A moderate decline in inflation, reduced unemployment, and fiscal policy support have boosted investor sentiment lately. However, the elevated inflation and the better-than-expected economic data might push the Fed to continue hiking interest rates aggressively. Therefore, the market is expected to remain volatile.
Rising recession fears, weak global economic data, rising global food prices, and commodity shortages keep investors concerned. Amid this backdrop, it could be wise to focus on stocks with solid fundamentals.
Wall Street analysts expect AutoNation, Inc. (AN), Altra Industrial Motion Corp. (AIMC), and ArcBest Corporation (ARCB) to see more than a 20% upside from their current price levels in the coming months. Also, these stocks are rated Strong Buy in our proprietary POWR Ratings system, given their fundamental strength.
AutoNation, Inc. (AN)
AN operates as an automotive retailer that offers a range of new and used vehicles, wholesale parts, repair, maintenance, and collision services.
It also provides automotive finance and insurance products that comprise vehicle services and other protection products and arranges finance for vehicle purchases through third-party finance sources.
For its fiscal 2022 second quarter ended June 30, 2022, AN’s gross profit increased 2.7% year-over-year to $1.36 billion. The company’s operating income came in at $558.10 million, representing a 5.3% rise from the year-ago period.
Its EPS came in at $6.48 for the quarter, representing a 34.2% rise from the prior-year period. As of June 30, 2022, the company had $336.50 million in cash and cash equivalents.
Analysts expect the company’s EPS to hit $24.67 for its fiscal 2022 ending December 31, 2022, representing a 36% rise from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.
The consensus revenue estimate of $27.52 billion for the same fiscal year represents a 6.5% year-over-year improvement. Its EPS is expected to grow at a rate of 24.7% per annum over the next five years.
The stock has gained 6.6% over the past month to close the last trading session at $124.82. The average analyst price target of $156.57 indicates a 25.4% upside potential.
AN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has an A grade for Value and a B for Quality. Click here to see the additional ratings for AN (Stability, Growth, Sentiment, and Momentum).
AN is ranked #2 of 24 stocks in the B-rated Auto Dealers & Rentals industry.
Altra Industrial Motion Corp. (AIMC)
AIMC designs, produces, and markets various electromechanical power transmission motion control products for use in various motion-related applications and high-volume manufacturing and non-manufacturing processes internationally. It operates through Power Transmission Technologies (PTT) and Automation & Specialty (A&S) segments.
AIMC’s net sales for its fiscal 2022 second quarter ended June 30, 2022, increased 1.9% year-over-year to $498.10 million. The company had $192.90 million in cash and equivalents as of June 30, 2022.
The consensus EPS estimate of $3.33 for fiscal 2022 ending December 31, 2022, represents a 3.5% year-over-year improvement. Analysts expect the company’s revenue to be $1.93 billion for the same fiscal year, representing a 1.5% rise from the prior-year period. Its EPS is expected to grow at a rate of 15% per annum over the next five years.
The stock has gained 8.1% over the past month to close the last trading session at $40.55. The average analyst price target of $50 indicates a 23.3% upside potential.
AIMC’s POWR Ratings reflect this promising outlook. It has an overall A rating, which equates to Strong Buy in our proprietary rating system.
The stock has a B grade for Value, Stability, Quality, and Sentiment. Click here to see the additional ratings for AIMC’s Growth and Momentum.
AIMC is ranked #9 of 90 stocks in the Industrial - Equipment industry.
ArcBest Corporation (ARCB)
ARCB provides freight transportation services and integrated logistics solutions worldwide. The company operates primarily through Asset-Based; ArcBest; and FleetNet segments.
For its fiscal 2022 second quarter ended June 30, 2022, ARCB’s total consolidated revenues increased 11.6% year-over-year to $1.39 billion. The company’s non-GAAP operating income came in at $150.50 million, representing a 96% rise from the year-ago period.
While its non-GAAP net income increased 101.4% year-over-year to $109.98 million, its non-GAAP EPS rose 111.8% to $4.30. As of June 30, 2022, the company had $127.06 million in cash and cash equivalents.
Analysts expect the company’s EPS to be $14.24 for fiscal 2022 ending December 31, 2022, indicating a 67.1% increase from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.
The consensus revenue estimate of $5.43 billion for the same fiscal year represents a 36.4% year-over-year improvement. Its EPS is expected to grow at a rate of 15.4% per annum over the next five years.
The stock has gained 9.4% over the past month to close the last trading session at $88.74. The average analyst price target of $122 indicates a 37.5% upside potential.
ARCB’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system.
It has a B grade for Growth, Value, Momentum, and Quality. In addition to the POWR Ratings grades we have just highlighted, one can see PKG’s Stability and Sentiment ratings here.
ARCB is ranked #2 of 22 stocks in the A-rated Trucking Freight industry.
AN shares were trading at $126.08 per share on Wednesday afternoon, up $1.26 (+1.01%). Year-to-date, AN has gained 7.90%, versus a -12.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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