AutoZone (NYSE:AZO), the largest retailer of aftermarket automotive parts in the U.S., reported Q1 2024 results on Dec. 5 that beat analyst expectations, making it one of the best stocks to buy. Yet, its shares fell on the news.
On the top line, its revenues were $4.19 billion, a couple of million higher than the consensus estimate, while on the bottom line, it earned $32.55 a share, 98 cents higher than the analyst estimate. Its U.S. same-store sales grew 1.2%, while its international sales — it has 740 stores in Mexico and 100 in Brazil — rose by 25%.
Many of the companies in the S&P 500 continue to beat earnings estimates.
As of Dec. 8, according to data from FactSet Research, with almost all of the S&P 500 constituents reporting Q3 2023 results, 82% reported a positive earnings surprise, and 62% reported a positive revenue surprise.
The top three sectors by average positive earnings surprise were consumer discretionary (18.3%), communication services (9.2%), and financials (9.0%).
Here are three stocks to buy, one from each of these sectors.
Airbnb (ABNB)
Airbnb (NASDAQ:ABNB) reported its Q3 2023 results on Nov. 1. It beat on both the top and bottom lines. Its revenues were $3.40 billion, $30 million higher than the analyst estimate. On the bottom line, it earned $1.6 billion or $2.47 a share, 36 cents higher than the consensus estimate.
Despite the excellent third quarter, the company warned that travel would slow in the final quarter 2023. While its shares initially fell on the news, they are up nearly 18% since then.
Other positives from Q3 2023 include a 14% increase in Nights and Experiences booked to 113.2 million, $18.3 billion in gross booking value (GBV), and a trailing 12-month free cash flow of $4.2 billion, a company record.
As CEO Brian Chesky said in its Q3 2023 letter, Airbnb has spent the past three years working on its core business to make it profitable and growing. Now, it wants to work at taking its business worldwide. In that regard, the company said that its cross-border nights booked increased 17% in Q3 2023.
Bearish analysts point out that the growth in Nights and Experiences booked in Q3 2023 slowed to 14% from 25% a year earlier. Of course, those same analysts fail to note that the 2023 quarterly growth works out to an additional 13.5 million Nights and Experiences booked.
Unless we get hit with a lengthy global recession, I don’t see Airbnb slowing down anytime soon.
Paramount Global (PARA)
Paramount Global (NYSE:PARA) stock gained more than 12% on Dec. 8 on speculation that the company was in play.
RedBird Capital and Skydance Media CEO David Ellison were looking to take control of the media conglomerate by acquiring Shari Redstone’s voting shares held through the Redstone family holding company, National Amusements.
As Yahoo Finance points out, according to current share prices, Redstone’s 10% equity stake is valued at $1 billion. However, the real value comes from her holding 77% of the media company’s votes, providing National Amusements with control. Redbird could buy her stake for a premium without purchasing the entire company.
They could then break up the business and hang on to the most valuable pieces, such as Paramount Pictures. In that scenario, Skydance would merge its assets with the studios, possibly shutting down its Paramount+ streaming service.
Takeover talks come after Paramount reported decent Q3 2023 results in early November that beat analyst estimates on the top line. Analysts were expecting $7.10 billion in revenue. It delivered revenue $30 million higher while adding 2.7 million subscribers to Paramount+ in the quarter, 680,000 higher than the consensus estimate. It even reduced its operating loss by $105 million to $238 million.
Down 65% over the past five years, PARA stock is worth more than $17 a share to an acquirer.
Assurant (AIZ)
Assurant (NYSE:AIZ) is having a good year in the markets, with the specialty insurer’s shares up more than 31% year-to-date.
The company reported its Q3 2023 results at the end of October. They blew past analyst estimates with top-line revenue of $2.8 billion, 4.5% higher than the consensus estimate. On the bottom line, it shined, generating adjusted earnings per share of $4.29, 73% higher than the Zacks Consensus Estimate and a whopping 325% over a year ago. Assurant President and CEO Keith Demmings said:
“Results for the third quarter were exceptionally strong and outperformed our expectation.Global Housing’s top-line momentum and improving loss experience combined with Global Lifestyle’s growing U.S. mobile business produced significant year-over-year earnings growth.”
Examples of the type of insurance it underwrites include extended service contracts and warranties for cell phone carriers ($4.2 billion in net earned premiums in the trailing 12 months) and insurance for automotive dealerships for variable service contracts ($4.0 billion), as well as renters and homeowners insurance through property managers, banks, mortgage servicers, etc.
The business-to-business-to-consumer (B2B2C) business model generates significant free cash flow. In the trailing 12 months ended Sept. 30, its free cash flow was $850 million, or 9.0% of its enterprise value of $9.47 billion. Anything above 8% is value territory.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
