There’s no doubt that the post-pandemic macro landscape has been treacherous to navigate on many levels. From the global supply disruptions that followed the reopening to the soaring inflation and Russia’s invasion of Ukraine, nothing has remained static, and uncertainty has been the only constant.
This new paradigm is acknowledged by Alex Brazier, the Deputy Head at BlackRock Investment Institute. “We‘re in an unprecedented macro environment that is driving constant shifts in the market narrative,” says Brazier, “from hopes of avoiding recession to fears good macro news could be bad for markets in just a few months.”
Working against a tough macro backdrop and buoyed by the AI hype, equities have managed to climb the proverbial wall of worry this year, but that doesn’t mean it’s all blues skies ahead, and Brazier thinks the narrative “could flip again.”
But there’s a solution for those looking to make headway in the market. “We see opportunities from timing market swings and staying selective,” is Brazier’s advice.
That ‘selective’ approach of the world’s biggest asset manager – Blackrock’s total assets under management currently stand at ~$9.43 trillion – has seen the investment firm picking up more shares of two specific equities recently.
Running these tickers via the TipRanks database, we find both are also Buy-rated by the analyst consensus. So, let’s see why you might want to be paying attention to these names right now.
Kosmos Energy (KOS)
We’ll start in the energy sector, where Kosmos Energy specializes in the exploration and production of oil and natural gas resources. With a strong focus on offshore drilling operations, Kosmos operates in various regions around the world, with a particular emphasis on Africa. It has major production assets in offshore Ghana and Equatorial Guinea and is involved in gas development in offshore Mauritania and Senegal, as well as the Gulf of Mexico.
In Q2, the company reached net Production of ~58,000 barrels of oil equivalent per day, although that figure fell from Q1’s 59,000. However, that should increase to between 67,000 – 70,000 boe per day in Q3.
Elsewhere in the report, the company missed expectations on both the top-and bottom-line. Revenue fell by 56% year-over-year to $273.32 million, coming in $27.21 million below the consensus estimate. Adj. EPS of $0.06 missed by $0.03.
Post the quarter’s end, the company announced it had successfully started production in its Jubilee South East (JSE) project, offshore Ghana with the field now generating ~100,000 barrels of oil per day gross.
BlackRock must remain a big believer in the KOS story. It bought 3,773,000 shares during the third-quarter and its overall holdings now stand at 46,221,246 shares, amounting to 10% of the company, and worth almost $336 million.
In line with BlackRock’s faith in Kosmos’s prospects, Barclays analyst James Hosie also stands among the company’s believers. He points to the beginning of production in the Jubilee SE project as helping to keep the narrative positive.
“The successful start of Jubilee SE and higher Ghanaian gas prices are positives that partially mitigate the impact of the Tortue LNG delay (it is expected to produce first gas in 1Q24),” Hosie said. “We forecast Kosmos generating material free cash flow in 2023-24, while continuing to invest in the Tortue LNG project, which can drive a further rise in production and cash flow. We forecast debt leverage continuing to fall during 2023, which could be the catalyst for the restart of shareholder returns.”
These comments underpin Hosie’s Overweight (i.e., Buy) rating on KOS, while his $9.40 price target implies shares will post gains of 29% over the coming months. (To watch Hosie’s track record, click here)
Overall, Kosmos has garnered 5 analyst reviews over the past 3 months, and all are positive, naturally making the consensus view a Strong Buy. Going by the $9.78 average target, a year from now, investors will be pocketing returns of 34%. (See KOS stock forecast)
Oshkosh Corporation (OSK)
Let’s now shift our focus to the industrial sector and Oshkosh, a company that has firmly established itself as a global leader in designing, manufacturing, and servicing a wide range of specialty vehicles and vehicle bodies.
Oshkosh is renowned for its innovative solutions in various sectors, including defense, fire and emergency, concrete placement, and access equipment. It is also the lead supplier of tactical vehicles to the United States Department of Defense. Thanks to its technological and engineering expertise, the defense business has secured new contracts, including the USPS Next Gen Vehicle contract and the Stryker Medium Caliber Weapon System, both awarded in 2021.
However, the stock faced some challenges earlier this year when the company unexpectedly lost its JLTV (joint light tactical vehicles) contract with the US Army, valued at $8.6 billion, to its competitor AM General.
Nevertheless, there were several positive aspects in last month’s Q2 report. Revenue increased by 16.4% year-over-year to $2.41 billion, surpassing the Street’s expectations by $170 million. Adjusted EPS of $2.69 also exceeded consensus expectations by $1.08. The outlook was also strong; for the full year, Oshkosh now expects adjusted EPS of ~$8 and revenue of ~$9.5 billion. Analysts were anticipating $6.18 billion in adjusted EPS and $8.75 billion in revenue, respectively.
BlackRock must have liked the results. In Q3 it purchased another 1,745,722 shares, bringing its total stake to 7,971,067 shares (12.2% of the company). These are currently worth ~$805 million.
With the shares still sitting some distance below the all-time high, Baird analyst Mircea Dobre spots an opportunity here, and one boosted by the Q2 acquisition of airport ground support equipment provider AeroTech.
“Operationally, OSK has lagged peers as Defense and Vocational (especially Fire) struggled with inflation, supply chain, and the JLTV contract loss with the stock still ~$30 below the prior high set in May 2021,” the 5-star analyst noted. “Q2 results demonstrated clear evidence of operational improvement in Vocational with the AeroTech deal closed and Defense turning the corner as well; the earnings ramp potential of the two segments will provide important offsets should Access trends soften, while driving meaningful profit growth should Access prove better than feared.”
Quantifying his stance, Dobre rates OSK shares an Outperform (i.e., Buy) alongside a Street-high $137 price target. The implication for investors? Upside of 36% from current levels. (To watch Dobre’s track record, click here)
Overall, 7 other analysts join Dobre in the bull camp and with an additional 5 Holds, the stock claims a Moderate Buy consensus rating. At $111.31, the average target makes room for growth of ~10% in the year ahead. (See Oshkosh stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Source: finance.yahoo.com