One of the primary issues moving markets in 2024 is the direction of interest rates. Specifically, when will the Federal Reserve begin cutting them?
There are many reasons for investors to want interest rate cuts, but it's likely to be particularly significant for owners of mid-cap stocks. These are stocks with a market cap between $2 and $10 billion.
But what mid-cap stocks should you be looking at? Quality should be high on your list. You want to find companies that have solid earnings and are projected to grow those earnings in the next 12 to 18 months. The stocks in this special presentation are projected to have a minimum of 15% earnings growth in the next year.
As the Federal Reserve is likely to lower interest rates, you'll also want to pay attention to sectors where money is expected to flow. That means looking beyond technology stocks and into areas such as consumer staples and even some beaten-down consumer discretionary stocks.
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- Albemarle
- Celsius
- Perrigo
- Chart Industries
- Cleveland-Cliffs
- Sibayne Stillwater
- Polaris
#1 - Albemarle (NYSE:ALB)
As of this writing, Albemarle Corp. (NYSE: ALB) was just under the $10 billion threshold for mid-cap stocks. The reason is that Albemarle is a lithium miner, and its price is highly correlated with the price of lithium. Weaker-than-expected demand for electric vehicles (EVs) has kept the sector well supplied and has ALB stock down more than 39% in 2024.
The company’s second-quarter earnings report in July only increased the slide in its stock. Albemarle missed on the top and bottom lines with numbers that show the year-over-year (YOY) volatility that is common with commodity stocks. Some of that miss was due to the company taking write-downs on projects that require higher lithium prices.
However, this is likely a case where demand delayed is not the same as demand denied. It seems more likely than not that lithium demand will increase and with it, lithium prices. That's bullish for ALB stock. While you wait, you can collect a safe, albeit unspectacular dividend, with a 1.84% yield, but one that has been growing for 30 consecutive years.
About Albemarle
Albemarle Corporation develops, manufactures, and markets engineered specialty chemicals worldwide. It operates through three segments: Energy Storage, Specialties and Ketjen. The Energy Storage segment offers lithium compounds, including lithium carbonate, lithium hydroxide, and lithium chloride; technical services for the handling and use of reactive lithium products; and lithium-containing by-products recycling services.
Read More - Current Price
- $89.86
- Consensus Rating
- Hold
- Ratings Breakdown
- 7 Buy Ratings, 15 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $117.10 (30.3% Upside)
#2 - Celsius (NASDAQ:CELH)
Celsius Holdings Inc. (NASDAQ: CELH) is a health and wellness company that is best known for its line of functional drinks and liquid supplements. CELH stock has taken investors on a roller coaster ride this year. At the time of this writing, the stock is down 25.3% in 2024. However, at two different points this year, the stock has been up approximately 60%.
Both of the drop-offs in Celsius stock came around earnings season. In the first quarter, the company missed revenue projections. The second quarter was better, but the company was still showing slower YOY growth. The company has a distribution agreement with PepsiCo Inc. (NASDAQ: PEP) and it appears the latter has an inventory overhang.
However, this looks like a case of investors taking profits. The company has 23% YOY revenue growth and is still poised to capture significant market share.
The Celsius analyst forecasts on MarketBeat give CELH stock a price target of $64.79, which is 56.9% higher than the stock’s closing price on August 21, 2024.
About Celsius
Celsius Holdings, Inc develops, processes, markets, distributes, and sells functional energy drinks and liquid supplements in the United States, Australia, New Zealand, Canadian, European, Middle Eastern, Asia-Pacific, and internationally. The company offers CELSIUS, a fitness drink or supplement designed to accelerate metabolism and burn body fat; various flavors and carbonated and non-carbonated functional energy drinks under the CELSIUS Originals and Vibe name, as well as functional energy drink under the CELSIUS Essentials and CELSIUS On-the-Go Powder names; and CELSIUS ready-to drink products.
