3 Mid-Cap Stocks with Expectations for High-Earnings Growth

Key Points

• Mid-cap stocks can give investors a Goldilocks option that balances volatility and growth. 
• Generac Holdings (GNRC): The manufacturer of whole home generators continues to benefit from relocation and our aging electrical grid. 
• Knight-Swift Transportation (KNX): The freight transportation/logistics company is suggesting that a recession may not be imminent. 
• Crocs (CROX): Higher profit margins and expected high demand will support the positive momentum in CROX stock.  

Mid-cap stocks give investors a “middle of the road” alternative to slow-but-steady large-cap stocks and volatile small-cap stocks. These stocks offer investors less volatility (but potentially less upside) compared to small-cap stocks. They also can offer better growth than large-cap stocks, albeit with more volatility.  

However, like any asset class, quality matters when deciding which mid-caps may be right for your portfolio. With earnings season upon us, investors can look for stocks that are expected to deliver strong earnings growth. This is the single best predictor of stock price performance, particularly if a stock shows signs of being undervalued. 

Here are three mid-cap stocks that present investors with a compelling case heading into earnings season.  

This Company May Help Your Portfolio Weather Any Market Storm 

Generac Holdings Inc. NYSE: GNRC is a company best known for its whole home generators. Demand for the company’s products grew in 2020, and 2021 as stimulus money flooded the economy. And there are two catalysts that are still in place. 

First, many potential consumers have relocated to areas that are prone to natural disasters. Second, many of these same areas are prone to excessive heat that puts strain on our country’s aging electrical grid. The possibility of seasonal brownouts is a good reminder of why it’s important to have a backup power supply.  

One look at the company’s balance sheet shows that revenue is declining on a year-over-year basis. That being said, revenue is higher than pre-pandemic levels, which suggests demand for the company’s products is still strong. 

Generac is forecast to have 31% earnings growth in the next 12 months. Currently, Generac analyst ratings on MarketBeat point to a 19% increase in the company’s share price.  

This Transportation Stock May be a Bellwether for the Economy 

Many economists continue to forecast a recession at some point in the next nine months. If so, you would expect a slowdown in the freight transportation and logistics business. But the outlook for Knight-Swift Transportation Holdings, Inc. NYSE: KNX is a reminder that you have to watch what the data says and not what you think it should say.  

Earnings for Knight-Swift are expected to grow by over 37% in the next 12 months. And since the company reported earnings in late April, virtually every analyst that had rated the company as a Buy or an Outperform has maintained those ratings. Plus, although many of those same analysts lowered their price targets, the Knight-Swift analyst ratings on MarketBeat continue to suggest KNX stock will post a 20% gain in the next 12 months.  

Consumers and Investors Alike Love This Footwear Brand 

Crocs, Inc. NASDAQ: CROX stock is up about 17% in 2023, slightly outperforming the S&P 500. However, the stock continues to build momentum with an addressable market that the company values at over $160 billion.  

One reason to believe the company’s momentum will continue is found in the company’s profit margins, that expanded to 28% in 2022. And in the first quarter of this year, the company saw revenue growth in China climb over 110%.  

The company was a pandemic winner, with sales of its flagship Crocs brand increasing. The company acquired the HEYDUDE brand for $2.5 billion in 2021. While this raised the company’s debt level, it also increased the company’s revenue. In its most recent quarter, Crocs delivered a 33% year-over-year increase in revenue along with a 27% YOY increase in earnings.  

Overall, earnings are forecast to grow by 10% in the next 12 months. And the CROX stock price is forecast to grow by approximately 24% from its current level.  

Although short interest is above 10%, Crocs is attractively valued with a forward P/E ratio of just 11x earnings.