Analysts recommend these upgraded stocks for May.
The S&P 500 continued its disappointing start to 2022 with an 8.8% decline in April. Heading into May, investors are concerned about the ongoing impact of Russia’s invasion of Ukraine, the possibility of aggressive Federal Reserve interest rate hikes and U.S. inflation raging at 40-year highs. Despite this year’s market volatility, analysts remain mostly optimistic about the 2022 U.S. economic outlook. In fact, analysts say the early-year stock market volatility and the chaotic macroeconomic environment have created a handful of fresh investment opportunities. Here are nine recently upgraded stocks to buy, according to CFRA.
East West Bancorp Inc. (ticker: EWBC)
East West Bancorp is a middle-market lender that specializes in banking trade between the U.S. and China. Analyst Alexander Yokum upgraded the stock and says East West is a compelling choice due to its potential for loan growth and net interest margin expansion. Net interest margin grew 0.14% in the first quarter, and Yokum projects that it will expand by at least another 0.35% by the end of 2022 due to the bank’s high interest rate sensitivity. East West’s commercial loan growth has been particularly impressive as well. CFRA has a “strong buy” rating and a $108 price target for EWBC, which closed at $74.32 on May 5.
Huntington Bancshares Inc. (HBAN)
Huntington Bancshares is a U.S. consumer and commercial bank that operates primarily in the Midwest. Yokum upgraded Huntington and says the bank has bullish trends in the first quarter: 1.4% growth in net interest income, 0.03% expansion in net interest margin and a 1.5% increase in its loan balance. He says Huntington’s credit risk quality is “excellent,” and synergies from its TCF Financial Corp. merger helped lower its efficiency ratio to 60.1%. Yokum is bullish on Huntington’s cost-saving initiatives, including a 17% reduction in bank branches in the past two quarters. CFRA has a “buy” rating and a $17 price target for HBAN stock, which closed at $13.61 on May 5.
ITT Inc. (ITT)
ITT manufactures advanced industrial technology products for the transportation, industrial and energy markets. Analyst Jonathan Sakraida upgraded the stock and says ITT has a strong balance sheet and should benefit from recent acquisitions, including a $140 million buyout of valve specialist Habonim. Sakraida says ITT is positioned to pass rising commodity costs on to customers in 2022. ITT’s Friction Technologies business, which produces brake pads and friction materials, is outperforming other auto industry suppliers, and Sakraida says commercial aerospace demand should rebound in the second half of 2022. CFRA has a “buy” rating and a $98 price target for ITT stock, which closed at $73.70 on May 5.
Halliburton Co. (HAL)
Halliburton is one of the largest global oilfield services providers. Analyst Paige Meyer upgraded the stock and says a booming North American oil and gas industry is bullish for Halliburton, which generates 42% of its total revenue from the region. The U.S. and other nations have released oil from strategic oil reserves, and Meyer projects that surging oil demand will increase oil and gas exploration and production spending by more than 20% in 2022. Meyer says Halliburton is in the early innings of a multiyear recovery. CFRA has a “buy” rating and a $48 price target for HAL stock, which closed at $36.69 on May 5.
Allegion PLC (ALLE)
Allegion produces mechanical and electrical security products. Analyst Richard Wolfe upgraded the stock and says Allegion is a top-tier producer in an attractive industry that has a compelling long-term demand outlook. Wolfe is especially bullish on Allegion’s electronics and touchless-entry products. He says nonresidential markets, which account for 70% of Allegion’s business, have reached a turning point in 2022 after an extended period of weakness due to the pandemic. At the same time, Wolfe says Allegion’s residential demand will likely remain elevated in the near term. CFRA has a “buy” rating and a $133 target for ALLE stock, which closed at $113.76 on May 5.
Palo Alto Networks Inc. (PANW)
Palo Alto Networks is one of the largest global cybersecurity vendors. Analyst Janice Quek upgraded the stock and says Palo Alto is one of the best-positioned companies to gain market share in a rapidly growing cybersecurity market. Palo Alto has doubled its product offerings in the past three years, which Quek says has tripled the company’s total addressable market and created significant cross-selling opportunities. She says Palo Alto remains the industry leader in network firewalls and has a deep portfolio of solutions for network, cloud and security applications. CFRA has a “strong buy” rating and a $747 price target for PANW stock, which closed at $529.64 on May 5.
Toyota Motor Corp. (TM)
Japan’s Toyota Motor is one of the world’s largest automakers. Analyst Aaron Ho upgraded the stock and says Toyota has made progress on its Toyota New Global Architecture initiative, which will update its vehicle platforms and lower assembly plant investments by about 40%. Ho says Toyota’s diverse vehicle model portfolio, constant feature innovation and global distribution network will help the company maintain at least double-digit revenue growth. Finally, Ho says Toyota’s electrification initiatives, which include its partnership with Contemporary Amperex Technology Co. Ltd. (300750), will be a longer-term revenue growth driver. CFRA has a “buy” rating and a $210 price target for TM stock, which closed at $169.93 on May 5.
CenterPoint Energy Inc. (CNP)
CenterPoint Energy is a Texas-based electric and natural gas utility that operates in eight different U.S. states. Analyst Daniel Rich upgraded CenterPoint and says electric grid improvements in Houston provide an opportunity for the company to generate peer-leading earnings growth and increase its 2.2% dividend by at least 7% annually over the next three years. In addition, CenterPoint is retiring coal plant operations and adding renewable generation capabilities as it progresses toward its goal of achieving net-zero carbon emissions by 2035. CFRA has a “strong buy” rating and a $35 price target for CNP stock, which closed at $30.94 on May 5.
Celanese Corp. (CE)
Celanese produces industrial chemicals, engineered plastics and acetate fibers. Wolfe upgraded the stock and says the company’s 12% quarter-over-quarter revenue growth in the first quarter was driven by 29% sales growth in engineered materials, which benefited from improving auto market demand. Despite acetic acid pricing pressures, Celanese maintained impressive 28% operating margins and generated $175 million in free cash flow in the quarter. The company also said its recent $11 billion acquisition of the mobility and materials business of DuPont de Nemours Inc. (DD) will double Celanese’s annual free cash flow. CFRA has a “buy” rating and a $185 price target for CE stock, which closed at $151.55 on May 5.
9 upgraded stocks to buy in May:
— East West Bancorp Inc. (EWBC)
— Huntington Bancshares Inc. (HBAN)
— ITT Inc. (ITT)
— Halliburton Co. (HAL)
— Allegion PLC (ALLE)
— Palo Alto Networks Inc. (PANW)
— Toyota Motor Corp. (TM)
— CenterPoint Energy Inc. (CNP)
— Celanese Corp. (CE)
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Update 05/06/22: This story was published at an earlier date and has been updated with new information.