Analysts reveal the top stocks with 'significant upside potential' heading into earnings

Published Sat, Jul 16 20228:11 AM EDT

It's widely expected to be a dour earnings season, but that's not stopping Wall Street analysts from naming some of their favorite buying opportunities ahead of results. Analysts said that there's a slew of stocks this week that still have tremendous upside going into the latest quarter's results. CNBC Pro combed through recent research to find the best positioned stocks heading into earnings. They include: Ulta, Tractor Supply, Bill.com , Boeing and D.R. Horton. Tractor Supply "TSCO remains one of our favorite stocks given our belief that multiple, long-duration topline drivers continue," Truist analyst Scot Ciccarelli said recently. The home improvement and lawn garden company is set to report earnings on July 21, and Truist says the stock has more room to run. Ciccarelli wrote in a note to clients that Tractor Supply is a long-term winner even though the company was already a key beneficiary of the pandemic. The analyst cited further home and land investment, rural migration and pricing power as keys to the company's success now and in the future. "We believe this inflation has helped drive solid 1H22 results including last month's positive 2Q22 pre-announcement," he wrote. The firm did lower its price target to $246 per share from $266 to account for what it calls "contraction in the market multiple over the last few weeks," but says the stock is just too attractive to ignore. "We remain buyers of TSCO, given its defensive (every day needs) characteristics and incremental upside potential," he said. Shares of Tractor Supply are down almost 15% this year. Boeing Goldman Sachs named the aerospace company one of its favorite names heading into earnings later this month. Analyst Noah Poponak said in a preview note to clients that he sees numerous positive catalysts likely to send Boeing higher. They include free cash flow inflection, a travel recovery and possible resumption of 787 deliveries in August. "Based on our conversations we believe this is the largest overhang on the stock, and would de-risk other narratives such as that around a potential equity raise," he said. Still, the firm says investors should buy shares of Boeing. The stock is up 8% this month, and Poponak says investor sentiment continues to be just too "negative." Like many companies, the supply chain has undoubtedly caused numerous production disruptions, but the analyst expects an upbeat tone from management when Boeing releases its results on July 27. "Expectations remain very low while cyclical upside potential remains very high," he wrote. D.R. Horton Higher mortgage rates and faster inflation continue to create havoc for consumers as well as the housing industry. Shares of the S & P 500 Homebuilders ETF , for example, are down almost 32% this year. But, Argus Research said in a recent note that homebuilder D.R. Horton stands out heading into earnings on July 21. "In our view, DHI has an edge in delivering affordable homes," analyst Christopher Graja said. Argus said D.R Horton has a wide range of brands and can take market share from smaller builders. "More than 60% of the homes DHI delivered in the 12 months through March 31, 2022 sold for less than $350,000, a sign that the company is well positioned to serve the value-conscious buyers who are likely to drive the housing market over the next several years," Graja said. The firm said D.R. Horton also has a robust balance sheet along with "broad geographic diversification." Graja did acknowledge the risks, especially as they pertain to interest rates. "However, we expect significant upside potential for home builders because there is a major shortage of affordable homes," he went on to say. The stock is up nearly 11% this month. Bill.com - Deutsche Bank, Buy rating "Upside Potential Remains Strong. ... For BILL's 4Q22 earnings release coming in August, we expect revenue growth of ~134% Y/Y (~62% organic) with ~10ppts of upside potential to total revenue and ~6ppts of upside to organic revenue. Further, we see the company potentially guiding to FY23 revenue growth of ~47-49% Y/Y (with further upside potential) along with details on the timeline to profitability with the potential for sustained profitability starting as soon as 4Q23." Ulta - Piper Sandler, Overweight rating "Digging into ULTA's Partnership with TGT; We See Meaningful Upside Potential. … While improving financials was never a key motive for ULTA x TGT (more about expanding customer reach), our analysis shows a clear path to margin upside vs. management's long term targets and up to 9% upside to current share levels from the partnership alone, according to our math. Bottom line, this partnership isn't new news, but digging deeper makes us even more bullish on the opportunity here." D.R. Horton - Argus Research, Buy rating "DHI has an edge in delivering affordable homes. … More than 60% of the homes DHI delivered in the 12 months through March 31, 2022 sold for less than $350,000, a sign that the company is well positioned to serve the value-conscious buyers who are likely to drive the housing market over the next several years. ... D.R. Horton should also benefit from its broad geographic diversification and healthy balance sheet. ... We expect significant upside potential for home builders because there is a major shortage of affordable homes." Tractor Supply - Truist, Buy rating "TSCO remains one of our favorite stocks given our belief that multiple, long-duration topline drivers continue. ... We remain buyers of TSCO, given its defensive (every day needs) characteristics and incremental upside potential. ... We believe this inflation has helped drive solid 1H22 results including last month's positive 2Q22 pre-announcement. ... .We are lowering our PT to $246 from $266 due to the contraction in the market multiple over the last few weeks." Boeing - Goldman Sachs, Buy rating "Investor sentiment remains negative on Boeing, despite some recovery from recent lows. ... Based on our conversations we believe this is the largest overhang on the stock, and would de-risk other narratives such as that around a potential equity raise. ... Expectations remain very low while cyclical upside potential remains very high."