SUPERNEWS

Macro

6 Bargain Stocks Poised to Surge: PEP, PPG, and More

S&P 500 rallies 26% since last fall, making bargain stocks scarce; Evercore and CNBC Pro spotlight undervalued opportunities.

By Bill Bullington

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4/8, 14:33 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
Ford Motor Company
First Solar, Inc.
Oracle Corporation
PepsiCo, Inc.
PPG Industries, Inc.
Qorvo, Inc.
Skyworks Solutions, Inc.
Western Digital Corporation
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Key Takeaway

  • Evercore strategists highlight bargain stocks like PepsiCo (PEP) and PPG Industries, with PPG expected to grow EPS by over 10%.
  • Qorvo, a chip maker valued at $11.1 billion, sees an 8% increase in 2024 EPS forecasts amid a challenging market for semiconductors.
  • These companies are poised for growth despite underperforming the S&P 500, making them attractive ahead of their earnings reports.

Market Rally and Hidden Gems

Since last fall, the S&P 500 has experienced a significant rally, climbing 26% from its low in late October and marking a 9% increase for the year. This surge has made it challenging for investors to find stocks that are still undervalued. Evercore strategists have identified a strategy focusing on laggards that are soon to report earnings and have seen an uptick in earnings forecasts. Notable mentions include PepsiCo and PPG Industries, with the latter showing a 7% decline this year but beating earnings estimates for over eight consecutive quarters. PPG Industries is expected to see a sales growth of just over 2% to $18.6 billion, with profit margins anticipated to rise, leading to an EPS growth of over 10%.

Tech Sector Opportunities

In the technology sector, CNBC Pro's analysis of the S&P 1500 Tech composite highlighted undervalued stocks based on their forward price-earnings ratio. Western Digital and Skyworks Solutions emerged as promising chip stocks, benefiting from the artificial intelligence enthusiasm. Oracle and First Solar were also highlighted for their strong performance and future growth prospects, with Oracle's cloud services and license support segment witnessing a 12% revenue increase.

Deep Value Stocks with Solid Fundamentals

Wolfe Research has spotlighted deep value stocks that boast strong earnings and balance sheets despite the market's high valuations. Criteria for selection included a high dividend yield, strong earnings yield, low debt, and a forward price-to-earnings ratio of 10 or less. Ford Motor and Star Bulk Carriers were among the companies listed, offering attractive dividend yields and solid financial performance. Alliance Resource Partners, despite a 14.2% dividend yield, saw a decline in shares by more than 7% in 2024.

Street Views

  • Evercore Strategists (Neutral on the market):

    "One solid strategy is to look for laggards that report earnings soon and have seen earnings forecasts rise, something Evercore strategists did in a recent screen."