3 Most Upgraded Stocks For Q2
2022.05.29 12:50
Follow The Upgrades To These Stocks
When we began working on this post, the idea was to write up the three most upgraded stocks so far in Q2. Things changed, however, when we discovered that the three most upgraded stocks in Q2 are all energy stocks.
In fact, energy stocks hold the top four (4) positions, hold 5 of the top 6, and they hold 8 of the top 10 spots along with many in the 11-20 range. The other two spots in the top 10 include a mining company and a health care play that we find interesting as well.
Energy Is The Most Upgraded Sector In Q2
When you look at the price of oil via United States Oil Fund, LP (NYSE:USO), and the estimates for energy earnings it is easy to understand why the sector is getting so much love from the analysts.
Earnings in the sector are up 268% in Q1 versus last year and that is more than 2300 basis points better than what the market expected at the start of the reporting cycle.
Looking forward, the sector is expected to post nearly 200% EPS growth in the 2nd quarter and that figure is up 5700 bps from the start of the quarter and rising, as is the full-year estimate.
The full-year estimate is the most tepid of all, only 100%, but the estimates for Q3 and Q4 are still trailing. The takeaway is the FY consensus estimate is up 2600 basis points since the beginning of the second quarter and oil prices are on the rise too.
Looking at the chart of WTI, this market is going higher. Tightening supply and increasing demand is no scenario for lower prices and there is always the threat of supply disruptions to account for.
In the U.S. alone, the strategic reserve, diesel, and gasoline stocks are at long-term lows which is another fundamental force driving higher prices. It is our expectation that WTI will have retested the all-time high by the end of the summer and then it may move higher.
The takeaway is that energy prices are sky-high and driving windfall profits in a high-yielding and lowly valued sector. Exxon (NYSE:XOM), the top holding in the Energy Select Sector SPDR® Fund (NYSE:XLE), trades at less than 10X its earnings while yielding more than 3.5%. We like those numbers.
XLE Chart
Diversified Miner Tech Resources Limited Pushed Higher By Analysts
Teck Resources (NYSE:TECK) is not a high-yielding stock, but it is a deep value in diversified mining. The company has operations around the world mining gold, copper, zinc, and other industrial metals as well as fertilizer products and some chemicals.
The stock received a string of price target increases in the wake of its last earnings report due to strength in several markets and we see this trend continuing after the next report.
As it is, the Marketbeat.com consensus estimate is firm Buy and that has held steady over the last 12 months. The Marketbeat.com consensus price target, however, is up in the 12, 3, and 1-month comparisons, the only negative is that price action is only 6% below the consensus target but we see it trending higher over the next quarter or two at least.
TECK Chart
Cigna Is On Break Out Watch
Health insurer Cigna (NYSE:CI) rounds out today’s list and comes in 7th in terms of upgrades and price target increases over the last 90 days. This company not only received price target increases following the last earnings report, but new coverage as well.
The consensus rating is a firm Buy and firming while the price target is on the rise in the 3 and 1-month comparisons. The consensus target is about 8% above the current price action but would be a new high if reached.
The takeaway here is the consensus target is trending higher and the technical action is bullish as well. Based on the chart, we expect to see this stock break out within the next few weeks if not days, and move up to the $280 to $290 region soon after.
Cigna Chart
