The earnings reporting onslaught for the third quarter begins this week and, while the economy certainly has improved during the quarter, there is still the pandemic overhang that could dampen the results from many of the top companies. Toss in the additional issues that the market is facing, not the least of which is perhaps the most important election since 1860, and there is certainly the potential for heightened volatility.
A new Goldman Sachs research report notes that the options market is implying a 5.8% earnings-day move for the average stock in the S&P 500, which is higher than the 5.5% long-term average. The report also noted this:
Our analysts’ weighted average price target implies +7% upside over the next 12 months to S&P 500 stocks vs 8 year average of +9% upside implied. In light of obvious economic uncertainties built into estimates, we view this upside as an encouraging sign of fundamental support. In this report, we leverage our equity analysts’ fresh estimates and qualitative comments to identify the 25 most out-of-consensus opportunities from our Americas coverage.
Five high-profile names make the cut here, and all could offer some serious upside for investors with a touch more risk appetite. While all five are rated Buy at Goldman Sachs, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Chipotle Mexican Grill
Despite numerous issues over the past few years, this remains a favorite destination for those looking to eat out, and the stock is a Goldman Sachs Conviction List pick. Chipotle Mexican Grill Inc. (NYSE: CMG) operates more than 2,400 fast-casual Mexican restaurants offering freshly made burritos, tacos, burrito bowls and salads.
Chipotle Mexican Grill is 100% company operated and runs average unit volumes much higher than peers. Goldman Sachs is very positive and noted this:
Goldman Sachs Restaurants analyst Katherine Fogertey sees 11% upside to Buy-rated over next 12 months. Her 3Q20 EPS estimate is 32% above consensus on the back of strength in digital momentum, high brand engagement and tailwinds from menu innovation and favorable commodity prices. She notes, the company continues to register strong growth in its mobile web and app usage, which continues to be a key differentiator for restaurants given still-limited dining room capacity and potential customer aversion for on premise dining in the near term.
The Goldman Sachs price target for the shares is $1,425, while the Wall Street consensus target is $1290.44. Chipotle Mexican Grill stock traded early Tuesday at $1,274.01.
This leading energy company is also a Goldman Sachs Conviction List pick. EOG Resources Inc. (NYSE: EOG) is one of the largest independent exploration and production companies operating in the United States, Canada, Trinidad, the United Kingdom and China. The company’s principal producing areas in the United States are located in New Mexico, North Dakota, Texas, Utah and Wyoming.
Goldman Sachs is very positive on energy for 2021:
Goldman Sachs Exploration & Production analyst Brian Singer sees 52% upside EOG over the next 12 months with EPS estimates significantly above consensus for the current quarter and over the next 4 quarters. He believes shares are oversold and do not reflect the company’s sustainability LEADership in Leverage, Earnings, Assets and Decarbonization. EOG shares have sold off on risk around post-election federal land access where EOG has greater interest than other Permian peers.
Shareholders receive a 3.93% dividend. Goldman Sachs has a $57 price target, but the consensus target is up at $63.97. EOG Resources stock traded at $39.25 a share Tuesday morning.