Earnings season is in full swing, and so far, the quarterly prints have been better than expected. With nearly half of the companies in the S&P 500 index having reported their second-quarter results, 80% have exceeded Wall Street consensus forecasts for their earnings per share, according to a report from JPMorgan Chase (NYSE:JPM).
That’s impressive considering that most economists and analysts were predicting that we’d be in the midst of a recession right now. The strong earnings season has further bolstered stocks, with all major indices in the U.S. continuing to rise.
The Dow Jones Industrial Average narrowly missed beating its all-time win streak, the benchmark S&P 500 is near an all-time high, and the tech-laden Nasdaq has led the march higher this year having gained 38% since January.
The momentum in equity markets is expected to continue in the coming months, making now a good time for investors to put capital to work. Here are three cheap growth stocks that smart investors will snap up now.
Deckers Outdoor (DECK)
Shoemaker Deckers Outdoor (NYSE:DECK) is a growth stock that seems unstoppable right now. The company behind Uggs, Teva sandals, and the increasingly popular HOKA running shoes just blew the doors off with its second-quarter earnings. Deckers said it earned $2.41 a share in Q2, which beat analysts’ consensus forecasts for earnings of $2.22 by 19 cents. The latest earnings per share (EPS) were up 45% from the year-earlier quarter.
The company’s net sales rose 10% year-over-year in Q2 to $675.8 million, beating Wall Street estimates of $667 million. The growth was primarily driven by HOKA running shoes, whose sales grew 27% in the quarter.
DECK stock has been on a tear, rising 39% this year, 70% over the last 12 months, and 370% through five years. Analysts see more runway ahead. The median price target on the stock among 17 analysts who track the company is 15% higher than the current levels. The stock currently trades at 26 times future earnings which is reasonable.
Hershey (HSY)
Chocolate maker Hershey (NYSE:HSY) just announced better-than-expected second-quarter earnings, raised its forward guidance, and increased its quarterly dividend payment to stockholders by 15% to $1.19 a share.
The Pennsylvania-based company, which sells nearly $10 billion worth of chocolate each year, reported a Q2 profit of $407 million, or $1.98 a share, up nearly 30% from $316 million, or $1.53 per share, a year earlier. Analysts had been calling for Q2 earnings of $1.89 a share.
Revenue in the quarter came in at $2.49 billion, which was basically in line with analyst forecasts of $2.50 billion. Looking ahead, Hershey lifted its guidance, saying it expects full-year earnings per share in a range of $9.46 to $9.54 a share.
As for the dividend, the new payout will be made to shareholders of record as of August 18 and payable on September 15. Founded in 1894, Hershey has paid an uninterrupted dividend to its shareholders since 1930. Despite all the good news, HSY stock is up only 2% this year. Time to buy.
Ford Motor Co. (F)
Ford Motor Co. (NYSE:F) just crushed its second-quarter earnings. Unfortunately, the strong print was completely overshadowed by news that the Detroit automaker is recalling 870,000 F-150 pick-up trucks and it has pushed back the timing of its electric vehicle (EV) rollout.
Ford announced EPS of 72 cents compared to the 55 cents that was expected on Wall Street. Revenue in the April through June period totaled $42.43 billion versus $40.38 billion which was expected among analysts.
Ford also increased its full-year earnings guidance to a range between $11 billion to $12 billion, up from a previous forecast of $9 billion to $11 billion. By all accounts, the Q2 earnings were stellar.
Sadly though, Ford also announced that it is recalling 870,701 trucks made between 2021 and 2023 due to the risk of an unexpected activation of the electric parking brake. And the automaker now expects to be building EVs at a rate of 600,000 per year sometime in 2024, a delay from earlier estimates that it would reach that target by the end of this year.
The negative news led F stock to fall more than 3% immediately after the great quarterly results were announced. Ford’s share price is now down 15% over the last 12 months. The stock is currently trading at 8 times future earnings, which is reasonable. And the company pays a quarterly dividend that yields a strong 4.58%. This is a buy-the-dip opportunity.
On the date of publication, Joel Baglole held long positions in DECK and HSY. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
