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1 Stock to Buy, 1 Stock to Sell This Week: GE Aerospace, UPS
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Jobless claims, Fed speakers, Q3 earnings will be in focus this week.
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GE Aerospace is a buy with upbeat profit and sales growth expected.
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UPS is a sell with weak earnings, soft guidance on deck.
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U.S. stocks closed higher on Friday to cap off their sixth winning week in a row, with the S&P 500 and Dow Jones Industrial Average rallying to new records.
For the week, the benchmark S&P 500 rose 0.9%, the blue-chip Dow climbed 1%, and the tech-heavy Nasdaq Composite gained 0.8%.
Source: Investing.com
The week ahead is expected to be an eventful one as investors assess the outlook for the economy, inflation, interest rates and corporate earnings.
Most important on the economic calendar will be Thursday morning’s release of initial jobless claims figures at 8:30AM ET, as well as a pair of flash PMI surveys.
That will be accompanied by a heavy slate of Fed speakers, with the likes of district governors Neel Kashkari, Lorie Logan, Mary Daly, and Patrick Harker all set to make public appearances during the week.
Source: Investing.com
Some 88% of market participants expect the Federal Open Market Committee to cut its benchmark interest rate by 25 basis points at its November 7 policy meeting, while nearly 12% expect no change, according to Investing.com’s Fed Monitor Tool.
Meanwhile, third-quarter earnings season shifts into high gear, with reports expected from several high-profile companies, including Tesla (NASDAQ:TSLA), IBM (NYSE:IBM), and Boeing (NYSE:BA).
Some of the other notable reporters include United Parcel Service (NYSE:UPS), Coca-Cola (NYSE:KO), General Motors (NYSE:GM), AT&T (NYSE:T), Verizon (NYSE:VZ), GE Aerospace (NYSE:GE), 3M (NYSE:MMM), Honeywell (NASDAQ:HON), Lockheed Martin (NYSE:LMT), American Airlines (NASDAQ:AAL), and Southwest Airlines (NYSE:LUV).
Regardless of which direction the market goes, below I highlight one stock likely to be in demand and another which could see fresh downside. Remember though, my timeframe is just for the week ahead, Monday, October 21 – Friday, October 25.
Stock To Buy: GE Aerospace
I foresee a strong performance for GE Aerospace stock this week, with a potential breakout to a fresh multi-year high on the horizon.
The primary catalyst for GE Aerospace is its third-quarter earnings report, set to be released before the market opens on Tuesday at 6:30AM ET.
Market participants expect a sizable swing in GE stock after the print drops, according to the options market, with a possible implied move of 5.3% in either direction.
Wall Street analysts are optimistic about the company’s performance, with consensus estimates predicting earnings of $1.14 per share on revenue of $9.05 billion.
Source: Investing.com
Several key factors are expected to drive GE Aerospace’s earnings and sales growth. First, the company is benefiting from a surge in demand for aftermarket services, which includes maintenance, repair, and spare parts. This is a high-margin business for the company and should provide a strong boost to its profitability.
Additionally, there is strong demand for new plane engines, particularly for narrow-body aircraft. GE Aerospace, which manufactures the LEAP engine used in many of these aircraft, stands to benefit as airlines continue to replace older fleets with more fuel-efficient models.
GE Aerospace stock ended at $192.61 on Friday, not far from a recent peak of $194.80, which was the highest level since May 2008. At current levels, the Evendale, Ohio-based company has a market cap of $210.7 billion.
Source: Investing.com
Since its spinoff in April, GE has been on a strong upward trajectory, with its stock up 40%. General Electric (NYSE:GE) split into three separate companies between November 2021 and April 2024, adopting the trade name GE Aerospace after divesting its healthcare and energy divisions.
InvestingPro highlights GE Aerospace’s promising outlook, emphasizing its favorable positioning in the Aerospace & Defense industry, which has allowed it to leverage a resilient business model and strong profit growth.
Be sure to check out InvestingPro to stay in sync with the market trend and what it means for your trading. Subscribe now with an exclusive 10% discount and position your portfolio one step ahead of everyone else!
Stock to Sell: UPS
On the flip side, United Parcel Service is facing a more challenging outlook, making it a strong sell this week due to a worrying combination of rising costs and weakening demand.
UPS is scheduled to release its third-quarter earnings report before the market opens at 6:00AM ET on Thursday, but the forecast is not promising.
