When Wall Street turns bearish on a stock, it’s worth paying attention. These calls stand out because analysts rarely issue grim ratings on companies for fear their firms will lose out in other business lines such as M&A advisory.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bearish calls are justified. Keeping that in mind, here are three stocks where the outlook is warranted and some alternatives with better fundamentals.
Hyatt Hotels (H)
Consensus Price Target: $149.21 (2% implied return)
Founded in 1957, Hyatt Hotels (NYSE: H) is a global hospitality company with a portfolio of 20 premier brands and over 950 properties across 65 countries.
Why Does H Fall Short?
- Softer revenue per room over the past two years suggests it might have to invest in new amenities such as restaurants and bars to attract customers
- Estimated sales growth of 3.2% for the next 12 months is soft and implies weaker demand
- Negative returns on capital show that some of its growth strategies have backfired
Hyatt Hotels’s stock price of $146.33 implies a valuation ratio of 45.7x forward P/E. If you’re considering H for your portfolio, see our FREE research report to learn more.
Oshkosh (OSK)
Consensus Price Target: $121.42 (-3.3% implied return)
Oshkosh (NYSE: OSK) manufactures specialty vehicles for the defense, fire, emergency, and commercial industry, operating various brand subsidiaries within each industry.
Why Are We Hesitant About OSK?
- New orders were hard to come by as its average backlog growth of 4% over the past two years underwhelmed
- Sales are projected to remain flat over the next 12 months as demand decelerates from its two-year trend
- 9.4 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
At $125.62 per share, Oshkosh trades at 11.6x forward P/E. To fully understand why you should be careful with OSK, check out our full research report (it’s free).
RTX (RTX)
Consensus Price Target: $144.75 (-0.5% implied return)
Originally focused on refrigeration technology, Raytheon (NSYE:RTX) provides a a variety of products and services to the aerospace and defense industries.
Why Is RTX Not Exciting?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 6.3% for the last five years
- Performance over the past five years was negatively impacted by new share issuances as its earnings per share were flat while its revenue grew
- Low returns on capital reflect management’s struggle to allocate funds effectively
RTX is trading at $145.45 per share, or 23.1x forward P/E. Check out our free in-depth research report to learn more about why RTX doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
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