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- Earnings forecasts will continue to come down in 2023, according to Goldman Sachs.
- The firm is calling for flat earnings, while the consensus among analysts is for 3% growth.
- Here are 27 stocks that Goldman Sachs expects to beat earnings estimates by at least 10%.
Earnings growth is expected to be the lowest it’s been since Q3 2020 in the upcoming reporting period, according to Goldman Sachs. Markets are pricing in 0% year-over-year earnings growth for Q4 2022, and if not for stocks in the energy sector, Goldman Sachs says S&P 500 earnings per share would have declined by 5%.
And while the rest of the market sees earnings rising 3% in 2023, Goldman Sachs believes that last year’s downbeat earnings momentum will persist. The firm’s base case is for flat earnings growth this year as the US avoids a recession, though earnings could shrink by 11% if the economy contracts.
“We expect further downward revisions to consensus 2023 EPS forecasts,” wrote David Kostin, Goldman Sachs’ chief US equity strategist, in a recent note.
Goldman’s glass-half-empty view on earnings stems from its conviction that profit margins will come under pressure as consumer demand weakens and taxes from the Inflation Reduction Act are implemented. Softer consumer spending could lead companies to cut prices in order to boost sales, Kostin wrote, adding that the new taxes on share buybacks and corporate book income will shave about 2% to 3% off of S&P 500 earnings.
Analysts are also cautious about margins, and expect them to narrow to 11.2% in Q4 from about 12% a year earlier, according to Goldman Sachs. Margins declined in Q3 as well, Kostin noted.
However, Kostin wrote that some of his firm’s clients think companies are purposefully being pessimistic about Q4 and their 2023 outlooks in an attempt to underpromise and overdeliver. The three-month trend of earnings revisions is the most negative since 2008 and 2020, Kostin noted, adding that firms have preannounced earnings at the highest rate since early 2020.
Whether or not companies can clear that unusually low bar will determine how stocks perform. Kostin wrote that the clearest path to an earnings beat in 2023 is if global economic growth tops expectations as China successfully moves past the pandemic and gets its economy firing again.
27 stocks to buy for strong earnings in 2023
Although Goldman Sachs is banking on negative earnings revisions in 2023, the firm believes that analysts are dramatically underestimating some companies’ earnings potential.
In a separate note, Kostin listed 27 stocks that have a 2023 earnings per share estimate from Goldman Sachs that is at least 10% higher than the current consensus estimate. Those stocks are listed below, along with their ticker, market capitalization, the consensus earnings estimate, Goldman’s earnings estimate, and the percentage difference between the two estimates, as of December 30.
1. Boeing
Markets Insider
Ticker: BA
Market cap: $124.4B
Consensus earnings estimate: $2.05
GS earnings estimate: $5.56
Difference: 170.6%
Source: Goldman Sachs
2. First Solar
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Ticker: FSLR
Market cap: $18.4B
Consensus earnings estimate: $4.06
GS earnings estimate: $6.86
Difference: 69.1%
Source: Goldman Sachs
3. Steel Dynamics
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Ticker: STLD
Market cap: $18.9B
Consensus earnings estimate: $10.33
GS earnings estimate: $13.97
Difference: 35.2%
Source: Goldman Sachs
4. United Airlines Holdings
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Ticker: UAL
Market cap: $15.1B
Consensus earnings estimate: $5.79
GS earnings estimate: $7.80
Difference: 34.6%
Source: Goldman Sachs
5. Freeport-McMoRan
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Ticker: FCX
Market cap: $64.4B
Consensus earnings estimate: $1.82
GS earnings estimate: $2.36
Difference: 29.9%
Source: Goldman Sachs
6. Alaska Air Group
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Ticker: ALK
Market cap: $6.1B
Consensus earnings estimate: $5.05
GS earnings estimate: $6.35
Difference: 25.8%
Source: Goldman Sachs
7. CF Industries Holdings
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Ticker: CF
Market cap: $16.3B
