Goldman Sachs analysts said this week there is a slate of stocks coming out of earnings that are just too attractive to ignore. Of the 250 companies in the S & P 500 that have reported earnings to date for the fourth quarter, just 69.6% reported above analysts’ expectations, according to Refinitiv. CNBC Pro combed through Goldman Sachs’ research to find the firm’s top ideas for companies exiting quarterly reports. They include Tractor Supply, Charter Communications , Exxon Mobil , General Motors and Caterpillar. Tractor Supply The farm supply retailer continues to impress, according to Goldman analyst Kate McShane. The firm came away even more positive on the name after Tractor Supply’s robust late January earnings report. “TSCO reported strong 4Q22 results, with top and bottom-line ahead of GS/consensus estimates,” McShane said. Tractor Supply’s powerful inventory, upbeat 2023 guide and inflection in traffic are just a few of the reasons investors should buy the stock now, she said. Its Neighbor’s Club reward program is also gaining traction, McShane wrote, and store remodels continue apace. Yet, the analyst said there’s still an opportunity for share gains as competitors aren’t as strong in their niche space, while Tractor Supply remains a defensive name. “We remain Buy rated as we think TSCO is insulated from a tougher macro environment based on its < 15% discretionary exposure but also, and more importantly, how fragmented the market is in which they operate,” she said. Shares of the company are up 1.6% this year. Charter Communications The cable company is coming off a mixed quarterly report in late January, but Goldman said shares are very attractive. Analyst Brett Feldman highlighted a key takeaway from Charter’s latest quarterly results. “The cable operator is seeing gradual improvement in its broadband subscriber trends,” he wrote. The firm said a key catalyst is that Charter is beginning to see the fruits of increasing its presence in smaller markets, even if it means increased capital expenditures over the short term. In addition, the cable behemoth is expected to increase its share buybacks in the years ahead, which should delight investors, the firm said. “We estimate that over the next 5 years CHTR will repurchase nearly $40bn of stock representing almost 60% of its market cap,” Feldman wrote. The analyst, who lifted his price target to $450 per share from $422, said that Charter’s ability for growth is underappreciated. “At a higher level, we believe that CHTR’s successful implementation of price increases, despite elevated competition, signals that the broadband market remains healthy and that providers of gigabit-capable services, such as CHTR, maintain pricing power,” he said. The stock is up almost 20% this year. Exxon Mobil The oil and gas behemoth unveiled its fourth-quarter results earlier this week, missing analysts’ estimates for revenue but beating expectations for per-share earnings, according to FactSet. Still, analyst Neil Mehta said that qualifies as a “strong execution quarter.” Mehta wrote that the company’s results highlights the “attractive capital returns potential of XOM, as well as expectations for Exxon Mobil’s free-cash flow breakeven to come in lower over time.” The firm is also bullish on the company’s underappreciated product pipeline in areas like the Permian in western Texas and New Mexico, as well as its offshore project in Guyana. Shares are up 40% over the past year. However, Mehta said the stock’s valuation is still attractive as it is the most well positioned of the major oil and gas producers. General Motors “While our new 2023 EPS estimate is below the mid-point of guidance reflecting our expectation that price and mix will be headwinds this year and near the higher end of what we believe is implied in guidance, we maintain our Buy rating on the stock reflecting GM’s longer-term opportunities in both EVs and AVs (where we see Cruise as a technology leader, and profitably scaling this business will be a debate for investors).” Charter Communications “Our key takeaway from CHTR’s 4Q22 results in that the cable operator is seeing gradual improvement in its broadband subscriber trends. … We estimate that over the next 5 years CHTR will repurchase nearly $40bn of stock representing almost 60% of its market cap. … At a higher level, we believe that CHTR’s successful implementation of price increases, despite elevated competition, signals that the broadband market remains healthy and that providers of gigabit-capable services, such as CHTR, maintain pricing power.” Tractor Supply “TSCO reported strong 4Q22 results, with top & bottom-line ahead of GS/consensus estimates. … We remain Buy rated as we think TSCO is insulated from a tougher macro environment based on its < 15% discretionary exposure but also, more importantly, how fragmented the market is in which they operate. … Tractor Supply’s inventory position has continued to look healthy. … With regard to TSCO’s Neighbor’s Club, the company earned over 28 million members & the program accounted for almost 75% of TSCO’s sales.” Caterpillar “Solid margins balanced by emerging supply-demand balance. We maintain our Buy rating on CAT relative to our Machinery coverage as we believe CAT is positioned to drive mid to high single digit unit profitability growth through the cycle driven by rising autonomous product features & the value of dealer network uptime amid ongoing construction labor inflation.” Exxon Mobil “Strong execution quarter; Buy on advantaged Upstream project queue and continued business transformation. We update our estimates for ExxonMobil following 4Q22 results, where the company beat on earnings with both E & P and Refining results coming in stronger vs GS estimates. … We continue to highlight the attractive capital returns potential of XOM, as well as expectations for XOM’s FCF breakeven to come in lower over time.”
