5 Stocks to Watch After Earnings

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5 Stocks to Watch After Earnings

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In the wake of recent earnings reports, several standout companies have emerged with strong potential for growth and value. This article highlights five key stocks noted by Morningstar analysts as having demonstrated resilience and opportunity in their respective sectors.

Let’s dive in.

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5 Stocks to Watch After Earnings

Microsoft: Cloud Giant with AI Momentum 

• Azure’s Accelerating Growth: Microsoft’s cloud platform, Azure, is seeing exceptional demand, particularly in AI, which is expected to boost revenue significantly in the second half of fiscal 2025.

• AI Demand: The ongoing strength in AI-related services is driving increased profitability and long-term growth for Microsoft.

• Fair Value Upside: Recent strong performance has led to an upward revision in Microsoft’s fair value, reflecting its solid fundamentals.

• Wide Economic Moat: Microsoft’s dominance in enterprise software, cloud services, and its diversified product portfolio ensure it remains a formidable player in the tech industry.

• Discounted Valuation: Trading at a discount to its revised fair value, Microsoft presents a strong buying opportunity for long-term investors.

Kenvue: Healthcare Spin-Off with Upside Potential

• Turnaround in Progress: Kenvue, a recent spin-off from Johnson & Johnson, is showing signs of business stabilization, with improving margins and cost-saving initiatives starting to take effect.

• Growth Drivers: The company benefits from favorable long-term trends such as an aging population, premiumization of consumer healthcare products, and expanding emerging markets.

• Margin Expansion: Kenvue’s margins are expected to grow significantly in the coming years, enhancing profitability.

• Undervalued Stock: Despite a recent rebound, Kenvue’s stock still trades at a discount, providing upside potential.

• Dividend Yield: With a healthy dividend yield of 3.8%, Kenvue offers income along with growth prospects, making it an attractive option for investors.

Chevron: Energy Leader with Strong Dividend

• Energy Sector Hedge: Chevron provides a natural hedge in portfolios against geopolitical risks and potential inflationary pressures, thanks to its strong position in the energy sector.

• Dividend Yield: Chevron offers an attractive dividend yield of 4.5%, higher than its peers, providing a steady income stream for investors.

• Relative Value: Compared to its counterpart ExxonMobil, Chevron trades at a more favorable valuation, offering better relative value.

• Long-Term Leverage: While oil prices may fluctuate, Chevron’s efficient operations and cost management provide long-term upside potential.

• Resilient Operations: Chevron’s strong financial position and strategic investments in energy projects ensure its resilience in the volatile energy market.

US Bancorp: Top Regional Bank with Growth Potential

• Strong Regional Bank: US Bancorp stands out among regional banks with its wide economic moat and solid credit metrics, making it a stable choice in the financial sector.

• Healthy Dividend: The bank’s 4.3% dividend yield is supported by strong capitalization and conservative credit practices, providing reliable income for investors.

• Undervalued Stock: Despite recent gains, US Bancorp trades at an 18% discount to its fair value, offering significant upside potential.

• Stress-Test Success: US Bancorp’s performance in the Federal Reserve’s stress tests led to a dividend increase, signaling strong financial health.

• Future Growth: As the yield curve steepens with potential Fed rate cuts, US Bancorp’s net interest margins are expected to expand, driving future profitability.

Alphabet: AI Powerhouse with Room to Grow

• Strong Revenue Streams: Alphabet continues to excel across its key business lines—search, advertising, YouTube monetization, and cloud services—driving robust revenue growth.

• Cloud Growth Potential: The company’s cloud computing business, particularly in AI-related demand, is expected to fuel long-term growth, prompting an increase in Alphabet’s fair value estimates.

• Regulatory Resilience: Despite regulatory challenges, Alphabet is well-positioned to maintain dominance in its core markets, leveraging its financial strength and scale.

• Attractive Valuation: With the stock trading at a significant discount to its fair value, Alphabet offers a compelling entry point for investors.

• Wide Economic Moat: Alphabet’s established market leadership and diverse revenue streams provide a strong economic moat, ensuring sustained competitive advantage.

The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

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