Read More - Current Price
- $34.80
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 12 Buy Ratings, 2 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $57.64 (65.6% Upside)
#3 - Perrigo (NYSE:PRGO)
Perrigo Co. (NYSE: PRGO) is a different way to play the health and wellness market. The Ireland-based company makes over-the-counter (OTC) products for consumers in the United States and internationally.
PRGO stock is trading near 15-year lows after falling over 12% in 2024 and more than 25% in the last 12 months. One reason for this is a steep decline in revenue for the company’s infant formula. In 2023, the FDA issued a warning letter related to specific manufacturing processes at its Wisconsin plant. The company is addressing those issues at that plant as well as its plants in Vermont and Ohio. However, that comes at a cost of approximately $40 million.
However, Perrigo looks like a solid, buy-the-dip candidate. Analysts project 23% earnings growth, and at 11x forward earnings, the stock’s valuation is starting to look too good to pass up. That’s particularly true when it comes with a dividend that’s been growing for 22 consecutive years and has a current yield of 3.88%.
About Perrigo
Perrigo Company plc provides over-the-counter health and wellness solutions to enhance individual well-being in the United States, Europe, and internationally. It operates through Consumer Self-Care Americas and Consumer Self-Care International segments. The company develops, manufactures, markets, and distributes self-care consumer products, such as upper respiratory products, including cough suppressants, expectorants, and sinus and allergy relief; nutrition products consisting of infant formulas and nutritional beverages; digestive health products, including antacids, anti-diarrheal, and anti-heartburn; pain and sleep-aids products comprising pain relievers and fever reducers; and oral care products, which include toothbrushes, toothbrush replacement heads, floss, flossers, whitening products, and toothbrush covers.
Read More - Current Price
- $28.03
- Consensus Rating
- Buy
- Ratings Breakdown
- 3 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $39.33 (40.4% Upside)
#4 - Chart Industries (NYSE:GTLS)
Investing in industrial gases may not excite many investors, but if you’re hoping to unlock value in mid-cap stocks, Chart Industries Inc. (NYSE: GTLS) deserves a closer look. The company designs, engineers, and manufactures process technologies and equipment for global gas and liquid markets.
This gives the company revenue drivers in end markets like hydrogen, natural gas (including liquified natural gas), data centers, nuclear reactors, the space economy, and more. The company is also expected to get a lift due to increasing demand for semiconductor chips.
GTLS stock is down 12.7% in 2024 and is trading near its 52-week low. The company has missed analysts’ earnings expectations in the last two quarters. However, both numbers were higher YOY, including an 83% YOY gain in the most recent quarter. Furthermore, analysts are forecasting 29% earnings growth over the next 12 months, which is likely to be a strong catalyst for stock price growth.
About Chart Industries
Chart Industries, Inc engages in the designing, engineering, and manufacturing of process technologies and equipment for the gas and liquid molecules in the United States and internationally. The company operates in four segments: Cryo Tank Solutions, Heat Transfer Systems, Specialty Products, and Repair, Service & Leasing.
Read More - Current Price
- $119.97
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 11 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $185.54 (54.7% Upside)
#5 - Cleveland-Cliffs (NYSE:CLF)
Cleveland-Cliffs Inc. (NYSE: CLF) is a solid mid-cap stock choice for its role in the global steel market. The company has grown to become one of the top four steel producers in the United States. It's also the largest supplier of steel to the auto industry.
CLF stock is down 39% in 2024, largely due to weakness in the underlying price of steel. The short-term outlook for steel prices may hinge on the results of the November presidential election. However, Morgan Stanley thinks that the steel market may have found a bottom, which could be a catalyst for steel stocks, including CLF stock.
Cleveland-Cliffs has garnered headlines for its failed attempt to acquire U.S. Steel Corp. (NYSE: X). However, the company hasn’t given up its taste for acquisition; it's digesting its purchase of Stelco in July. Analysts are bullish on the acquisition that they believe will increase the company’s steelmaking footprint, including doubling its exposure to the flat-rolled steel market.
