate the shares of companies whose sectors are being lifted by strong, positive catalysts. As a result, I sought to include in this article stocks within the travel, automotive, retail, renewable energy, restaurant and healthcare sectors. All of these stocks to buy are very well-positioned to easily outperform the market in the coming months and quarters.
Stocks to Buy: Ford (F)
On July 27, Ford (NYSE:F) reported earnings per share, excluding certain items, of 68 cents versus analysts’ average outlook of 44 cents. The company’s automotive revenue jumped 57% year-over-year (YOY) to $37.9 billion, beating the mean outlook of $35.2 billion by a large amount.
Ford’s prosperity has continued into the current quarter, as it reported its sales last month had soared nearly 37% versus the same period a year earlier. Leading the way for the automaker were its electric vehicle (EV) sales and its SUV sales.
Powered by this demand, Ford should continue to delivery very strong financial results going forward. And as it continues to introduce new EVs, it should benefit tremendously. Meanwhile, the forward price-to-earnings (P/E) ratio of F stock is just 8.5x, giving the shares plenty of room to advance much further.
A maker of components for solar projects, Enphase (NASDAQ:ENPH) reported Q2 EPS of $1.07, much higher than analysts’ average estimate. The company’s revenue soared 68% year-over-year to $530 million. versus analysts’ mean estimate of $505 million.
Enphase’s Q3 revenue guidance also beat expectations, coming in at $590 million to $630 million, versus analysts’ mean outlook of $550 million.
Already benefiting a great deal from the huge demand for solar energy in Europe, Enphase noted its sales on the continent had soared 69% in Q2 versus Q1. European homeowners “want self-consumption as the region not only faces rising energy prices but also a growing demand for home electrification driven by EVs and natural gas shortages,” Enphase explained.
With the Inflation Reduction Act recently signed into law enacting tax credits for solar projects in the U.S. for the next decade, Enphase’s business in the U.S. should get a tremendous lift as well.
Stocks to Buy: Marriott (MAR)
Marriott (NASDAQ:MAR) reported Q2 EPS of $1.80, well above analysts’ average outlook of $1.57. The hotel chain’s top line soared 70% YOY to $5.34 billion versus analysts’ average estimate of $960 million.
The company’s CEO, Anthony Capuano, said in a statement, “Looking ahead, we are optimistic about our financial outlook and strong cash generation and expect to return more than $2.2 billion to shareholders through dividends and share repurchases in 2022.”
Capuano added that the company revenue per available room, or RevPAR, had recovered to pre-pandemic levels in every part of the world except the Asia Pacific region.
“Occupancy on Fridays and Saturdays was fully recovered and occupancy on Thursdays and Sundays, typically known as shoulder nights, was close to 2019 levels,” the CEO reported.
With the pent-up demand for travel likely to continue at least through the end of the year, MAR stock should perform very well for at least the next several months.
General Electric (GE)
General Electric (NYSE:GE) reported Q2 EPS of 78 cents, truly crushing analysts’ average outlook of 42 cents. Its top line climbed only 1.6% YOY to $18.6 billion, but analysts’ mean outlook was $17.9 billion.
Unsurprisingly, the company’s aerospace unit was the primary reason for the conglomerate’s earnings beat. The unit’s profit soared to $1.1 billion, up from just $176 million during the same period a year earlier, while the unit’s orders climbed 26% YOY to $6.9 billion.
In recent quarters, GE’s renewables unit has weighed on the conglomerate’s quarterly results. However, the restoration of the tax credits for wind turbines included in the IR Act should provide a big boost for the unit and for GE as a whole.
Earlier this month, Bank of America analyst Andrew Obin wrote that given the restoration of the tax credits, the unit’s operating income should climb after this year.
“We continue to see GE shares as having a sizeable valuation discount from our sum-of-the-parts analysis,” reported the analyst, who cut his price target on GE stock to $105 from $120 but reiterated a “buy” rating on the name.
Stocks to Buy: Albemarle (ALB)
A lithium miner, Albemarle (NYSE:ALB) is benefiting tremendously from the explosion in demand for EVs. Of course, most EVs use lithium-ion batteries.
Earlier this month, with its Q2 revenue nearly doubling YOY, Albemarle reported Q2 EPS, excluding some items, of $3.45, well above analysts’ average estimate of $3.25. The company’s EPS jumped an incredible 288% YOY.
Additionally, Albemarle raised its 2022 revenue guidance to $7.1 billion to $7.5 billion from its previous estimate of $5.8 billion to $6.2 billion. The company now expects its top line to more than double this year versus 2021.
The company is benefiting from both higher lithium prices and renegotiations of its existing lithium contracts. “Over the past year, we have shifted our Lithium contracting strategy to realize greater benefits from these strong market dynamics,” said Albemarle CEO Kent Masters in a statement.
Yet another company benefiting tremendously from the pent-up demand for travel is online travel agency Expedia (NASDAQ:EXPE).
For Q2, the company reported its revenue climbed 51% YOY to $3.2 billion versus analysts’ average outlook of $2.9 billion. Expedia’s EPS came in at $1.96, well above the average estimate of $1.56. Impressively, Expedia’s lodging gross bookings last quarter were 8% higher than in the same quarter of 2019.
“Despite the disruptions during the summer travel season and an uncertain macroeconomic backdrop, travel demand has remained strong,” said Expedia CEO Peter Kern in a statement. “We posted our highest ever lodging bookings this quarter on the highest revenue and adjusted EBITDA for any second quarter,” he added in the earnings call.
Stocks to Buy: Chipotle (CMG)
Restaurant chain Chipotle (NYSE:CMG) is benefiting from the better-than-expected financial health of consumers, as many people with decently paying jobs are eating at its restaurants.
Chipotle’s Q2 EPS, excluding certain items, came in at $9.30 versus analysts’ average estimate of $9.04. Its comparable restaurant sales increased by double-digit-percentage levels YOY.
Chipotle implemented pricing increases in Q2 and expected to raise its prices further in August. “Our longer term view is consistent here – this is an impressively strong business, generating exceptional returns on new units with a long runway for growth ahead of it,” Morgan Stanley wrote in response to the company’s Q2 results and upbeat comments.