3 All-Stars in terms of earnings with still room for improvement

Earnings are key to determining which stocks will outperform. Unsurprisingly, stocks that outperform in terms of earnings also experience strong price appreciation. Even if a stock’s price has increased significantly, it may still have potential for further growth if its earnings are growing at a commensurate rate.

A good example of a company that outperforms in terms of earnings is Nvidia (NASDAQ:NVDA). Its stock price grew by triple digits last year. However, with its earnings growing at a similar pace, investors were poised to continue pushing its stock price higher in 2024.

Analysts, CEOs, and traders are reasonably focused on this key performance indicator. The magnitude of earnings growth can predict the speed and magnitude of a company’s stock price increase. However, identifying the best-performing companies can be a bit more complex than simply selecting the stocks with the highest earnings.

Some analysts are concerned that expectations for the upcoming earnings season are very high. It is worth looking at stocks that are showing strong earnings growth and are expected to maintain it in the coming months.

The following stocks are a list of three companies that have outperformed in terms of earnings and could see further gains heading into earnings season.

Travelers (TRV)

Insurance companies are expected to benefit from two tailwinds this year. Rising premiums are boosting revenues, and interest rates are expected to fall, reducing costs. This combination means profits are expected to rise significantly for companies like The travellers (NYSE:VRT).

Travelers already has the status of a top performer. The company has seen strong EPS growth over the past two quarters. Analysts are now expecting EPS of $2.65 for the current quarter. This represents growth of $0.06 over the same quarter last year. This positive trend is expected to continue, with the next quarter’s growth forecast at 102% year-over-year.

The insurance industry as a whole was hit by significant catastrophe losses last year. However, Travelers is rebounding after a relatively benign start to 2024. While further natural disasters cannot be ruled out, a repeat of the doubling of losses seen last year is highly unlikely. With this in mind, analysts have set a price target of $228.46 per share for TRV, suggesting 13% upside potential.

Seagate Technology (STX)

Seagate Technology (NASDAQ:STX) is a computer memory company best known for its hard drives. It has proven to be one of the top performers in terms of profits in the current boom in artificial intelligence (AI). AI requires significant storage capacity to generate results and store vast amounts of digital content created using AI technologies. Seagate will be well positioned to achieve continued strong sales as the AI ​​industry grows.

STX stock is up nearly 66% over the past twelve months. In 2024, gains have reached about 20% so far. Non-GAPP earnings growth has been even more impressive, rising from -$0.28 to $0.33 over the same period.

Analysts expect the positive momentum to continue. Current estimates suggest earnings of $0.74 per share for the current quarter. This would equate to a quarterly earnings growth rate of over 500%. While such a rapid pace is unsustainable, earnings are expected to grow by around 400% in 2024 and 485% next year.

Arteriosclerosis (AORT)

Cardiac implant company Artivion (NYSE:AORT) has seen its stock price increase by nearly 50% over the past year. It continues to report strong sales growth for its core product. Sales growth is expected to increase by 12.30% for the next quarter.

Heart attacks are the leading cause of death in the U.S., so demand for stents and other treatments for aortic disease is expected to remain stable. Artivion’s CEO is upbeat about the outlook, citing expansion in Latin America, which led the company to raise its forecast for the rest of the year. The company expects its EPS to triple in the second quarter.

Analysts are not as confident and expect the company to report earnings of -$0.06 for the quarter. Still, this is an improvement from the -$0.08 reported in the same period last year. Nevertheless, all analysts recommend buying the stock. However, if Artivion’s results match its outlook, this could represent a major earnings outperformance of 25% over current estimates, pushing AORT stock higher.

As of the date of publication, Stavros Tousios did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the advice of InvestorPlace.com Publication Guidelines.

As of the date of publication, the responsible editor did not hold (either directly or indirectly) any positions in the securities mentioned in this article.