These stocks are compelling trades into the earnings reporting season, analysts say

Published Sat, Oct 2 20218:52 AM EDT

With the third quarter coming to an end, investors are gearing up for the earnings reporting season coming soon. This week, Wall Street analysts began naming some of their favorite stocks to buy ahead of the big trading event. While analysts have warned that earnings growth may slow from prior quarters due to inflation and supply chain issues, there are still a handful of top buying opportunities, analysts say. CNBC Pro combed through the best Wall Street research to find the most intriguing stocks to buy ahead of earnings. They include: Humana, DigitalBridge , Pepsi, J.B. Hunt and T-Mobile . Pepsi It's setting up to be a big quarter for the beverage giant which reports earnings on Tuesday, according to Morgan Stanley. "We expect another PEP EPS beat in Q3, and another quarter of strong organic sales growth confirming higher LT topline growth after Pepsi's reinvestment in marketing/cap-ex in recent years," analyst Dara Mohsenian said. The firm said Pepsi is making strong share gains in the snacks category and that Pepsi's cost outlook is better positioned than many other peers in the sector. Further, Mohsenian called Pepsi's snack business best-in-class and a "consistent 4-5% organic sales topline grower." "This steady sequential improvement and consistent results give us confidence that the recent topline growth acceleration is sustainable," he said. The stock is also attractively priced and "compelling," with higher long-term revenue growth potential than peers in the sector, he added. Shares of Pepsi finished the week down 2%. Humana The health insurance giant was initiated with a buy rating by investment firm Leerink earlier this week. While rapidly increasing medical and coronavius pandemic costs have pushed down expectations for the remainder of 2021, it's a buying opportunity for investors, according to analyst Whit Mayo. "Against muted 2H expectations for Managed Care, we see opportunities to invest into the post- COVID accelerating growth environment and associated 2022 inflection," he said. Meanwhile, shares have been trading sideways and are down over 4% this year. However, Mayo urged calm and says investors need to look at the bigger picture. "Against an undemanding valuation, positive skew to 2022 estimates, we see a compelling 2:1 risk/reward" Mayo added. The firm also believes the insurance company is now better positioned and less exposed than at any other time during the pandemic. Mayo said his analysis show that Humana's decline in non-coronavirus medical care has significantly improved which should help the bottom line. Humana is set to release its third-quarter earnings report on November 3. DigitalBridge Group "Opportunity knocks" for investors, Wells Fargo analyst Eric Luebchow wrote recently of the real estate investment trust company that primarily invests in digital infrastructure. "With the stock down ~27% since its peak on 6/21, we think it's compelling time to own DBRG ahead of Q3 earnings, when we expect another beat-and-raise," he said. Luebchow praised the company's robust balance sheet and says DigitalBridge has the "most attractive risk/reward prospects" in the firm's coverage. "We value DBRG at Overweight, as we see upside to estimates as DBRG executes on its digital rotation and invests into high-quality digital infrastructure assets," he said. The firm is particularly bullish on DigitalBridge's two data center businesses, Vantage and Databank and expects them to carry the bulk of the company's growth going forward. A data center is a building that usually houses computers or other telecommunications systems. "In the more near term, it appears DBRG is set on investing more capital into its Vantage and Databank data center platforms vs. acquiring any new logos in the data center or tower sector at elevated multiples," he added." DigitalBridge is slated to report third-quarter earnings in early November. J.B. Hunt- Stephens, Overweight rating "Compelling 2022 Set-Up Unchanged. We expect JBHT's 3Q21 results to either meet or slightly miss the current Street estimates. Thinking about the positives, we expect some of the most notable items to be a ramp in the benefits from a strong intermodal pricing environment, a continuation of robust dedicated demand & strong brokerage results given the current tightness in capacity. However, we believe these tailwinds will be muted in the near term by a continuation of network congestion / challenges that are likely to drive a y/y decline in intermodal volumes and worse-than-expected results in the Final Mile segment." Pepsi- Morgan Stanley, Overweight rating We expect another PEP EPS beat in Q3, and another quarter of strong organic sales growth confirming higher LT topline growth after Pepsi's reinvestment in marketing/cap-ex in recent years. ... .This steady sequential improvement & consistent results give us confidence that the recent topline growth acceleration is sustainable. ... Last, we believe PEP's valuation remains compelling, with PEP trading at only at a ~3% CY23 EV/EBITDA premium to much lower growth food peers, despite much higher LT revenue growth potential (4-5% at PEP LT vs. 2.0-2.5% at food peers), as well as higher margins ROIC." Humana- Leerink, Buy rating "Near-term concerns of rebounding medical costs and COVID costs are priced in. Against muted 2H expectations for Managed Care, we see opportunities to invest into the post- COVID accelerating growth environment and associated 2022 inflection. HUM's current valuation spread to UNH is notable, and we see that closing. Against an undemanding valuation, positive skew to 2022 estimates, we see a compelling 2:1 risk/reward." DigitalBridge Group- Wells Fargo, Overweight rating Opportunity knocks. With the stock down ~29% since its peakon 6/21, we think it's compelling time to own DBRG ahead of Q3 earnings, when we expect another beat-and-raise. ... .In the more near term, it appears DBRG is set on investing more capital into its Vantage and Databank data centerplatforms vs. acquiring any new logos in the data center or tower sector at elevated multiples. ... .We value DBRG at Overweight, as we see upside to estimates as DBRG executes on its digital rotation and invests into high-quality digitalinfrastructure assets T-Mobile- Credit Suisse, Outperform rating "We believe T-Mobile remains compelling for patient investors with rural/enterprise share gain opportunity, an improved wireless network priced well below AT & T and Verizon, 10%+ remaining growth in margin percentage driven by merger synergies, & the potential for ~$60B in stock buybacks the next 5 years vs. its ~$160B market cap."

Pedestrians walk by a T-Mobile store in New York.

Scott Mlyn | CNBC