As we move into April, the dust is settling on fourth quarter 2023 earnings season, and, by most accounts, it was a success. According to data from FactSet, 73% of companies listed in the S&P 500 index exceeded their earnings estimates. Overall, earnings for the last quarter of 2023 grew 4% year-over-year, marking the second consecutive quarter of annualized growth. The communications services sector reported the strongest earings growth among the 11 sectors that comprise the S&P 500 at 45%.
Successful Q4 2023 earnings are largely responsible for the stock market rising to an all-time high in this year’s first quarter. The S&P 500 is closing out Q1 up 11%, its strongest start to a year since 2019. All three major stock indices in the U.S. are currently at record highs. This despite the fact that inflation remains stubborn and the U.S. Federal Reserve has pushed back the timing of interest rate cuts this year. A lot will be riding on earnings for this year’s first quarter that will start rolling in mid-April. As we wait for those results, here are the three most compelling stocks to buy now that the Q4 earnings dust has settled.
The Gap (GPS)
Clothing retailer The Gap (NYSE:GPS) is riding high after posting a strong Q4 2023 earnings report and providing further evidence that its turnaround strategy is working. GPS stock is up more than 40% since the company delivered its latest print. Over the last 12 months, the share price has tripled. The latest leg higher comes after The Gap reported earnings per share (EPS) of 49 cents, surpassing the 23 cents forecasted on Wall Street.
Revenue in Q4 totaled $4.30 billion versus $4.22 billion that had been expected among analysts. The company highlighted that its latest earnings got a lift from sales at Old Navy, which grew 6% to $2.29 billion. It was the first growth at Old Navy in more than a year. Analysts and investors also liked that The Gap’s gross margin rose 5.3 percentage points to 38.9% due to fewer markdowns and lower input costs.
The Gap successfully decreased its inventory level by 16% during all of last year. The company is now focused on selling items at full price, with no further markdowns planned. The blowout print and impressive metrics have GPS stock surging as we enter the year’s second quarter.
Micron Technology (MU)
Shares of Micron Technology (NASDAQ:MU) also got a huge boost from the company’s most recent earnings. MU stock is up 44% year to date and has doubled in the last 12 months. The surge comes after Micron provided upbeat forward guidance fueled by demand for artificial intelligence (AI) products and services. The company, which makes memory and storage for computers, reported EPS of 42 cents compared to a loss of 25 cents that was expected on Wall Street.
Micron’s fiscal second quarter revenue totaled $5.82 billion versus $5.35 billion that was expected among analysts. Management said that the company is benefitting from booming demand for its memory and computer data storage products, driven by the growth of AI. Looking ahead, Micron executives said they expect to report revenue of $6.60 billion for the just completed first quarter of 2024, which is above the $6.02 billion that analysts had penciled in for the company.
Micron, who provides memory and storage systems for AI, now looks like the hottest AI play on Wall Street.
Dick’s Sporting Goods (DKS)
Dick’s Sporting Goods’ (NYSE:DKS) stock has been trading like a tech start-up ever since it issued record quarterly results and raised its dividend by 10%. Year to date, DKS stock has gained 53%, outpacing many of the mega-cap technology stocks. Since releasing latest results, the company’s share price has risen 25%. This comes after Dick’s reported EPS of $3.85 versus $3.35 that was expected on Wall Street.
Revenue in the final quarter of last year reached a record $3.88 billion, exceeding analysts’ forecast of $3.80 billion. Sales were up 8% from a year earlier, the biggest quarterly sales in its history. The forward guidance provided by the sporting goods retailer was also robust and ahead of analysts’ expectations. Dick’s also announced a quarterly dividend of $1.10 per share going forward, up 10% from $1 previously.
Over the past five years, DKS stock has increased 507%, making it one of the best-performing retail stocks and a great long-term investment.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
