First quarter profit forecasts have come down dramatically for many S&P 500 companies, threatening to rein in their stock prices. But earnings estimates are actually rising for an exclusive group of companies, increasing the odds that these stocks can lead the market this year. Three companies in particular are expected to demonstrate resilience in the face of a slowdown: Estee Lauder Cos. (EL), M&T Bank (MTB) and Boeing Co. (BA), per Barron’s.
3 High Fliers
(YTD Stock Performance)
· Estee Lauder Cos.; 17.7%
· M&T Bank Corp.; 16.9%
· Boeing Co; 25.8%
Here's a look at these 3 companies in more detail.
Despite weak sales growth plaguing most big companies, Estee Lauder last week reported organic sales growth of 11%, surpassing estimates across the board and sending shares 11% higher in a day. Shares of the maker of fragrances, makeup and other products trade at 28 times forward earnings estimates. Bulls view the pricey valuation as warranted, given expectations for earnings growth in the double-digits over the next few years. The company "gained share in an accelerating prestige beauty market in China, as affordable luxuries remain resilient in a slower China economy,” wrote Macquarie Research in a recent note.
M&T’s latest results, which topped expectations for loan growth and margins, sent the financial company's shares rising. While the stock has gained 10.1% YTD, they remain down sharply over 12 months.
Barron’s sees the Buffalo, New York-based regional bank as benefiting from expansion into the southern part of the U.S as it remains focused on New Jersey’s high concentration of small businesses for its loan volume. Shares trade at 11 times projected 2019 earnings.
At the end of January, shares of jet maker Boeing jumped 6% in one day when it reported better-than-expected quarterly revenue and profits, even though estimates have been consistently rising for a year.
While the company is seen as benefiting from broad trends like solid demand for air travel, its 737 platform and newer 787 platform have both demonstrated strength. As the 787 improves margins, shares trade at about 20 times projected 2019 earnings, in line with the average S&P 500 company, and at just 15 times free cash flow, per Barron’s.
Despite these positive drivers, protracted weakness in the overall market and U.S. economy could still drag down these stocks. These companies' earnings strength, though, could minimize their losses.