3 Stocks that Analysts Continue to Upgrade into Earnings Season

Key Points

• Knowing which stocks analysts are upgrading can be a reliable indicator of future performance. 
• United Health Group (UNH): The company is developing a fortress balance sheet based on strong free cash flow. 
• Energy Transfer (ET): With oil prices expected to rise, investing in this midstream company is likely to bring capital gains along with a solid dividend.  
• Cameco (CCJ): As governments search for clean energy solutions, uranium may be ready to have its moment. 

One simple signal that investors can use to decide if a stock is likely to move higher is to look at analyst sentiment. An analyst is a market professional employed by either funds that buy securities (I.e. buy-side) or for brokers and banks that sell them (sell-side).  

The role of analysts is to interpret a company’s financial data for investors. They do this by making connections with company insiders, listening to conference calls, and comparing a company’s financials with other companies in its industry or sector.  

They take all of this information and boil it down to a concise “rating” for a stock. Although other terms may be used, these ratings are loosely defined as buy, hold, or sell. Analysts most commonly issue updates to their ratings around the time that a company reports its quarterly earnings. When an analyst upgrades a stock (e.g., from hold to buy or sell to hold), it’s generally seen as a bullish indicator for that stock.  

Analyst ratings can be a reliable indicator of the likely performance of a stock in the short term. However, they don’t have a perfect track record. You should always perform your own due diligence before making an investment decision.  

Nevertheless, this can be a good starting point for your research. And here are three stocks that are getting positive analyst coverage heading into earnings season.  

Cash is King for This Health Insurance Giant 

UnitedHealth Group Incorporated NYSE: UNH is one of the leading health insurers in the United States. As you can imagine, this leads to predictable, and growing, revenue and earnings. This has resulted in the company posting a significant increase in its free cash flow (FCF). In its most recent quarter, UnitedHealth posted $15.6 billion in FCF. That was over 200% larger than in the same quarter in 2022. 

And with revenue and earnings both expected to continue to grow through 2024, investors should expect to see more of the same. That also includes healthy dividend payments. At 1.63%, UnitedHealth’s dividend yield may not seem that impressive. But it currently pays out $7.52 on an annual basis, has a sustainable payout ratio of around 34%, and has been increasing its dividend for the last 14 consecutive years.  

Since its last earnings report, analysts have maintained their strong buy rating on the stock. And although some firms lowered their price targets for UNH stock, the UnitedHealth Group analyst ratings on MarketBeat show a healthy 28% upside from its current level.  

Get Paid When the Price of Oil Goes Up 

Energy Transfer LP NYSE: ET is one of the nation’s leading midstream providers. The company continues to add to its network of pipelines which currently spans 41 states. And this is at a time when the Biden administration has banned the construction of new pipelines.  

All that oil, including the oil needed to refill the Strategic Petroleum Reserve (SPR) has to flow somewhere. And that’s bullish for Energy Transfer. But that’s not the only bullish indicator. 

Even though many economists are predicting a recession in the United States in late 2023 or early 2024, there’s ample reason to believe the price of oil will rise. OPEC in general, and Saudi Arabia in particular, have made it clear they are going to do whatever it takes to put a floor on oil prices. That floor right now seems to be around $70 a barrel. 

To be fair, with a P/E of around 9x and a stock price just above $12, many investors are buying ET stock for its dividend which currently yields over 9%. But analysts are still bullish on the stock. The Energy Transfer analyst ratings on MarketBeat give the stock a 27% upside from its current level.  

Nuclear Energy May be Getting Its Moment 

Cameco Corporation NYSE: CCJ provides uranium for the generation of electricity. Uranium is the most critical element needed to produce nuclear power. And there are reasons to believe that demand for uranium will increase.  

Although I just made a case for a fossil fuel company, there’s no question that the world is transitioning to a carbon-light future. But many investors are discovering that finding truly clean energy alternatives narrows the range of investable opportunities. 

One truly clean energy option is nuclear power. For many reasons, nuclear power has fallen out of favor with global governments. But the war in Ukraine along with the demand for action on climate change is putting all options back on the table.  

Anytime you invest in commodities, there is a certain amount of risk. However, analysts are bullish about Cameco. The consensus price target suggests that CCJ stock could have an upside of 23% in the next 12 to 18 months.