About Cleveland-Cliffs
Cleveland-Cliffs is the largest flat-rolled steel company and the largest iron ore pellet producer in North America. The company is vertically integrated from mining through iron making, steelmaking, rolling, finishing and downstream with hot and cold stamping of steel parts and components. The company was formerly known as Cliffs Natural Resources Inc and changed its name to Cleveland-Cliffs Inc in August 2017.
Read More - Current Price
- $11.81
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 5 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $17.75 (50.3% Upside)
#6 - Sibayne Stillwater (NYSE:SBSW)
Sibayne Stillwater Ltd. (NYSE: SBSW) is a mid-cap stock that can give investors exposure to the precious metals sector. You don’t have to be a gold bug to appreciate the opportunity in this market. Gold is at a record high as investors are becoming concerned about further devaluation of the U.S. dollar.
Sibayne Stillwater is a gold and silver miner. However, it’s also a miner of palladium and exploring expansion into copper and lithium. The former is a key component of catalytic converters which may not be as threatened by EVs as feared. And copper and lithium will be in high demand for the renewable energy economy.
SBSW stock is down 16% in 2024 but has formed a solid layer of support around $3.85 per share. The Sibayne Stillwater analyst forecasts on MarketBeat give the stock a consensus Reduce rating, but the consensus price target of $5.67 suggests an upside of over 25%.
About Sibanye Stillwater
Sibanye Stillwater Limited, together with its subsidiaries, operates as a precious metals mining company in South Africa, the United States, Europe, and Australia. The company produces gold; platinum group metals (PGMs), including palladium, platinum, rhodium, iridium, and ruthenium; chrome; nickel; and silver, cobalt, and copper.
Read More - Current Price
- $4.25
- Consensus Rating
- Reduce
- Ratings Breakdown
- 0 Buy Ratings, 3 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $5.17 (21.6% Upside)
#7 - Polaris (NYSE:PII)
Like many stocks on this list, Polaris Inc. (NYSE: PII) is underperforming the market. Elevated inflation and higher interest rates took the juice out of this powersports vehicles manufacturer. The products may be nice to have, but they’re not must-haves.
That slowdown is clear in the company’s first- and second-quarter earnings reports. In both cases, revenue missed estimates and was down sharply YOY.
However, the rate of inflation is coming down, and it may have come down enough for the Fed to lower interest rates. Analysts have been mostly bearish on Polaris since the company’s July earnings report. The consensus rating of Hold is supported by a forward P/E ratio of 22x which would suggest a fully valued stock.
However, if you believe that consumer demand will pick up, PII stock may be worth a buy. While you wait, you can benefit from buying a dividend aristocrat that has increased its dividend for 29 consecutive years and currently offers investors a 3.11% yield.
About Polaris
Polaris Inc designs, engineers, manufactures, and markets powersports vehicles in the United States, Canada, and internationally. It operates through three segments: Off-Road, On-Road, and Marine. The company offers off-road vehicles (ORVs), including all-terrain vehicles and side-by-side vehicles; military and commercial ORVs; snowmobiles; motorcycles; and moto-roadsters, quadricycles, and boats.
Read More - Current Price
- $84.62
- Consensus Rating
- Hold
- Ratings Breakdown
- 4 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $89.18 (5.4% Upside)
With a rate cut of at least 25 basis points (0.25%) a near certainty in September, now is a good time to look for mid-cap stocks to buy.
History shows that stocks will typically underperform after a rate cut. That's because falling interest rates are a form of stimulus. An economy that needs to be stimulated is generally not considered healthy.
But if you're playing the long game, that shouldn't matter. Because over time, a looser monetary policy is generally good for corporate profits. And one of the single best predictors of stock price growth is earnings (profit) growth.
MarketBeat has a stock screener that can help you sort specifically for mid-cap stocks. More than that, you can screen for different sectors and performance indicators such as projected earnings growth.
And if exchange-traded funds (ETFs) are more your style, you can use the MarketBeat ETF screener to find funds that specialize in mid-cap stocks.
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