Several headwinds are weighing on UPS’s performance. One of the most significant challenges is the slowing global economy. As inflation persists and interest rates remain elevated, consumer and business spending has slowed, leading to a drop in package volumes for UPS.
According to the options market, traders are pricing in a swing of 4.9% in either direction for UPS stock following the print.
Earnings have been catalysts for outsized swings in shares this year, as per data from InvestingPro, with UPS stock gapping down 11.5% when the company last reported quarterly numbers in July.
Analysts have been steadily revising their estimates downward in recent weeks, with all 21 analysts surveyed by InvestingPro cutting their profit forecasts by roughly 35% from initial expectations.
Source: InvestingPro
Wall Street sees UPS earning $1.63 per share, up 3.8% compared to EPS of $1.57 in the year-ago period. Meanwhile, revenue is forecast to tick up 5% year-over-year to $22.1 billion.
The company’s heavy reliance on global trade and shipping means it is particularly vulnerable to these macroeconomic pressures, which have been impacting revenue.
In addition to weaker demand, UPS is facing rising costs, particularly in fuel and labor. These rising expenses are squeezing margins and making it more difficult for UPS to maintain profitability.
Given these challenges, UPS is expected to issue weak guidance for the upcoming quarters, further dampening investor sentiment.
UPS stock closed Friday’s session at $135.93, not far from a recent low of $123.12, which was the weakest level since July 2020. At its current valuation, the Sandy Springs, Georgia-based shipping giant has a market cap of $116.4 billion.
Source: Investing.com
Shares are down 13.5% in the year to date.
Not surprisingly, UPS has a below-average InvestingPro ‘Financial Health’ score of 2.3 out of 5.0 due to mounting concerns over its near-term profit and sales growth outlook.
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Disclosure: At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR® S&P 500 ETF, and the Invesco QQQ Trust ETF. I am also long on the Technology Select Sector SPDR ETF (NYSE:XLK).
I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies’ financials.
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.
Follow Jesse Cohen on X/Twitter @JesseCohenInv for more stock market analysis and insight.
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Nasdaq, S&P 500 sink as tech leads losses ahead of Tesla earnings
Sales of existing homes fell in September as house hunters remained on the fence about buying a home despite mortgage rates easing during the month.
Existing home sales slipped 1.0% from August’s tally to a seasonally adjusted annual rate of 3.84 million, the National Association of Realtors said Wednesday. That marked the lowest rate since October 2010. Economists polled by Bloomberg expected a pace of 3.88 million in September.
On a yearly basis, sales of previously owned homes were 3.5% lower in September. The median home price rose 3.0% from last September to $404,500, marking the 15th consecutive month of annual price increases.
“Home sales have been essentially stuck at around a 4 million-unit pace for the past 12 months,” NAR chief economist Lawrence Yun said in a press release.
There have been significant challenges that have weighed on sales activity, including a lack of inventory, escalating prices, and elevated mortgage rates. Last month, however, those factors turned around.
The Federal Reserve cut its benchmark rate by half a percentage point in September. While the central bank doesn’t set mortgage rates, its actions influence their direction of movement.
Mortgage rates hit the lowest level since February 2023 ahead of the Fed decision to ease, while listing inventory picked up.
But overall, that hasn’t been enough to entice buyers.
“Some consumers are hesitating about moving forward with a major expenditure like purchasing a home before the upcoming election,” Yun said.
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Tesla stock jumps on Q3 earnings beat
Tesla (TSLA) reported mixed third quarter results after the bell on Wednesday, but the stock jumped in after-hours trading as investors cheered the earnings beat, higher gross margins, and news that Tesla’s cheaper EV is on track for production next year.
For the quarter, Tesla reported revenue of $25.18 billion vs. $25.4 billion per Bloomberg consensus, higher than the $25.05 billion it reported in Q2 and also topping the $23.40 billion Tesla reported a year ago. Tesla posted adjusted EPS of $0.72 vs $0.60 expected, on adjusted net income of $2.5 billion and free cash flow of $2.9 billion.
The closely watched gross margin figure came in at 19.8%, much higher than the 16.8% expected.
Tesla shares were up nearly 8% in after hours trade.
“We delivered strong results in Q3 with growth in vehicle deliveries both sequentially and year-on-year, resulting in record third-quarter volumes,” the company said in its earnings deck. “Preparations remain underway for our offering of new vehicles — including more affordable models — which we will begin launching in the first half of 2025.”