Consensus earnings estimate: $14.34
GS earnings estimate: $18.02
Difference: 25.7%
Source: Goldman Sachs
8. Nucor
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Ticker: NUE
Market cap: $39.1B
Consensus earnings estimate: $12.27
GS earnings estimate: $15.23
Difference: 24.2%
Source: Goldman Sachs
9. Amazon
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Ticker: AMZN
Market cap: $946.6B
Consensus earnings estimate: $1.80
GS earnings estimate: $2.18
Difference: 20.8%
Source: Goldman Sachs
10. Mosaic
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Ticker: MOS
Market cap: $15.1B
Consensus earnings estimate: $9.91
GS earnings estimate: $11.95
Difference: 20.6%
Source: Goldman Sachs
11. Expedia Group
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Ticker: EXPE
Market cap: $15.2B
Consensus earnings estimate: $9.31
GS earnings estimate: $11.14
Difference: 19.6%
Source: Goldman Sachs
12. Raymond James Financial
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Ticker: RJF
Market cap: $24B
Consensus earnings estimate: $9.99
GS earnings estimate: $11.65
Difference: 16.6%
Source: Goldman Sachs
13. Stanley Black & Decker
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Ticker: SWK
Market cap: $12.5B
Consensus earnings estimate: $4.47
GS earnings estimate: $5.15
Difference: 15.2%
Source: Goldman Sachs
14. D.R. Horton
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Ticker: DHI
Market cap: $32.4B
Consensus earnings estimate: $9.36
GS earnings estimate: $10.77
Difference: 15.1%
Source: Goldman Sachs
15. C.H. Robinson Worldwide
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Ticker: CHRW
Market cap: $11.1B
Consensus earnings estimate: $5.70
GS earnings estimate: $6.50
Difference: 14.1%
Source: Goldman Sachs
16. Advanced Micro Devices
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Ticker: AMD
Market cap: $109.7B
Consensus earnings estimate: $3.67
GS earnings estimate: $4.15
Difference: 13.2%
Source: Goldman Sachs
17. PulteGroup
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Ticker: PHM
Market cap: $11.2B
Consensus earnings estimate: $7.31
GS earnings estimate: $8.25
Difference: 12.9%
Source: Goldman Sachs
18. KLA
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Ticker: KLAC
Market cap: $58.8B
Consensus earnings estimate: $18.35
GS earnings estimate: $20.67
Difference: 12.6%
Source: Goldman Sachs
19. Biogen
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Ticker: BIIB
Market cap: $40.8B
Consensus earnings estimate: $15.65
GS earnings estimate: $17.56
Difference: 12.2%
Source: Goldman Sachs
20. Alphabet
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Ticker: GOOGL
Market cap: $1,170B
Consensus earnings estimate: $5.23
GS earnings estimate: $5.86
Difference: 12%
Source: Goldman Sachs
21. CoStar Group
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Ticker: CSGP
Market cap: $31.9B
Consensus earnings estimate: $1.43
GS earnings estimate: $1.61
Difference: 12%
Source: Goldman Sachs
22. Wells Fargo
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Ticker: WFC
Market cap: $162.9B
Consensus earnings estimate: $5.11
GS earnings estimate: $5.72
Difference: 12%
Source: Goldman Sachs
23. Capital One Financial
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Ticker: COF
Market cap: $38B
Consensus earnings estimate: $15.92
GS earnings estimate: $17.75
Difference: 11.5%
Source: Goldman Sachs
24. Chubb Limited
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Ticker: CB
Market cap: $93.4B
Consensus earnings estimate: $18.02
GS earnings estimate: $20.08
Difference: 11.5%
Source: Goldman Sachs
25. Enphase Energy
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Ticker: ENPH
Market cap: $31.9B
Consensus earnings estimate: $5.34
GS earnings estimate: $5.93
Difference: 11.2%
Source: Goldman Sachs
26. Discover Financial Services
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Ticker: DFS
Market cap: $29B
Consensus earnings estimate: $13.94
GS earnings estimate: $15.45
Difference: 10.8%
Source: Goldman Sachs
27. Lincoln National
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Ticker: LNC
Market cap: $5.3B
Consensus earnings estimate: $9.04
GS earnings estimate: $9.99
Difference: 10.5%
Source: Goldman Sachs
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