The 2022 drop was brutal for stock investors, in fact, it was the worst market year since the Great Recession of 2008. Still – some Street strategists are predicting guess that this year there will be a recovery, or at least partial recovery, in store.
Although the S&P 500 lost nearly 20% last year, inflation remains at more than 7% year-on-year, and the Federal Reserve has raised interest rates by as much as 4.25% in response, said John Stoltzfus, chief investment strategist. Oppenheimer Asset Management’s chief investment officer, remains optimistic about the new year.
“We continue to see a ‘half-full glass’ as the end of the ‘free money and over-stimulation of the economy indicates good times’,” Stoltzfus said in a recent note. more to come,’ Stoltzfus said in a recent note, in which he also predicted a 15% increase for the economy. S&P at the end of the year.
“The Fed Funds rate hike cycles are never interesting; they can create varying degrees of discomfort and market volatility but have ultimately been shown in the past to have a positive effect on the economy and markets in uncovering problems levels that stem from their origins and provide a regime of retreat that can lead to a sustained economic recovery,” Stoltzfus added.
And if we’re looking at current economic policymakers setting the conditions for a ‘sustainable economic recovery’, then a number of stocks should lead the way. Top Oppenheimer analysts point to two stocks in particular that could take off over the next 12 months. We run the stock through TipRanks database to see what makes them stand out.
Logistics XPO (XPO)
The Oppenheimer’s first pick we’re reviewing is XPO Logistics, a Connecticut-based company in the freight business that specializes in under-cargo, or LTL, shipping. This is an important link in the supply chain, including shipments that are too large for the parcel sender to fill but not completely fill a semi-trailer. At the end of summer 2021 and in November 2022, XPO separates its transportation and logistics brokerage businesses; in the current configuration, the company is a pure LTL company. As an LTL shipper, XPO can reach 99% of the US postal zip code areas, as well as large parts of Canada and Mexico.
XPO’s final financial release, for Q3 of 22, showed strong bottom-line results – operating income came in at $185 million, up 65% year-over-year. This result taken from the top line is $3.04 billion. It’s important to note that operating income increased while total quarterly revenue fell 7%, and despite the drop in revenue, operating income was a quarterly record for the company. The company reported diluted earnings from continuing operations of $1.13, well above the 19 cents recorded in the year-ago period.
On the balance sheet, XPO provides a more reasonable result, with $265 million in cash from operations — a total of $142 million in free cash. XPO had $544 million in cash and cash equivalents on its books as of the end of Q3 2022, plus another $1 billion in available credit, for a total liquidity of more than $1.54 billion.
For Oppenheimer Scott Schneeberger, a 5-star analyst, XPO is a company with a clear roadmap for the coming months. He writes, “We are gradually building on XPO’s opportunity to optimize LTL operations through its technological capabilities, which have grown significantly in recent years. XPO is one of the top 4 competitors in the industry with solid growth prospects and the opportunity to improve operating ratio through expected volume/price gains versus inflation/operating costs. optimized through technology/transport provided by a third party.”
Schneeberger added: “We consider XPO Logistics’ North American Lump-Low-Trailer (LTL) business to be attractively positioned for operational/financial improvement. XPO is pursuing a number of initiatives. self-improvement in an industry characterized by stable valuation,” added Schneeberger.
Looking ahead, Schneeberger extrapolates his stance to an Outperform (i.e. Buy) rating and $45 price target that suggests a one-year upside potential of ~35% for the stock. (To see Schneeberger’s achievements, click here)
Oppenheimer’s actions were not unusual on Wall Street; Based on 11 Add Buys and 3 Holds, the stock boasts a strong Buy consensus rating. The shares are selling for $33.4, and their median price target of $50.13 implies a potential 50% gain in a one-year time frame. (View XPO stock forecast on TipRanks)
Papa John’s International (PZZA)
For the second stock on this list, we’ll turn to the fast food delivery segment and look at Papa John’s, the third largest pizza delivery chain in the world. The company maintains headquarters in both Atlanta, Georgia and Louisville, Kentucky, boasting more than 5,500 locations in 49 countries globally. Papa John’s has been in business since 1984.
The company’s revenue is solid, having held at or near $500 million per quarter for the past few years. In Q3 of 22, the most recently reported quarter, the company had top revenue of $511 million; this is down $2 million from the third quarter of the previous year.
Ultimately, the company remains profitable, although earnings are under pressure. Papa John’s shows GAAP unadjusted EPS of 54 cents for Q3 2022; this is down from the 83 cents reported in the third quarter of 21, or a 34% drop.
The company opened 18 new units in Q3 of 22 and is on track to achieve 240 to 260 new units for the whole of 2022.
Brian Bittneranother five-star Oppenheimer analyst, took a close look at Papa John’s and what he saw points to a possible path for the pizzeria, despite the recent drop in earnings.
“After a challenging year in ’22 involving rising costs and falling margins, we believe the earnings setup could improve in ’23 and beyond… PZZA remains very confident in the target of adding 1,400–1,800 new net units between 2022–2025 , driven by international growth. This implies +380–520 units per year for ’23–’25 versus +250 [in 2022]… Overall, sales appear to be steady, unit growth is in accelerated mode, and margin improvement drivers are emerging. We believe this will make for a more attractive setup in 2023,” said Bittner.
Plenty of sales potential and expansion plans have given Bittner a reason to rate PZZA stock at Outperform (i.e. Buy). His $105 price target suggests a ~28% stock price increase by the end of 2023. (To see Bittner’s track record, click here)
Overall, there are 11 recent analyst reviews of Papa John’s, favoring Buy over Hold (i.e. Neutral) with a margin of 8 to 3 for a Moderate Buy consensus rating. The stock is selling for $82.05 and an average price target of $96.50 suggests ~18% one-year upside potential. (View PZZA stock forecast on TipRanks)
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deny the responsibility: The opinions expressed in this article are those of prominent analysts only. Content is used for informational purposes only. It is very important that you do your own analysis before making any investment.
