Six Stocks Goldman Sachs Likes Ahead of Earnings
Analysts at Goldman Sachs have stocks that they are confident will head into a new earnings season. CNBC Pro combed through Goldman’s research reports for stocks that gave the company a Buy rating. The stocks we found are Amazon, ServiceNow, Colgate-Palmolive, Boeing, Microsoft, and Cleveland-Cliffs. After Amazon lost nearly 50% of its value in 2022, analyst Eric Sheridan believes Amazon is worth buying despite the immediate headwinds. A tougher road ahead prompted Sheridan to recently cut his Amazon price target by $20 to $145. But that still implies a potential upside of 49% from when Amazon closed on Friday. Sheridan expects fourth-quarter revenue to be in line with management’s guidance. That’s lower than he previously expected, pushed down by a more conservative growth expectation for Amazon Web Services and a deteriorating international consumer environment. Ultimately, Sheridan expects e-commerce growth of 11.5% year-over-year in the fourth quarter, before declining 10% year over year in the first quarter. “We are slightly revising our operational estimates for Q4’22, 2023 and beyond to add a higher level of conservatism to our forecasts as the global macro and consumer environment remains volatile and visibility for 2023 is low,” he said in one Notice of 11.12 Notice to customers. Amazon is in the midst of its largest round of layoffs yet, affecting more than 18,000 workers. Amazon is scheduled to release earnings after the market close on February 2. ServiceNow Though software stocks and their high valuations took a hit last year, analyst Kash Rangan said ServiceNow’s defensive suite of products will spur growth. Rangan said the Santa Clara, Calif.-based cloud-computing platform dampened earnings expectations comparatively early, allowing it to meet or slightly beat earlier guidance for the fourth quarter. “While we don’t see ServiceNow isolated from extended sales cycles and weaker net new business momentum (which likely continued through December), we are encouraged by the company’s offerings that offer fast payback and high ROI” , Rangan said in a Jan. 17 note to customers. The company reports January 25th. Rangan’s price target of $640 implies a 45% upside potential from ServiceNow’s close on Friday. The stock lost 40% in 2022. While year-on-year comparisons will be hard to beat, ServiceNow should be able to maintain a “healthy top-line cadence” among current customers given its value proposition, stable mix of workflows, and penetration opportunities. Colgate-Palmolive analyst Jason English raised estimates ahead of Colgate-Palmolive’s Jan. 27 results as headwinds turn to tailwinds from exchange rates. Multinationals felt the pain of the fittest for most of 2022, but the currency weakened in the second half of the year. The currency effect has moved from an 8% headwind on English’s full-year 2023 earnings per share estimate to a near-neutral variable. While English said the uncertain global environment could hurt Colgate’s business, he still expects the toothpaste and soap maker to meet Goldman’s 9%-per-share earnings growth forecast for the year. “We are increasing our estimates ahead of the event to reflect recent currency, commodity and consumer trends,” English said in a note to clients Jan. 16. Colgate reports results on January 27th. Goldman Sachs also said pricing remains stronger than previously expected, although Colgate has felt some impact from being less reliant on promotions than its peers. Colgate is down 7.7% over the past year, beating the nearly 20% loss in the S&P 500. English has a price target of $86, up 14% from Colgate’s Friday close. Other stocks where Goldman sees solid earnings prospects include Boeing, Microsoft and Cleveland-Cliffs. Amazon For Q4’22 we now expect revenues of USD 146bn (vs. management guidance of USD 140-148bn), partly driven by more conservative AWS growth assumptions. Specifically, we now forecast a slowdown in AWS growth to +21% yoy (vs. +27.5% yoy in Q3’22) with more muted growth expectations in 2023. In addition, we are slightly adjusting our revenue growth rates for NA versus International assuming a more pronounced deterioration in the international consumer environment versus a more stable environment in the US… Our estimates would mean that North American e-commerce will grow +11.5% yoy in Q4’22 and decline in Q1’22 23rd Quarter down -20% qoq. ServiceNow We view ServiceNow as well positioned to meet the Q4 expectations set in October (subscription revenue growth of 20.5%/26.5% in USD/CC, CRPO growth of 20/26% in USD/ CC and operating margins) to meet (or easily exceed) solidly. of 26%). As we anticipate initial 2023 guidance to reflect conservatism over recent quarters, management is likely to set revenue growth expectations at +19-21% USD, consistent with cRPO’s Q4 performance. Colgate-Palmolive We are upgrading our estimates ahead of the event to reflect recent currency, commodity and consumption trends. The biggest change is in the currency, which went from an 8% headwind to FY23 earnings per share to a roughly neutral contributor in our model at the end of October. We are raising our estimates accordingly and now expect modest revenue growth for 4Q22 and initial guidance for FY23 which includes Strait [mid single digit] to [high single digit] guided EPS growth. However, it is possible that the company will only tie to an msd growth outlook given the global uncertainty, but assuming spot currencies and commodities remain resilient, we see no reason to believe that they will ultimately be unable to to meet our now higher EPS of 9% growth guidance for the year. Boeing Given the robust order and delivery levels in the quarter, we see strong free cash flow for the fourth quarter. We expect the company to reiterate all of the guidance it provided at its November investor day, while investor expectations still look fairly low. Microsoft While we are trimming our Azure estimates due to the unpredictability of the consumption model, strength in commercial RPO (+30%) could lead to a re-acceleration once recession concerns ease. The fact that Microsoft’s install base is mostly enterprise customers also provides stability and is a differentiator to Cleveland-Cliff’s competitors (due in part to less maintenance activity and less lost volume), see that margins are from 2H22 to 2023 rise. While many investors are skeptical about the company’s ability to deliver significant cost reductions (given only a modest easing in cost pressures), we expect that continuously improving quarterly updates from the company would likely boost investor confidence in the company’s execution. Additionally, we expect volumes to increase in 2023 as auto demand improves from 2022 levels – CNBC’s Michael Bloom contributed to this report.
https://www.cnbc.com/2023/01/21/six-stocks-goldman-sachs-likes-ahead-of-earnings-.html Six Stocks Goldman Sachs Likes Ahead of Earnings
