As the second-quarter earnings season heats up, investors are looking for companies that combine durable long-term growth drivers with strong underlying fundamentals.
While quarterly reports can create short-term volatility, they also provide opportunities to build positions in high-quality businesses that have the potential to outperform over time.
Three stocks that stand out ahead of their upcoming Q2 reports on Thursday, July 16 are GE Aerospace GE), Taiwan Semiconductor TSM), and UnitedHealth Group UNH).
Each operates in an industry with attractive long-term demand trends, boasts market-leading positions, and has catalysts that could support further upside if quarterly results reinforce their investment theses.
GE Aerospace Continues to Benefit From Aviation Recovery
GE Aerospace has emerged as one of the market’s premier industrial companies following its transformation into a pure-play aerospace business. The company continues to benefit from robust commercial air travel demand following the COVID-19 pandemic, rising aircraft utilization, and a growing backlog of engine service work.
Perhaps GE’s greatest strength is its highly profitable aftermarket business. As airlines keep aircraft flying longer amid ongoing delivery constraints from Boeing BA) and Airbus EADSY), demand for maintenance, repair, and overhaul services continues to rise. Since servicing engines typically generates higher margins than selling new ones, this dynamic has helped drive steady earnings expansion.
Analysts expect another quarter of solid revenue and earnings growth as commercial aviation remains healthy despite lingering supply-chain challenges. GE’s Q2 revenue is expected to be up nearly 17% to $11.86 billion, with quarterly EPS projected to rise 12% to $1.86.
Taiwan Semiconductor Remains at the Center of the AI Boom
Few companies are more important to the artificial intelligence investment story than Taiwan Semiconductor. As the world’s largest contract chip manufacturer, TSM produces the advanced semiconductors powering AI accelerators designed by Nvidia NVDA), AMD AMD), Broadcom AVGO), and Apple AAPL).
Demand for advanced manufacturing capacity continues to outpace supply, allowing Taiwan Semiconductor to benefit from favorable pricing, exceptional capacity utilization, and expanding profit margins.
Adding confidence ahead of earnings, the company most recently reported record quarterly revenue and EPS during Q1 at $35.89 billion and $3.49 per share, respectively.
Wall Street expects new quarterly peaks, with consensus estimates calling for Q2 EPS of $3.87 on nearly $40 billion in revenue, reflecting continued AI-driven demand. Those expectations reflect nearly 57% EPS growth and 32% sales growth.
UnitedHealth is Staging an Impressive Turnaround
Trading near its 52-week high, UnitedHealth Group’s stock has been on an impressive rebound after facing increased regulatory scrutiny, higher-than-expected Medicare Advantage utilization, and uncertainty surrounding reimbursement trends.
With those headwinds starting to subside, investors are starting to re-recognize the company’s industry-leading scale. Although Q2 sales are expected to dip 1% to $110.05 billion, quarterly EPS is expected to be up 18% to $4.84, reflecting the health giant’s more promising execution.
Of course, what has also kept investors engaged is that UNH offers a very respectable 2.16% annual dividend yield that equates to $9.28 per share quarterly.
Bottom Line
Quarterly earnings often create volatility, but they can also present opportunities to accumulate shares of industry leaders with durable competitive advantages.
GE Aerospace and Taiwan Semiconductor are currently sporting a Zacks Rank #2 (Buy), with UnitedHealth Group stock boasting a Zacks Rank #1 (Strong Buy). Investors looking to strengthen their portfolios as the Q2 earnings season heats up may find these three blue-chip companies worthy of closer consideration.
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GE Aerospace (GE) : Free Stock Analysis Report
UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
Taiwan Semiconductor Manufacturing Company Ltd. (TSM) : Free Stock Analysis Report
The Boeing Company (BA) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Broadcom Inc. (AVGO) : Free Stock Analysis Report
Airbus SE – Unsponsored ADR (EADSY) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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