Earlier this month, Tesla (TSLA) announced third quarter deliveries that slightly missed expectations, sending the stock lower.
Tesla said it delivered 462,890 vehicles in Q3, up 6.4% quarter over quarter, to mark the first quarter of delivery growth this year. The numbers also came in ahead of the 435,059 EVs the company delivered in the year-ago period. But Wall Street had expected Tesla to deliver closer to 463,897, according to Bloomberg.
“Refreshed Model 3 ramp continued successfully in Q3 with higher total production and lower cost of goods sold quarter-over-quarter. Cybertruck production increased sequentially and achieved a positive gross margin for the first time,” Tesla said in its report.
Tesla said it expects vehicle deliveries to achieve “slight growth” in 2024.
Ahead of Tesla’s Q3 disclosure, shares were down approximately 11% since Tesla revealed its robotaxi, dubbed the Cybercab, at its showy “We, Robot” event from the Warner Bros. studio lot in Burbank, Calif., on Oct. 10.
The debut and release of a cheaper EV is what many analysts and industry watchers believe will spur the next leg higher of EV sales, as even CEO Elon Musk has said before. During its Q2 report, Tesla and Musk said the company remains on track for the production of new vehicles, likely including a cheaper EV, in the first half of next year.
Investors and analysts were left wanting more details from Tesla’s “We, Robot” event on the Cybercab itself and detailed testing plans, along with questions about the development of Tesla’s sub-$30,000 EV, dubbed the Model 2.
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Transak hit by data breach, 92K users exposed
Transak disclosed a data breach affecting over 92,000 users after a phishing attack compromised an employee’s laptop.
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The Dow plummets more than 600 points and is on track for its worst day in more than a month
The Dow Jones Industrial Average and other major indexes suffered a steep decline Wednesday afternoon as the yield on the benchmark 10-year U.S. Treasury note continued its upward climb, reaching 4.23%—a level not seen since July.
In the afternoon, the Dow dropped 631 points, or 1.4%, heading for its worst day in over a month. Meanwhile, the tech-heavy Nasdaq and the S&P 500 declined by 2.2% and 1.4%, respectively. However, there was some relief for investors as oil prices eased, with West Texas Intermediate (WTI) futures trading around $70.65 per barrel.
The Federal Reserve’s Beige Book, released in the afternoon, reported that economic activity remained largely unchanged across the 12 Federal Reserve Districts, with the Southeast significantly impacted by a harsh storm season.
On Wednesday, all eyes are on Tesla (TSLA) as the company prepares to release its latest earnings report. Analysts expect earnings per share to be 60 cents, down from 66 cents a year ago but an improvement from 52 cents in the previous quarter, according to FactSet estimates. Revenue is projected to hit $25.4 billion, compared to $23.3 billion in the third quarter of 2023 and $25.5 billion in the preceding quarter.
Apart from Tesla, investors are closely monitoring earnings reports from other major corporations, including AT&T (T), Boeing (BA), and Coca-Cola (KO).
McDonald’s stock plunges over 5%
McDonald’s (MCD) shares took a sharp hit, falling over 5% after the Centers for Disease Control and Prevention (CDC) linked the chain’s Quarter Pounder burgers to an E. coli outbreak. The outbreak has led to 10 hospitalizations and one death, driving a significant decline in McDonald’s stock during the afternoon trading session.
As of now, 49 cases have been reported across 10 states between Sept. 27 and Oct. 11, with a majority of illnesses occurring in Colorado, Nebraska, Utah, and Wyoming. The CDC noted that most of those affected had eaten a Quarter Pounder. Investigators are working swiftly to identify the contaminated ingredient.
Spirit Airlines stock soars 30%
After a failed attempt at merging with JetBlue (JBLU-0.80%), ultra-low-cost carrier Spirit Airlines (SAVE+28.01%) is reportedly turning back to a familiar partner. The Wall Street Journal (NWSA-0.34%), citing people familiar with the matter, reports that Spirit and Frontier Airlines (ULCC+3.05%) are in early talks over a potential merger. The news sent Spirit’s stock soaring nearly 30% on Wednesday.
–Francisco Velasquez and Rocio Fabbro contributed to the article
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Bitcoin’s correction ignited selling in altcoins, which are slipping below critical support levels.
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