Earnings are essential to determining which stocks will outperform. Unsurprisingly, earnings outperformers also see strong price appreciation. Even if a stock’s share price has increased significantly, it can still have further growth potential if its earnings increase at a commensurate rate.
A good example of an earnings outperformer is Nvidia (NASDAQ:NVDA). It saw its share price grow by triple digits last year. However, as its earnings grew at a similar rate, investors were comfortable continuing to push its share price higher in 2024.
Analysts, CEOs and traders alike are reasonably focused on this key performance metric. The magnitude of earnings growth can predict how fast and to what extent a company’s share price may increase. However, identifying the top outperformers can be slightly more complex than simply picking stocks with the highest earnings.
Some analysts worry that expectations for the coming earnings season are very high. It is useful to examine stocks with strong earnings growth that are projected to sustain it in the coming months.
The following stocks comprise a list of three earnings outperformers that may have more run to run as earnings season approaches.
Travelers (TRV)
Insurance companies are expected to benefit from dual tailwinds this year. Rising premiums increase revenue and interest rates are expected to fall, reducing costs. This combination means earnings should expand substantially for companies like Travelers (NYSE:TRV).
Travelers already has the status of one of the earnings outperformed. It reported strong EPS growth over the past two quarters. Analysts now expect an EPS of $2.65 for the current quarter. This represents all-start growth over the $0.06 reported in the same quarter last year. This positive trend is forecasted to continue, with next quarter’s growth projected at 102% year-over-year (YOY).
The insurance industry overall was impacted by significant catastrophe losses last year. However, Travelers is rebounding after a relatively benign start to 2024. While further natural disasters can’t be ruled out, a repeat of the doubling in losses seen last year is highly unlikely. With this in mind, analysts have set a price target of $228.46 per share for TRV, suggesting a potential upside of 13%.
Seagate Technology (STX)
Seagate Technology (NASDAQ:STX) is a computer memory company best known for its hard drives. It has proven to be one of the strongest earnings outperformers amidst the ongoing boom in artificial intelligence (AI). AI requires significant storage capacity to generate results and store vast amounts of digital content created through AI technologies. Seagate will be well-positioned for strong ongoing sales as the AI sector expands.
STX stock price has risen nearly 66% over the past twelve months. In 2024 gains have reached around 20% so far. Even more impressive has been its non-GAPP earnings growth. It climbed from -$0.28 to $0.33 over the same period.
Analysts forecast that the positive momentum will continue. Current estimates suggest $0.74 per share in earnings for the current quarter. This would equate to a quarterly earnings growth rate of over 500%. While such a torrid pace is unsustainable, earnings are projected to increase by around 400% in 2024 and 485% next year.
Artivion (AORT)
Cardiac implant company Artivion (NYSE:AORT) has seen its share price increase almost 50% in the past year. It still continues to report strong sales growth for its main product. Sales growth is expected to increase by 12.30% for the next quarter.
Heart attacks are the leading cause of death in America, so demand for stents and other aortic disease treatments is expected to remain steady. Artivion CEO is positive about the outlook, citing expansion in Latin America, which led the company to raise its guidance for the rest of the year. The company expects EPS to triple in the second quarter.
Analysts are not as confident and forecast the company to report earnings of -$0.06 for the quarter. Still, this is an improvement on the -$0.08 reported in the same period last year. Nonetheless, all analysts recommend purchasing the stock. However, if Artivion’s results match its outlook, this could be a major earnings outperformer of 25% versus current estimates, pushing AORT stock higher.
On the date of publication, Stavros Tousios did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.