First quarter earnings season is underway and Bank of America has named a host of top picks heading into their latest profit reports. Fourteen percent of S & P 500 companies have reported earnings so far and, of those, 79% have posted results above analyst estimates, according to LSEG. CNBC Pro combed through Bank of America research to find the firm’s favorite buy-rated stocks ahead of company earnings. They include: CoStar Group, Fidelity National Information Services, Cisco, Home Depot and Adobe. Cisco Time to buy shares of the networking equipment maker. Bank of America upgraded the stock to buy from neutral earlier this week, citing several positive catalysts. In fact, analyst Tal Liani is so bullish on Cisco that he sees a “favorable setup for the next few years.” Growth drivers include market share gains in data networking in addition to new product launches in cyber security. Cisco also recently completed its acquisition of Splunk. “Lastly, Splunk’s integration should benefit from go-to-market synergies, with 5,000 customers identified and targeted, international growth opportunities, and greater channel presence,” Liani wrote. Liani also likes Cisco’s “low expectations and valuation support.” Cisco is down 4.4% this year and scheduled to report earnings in mid-May. Home Depot The home improvement chain is firing on all cylinders, according to analyst Robert Ohmes. “Improvements to productivity and supply chain should help to drive margin improvement, partially offset by near-term investments to drive future growth and deepen HD’s competitive moat,” he said in a recent note. The bank is also bullish on Home Depot’s purchase of trade distributor SRS Distribution, which was announced in late March. “We expect the acquisition to accelerate growth and expand HD’s share of wallet with the complex pro,” Ohmes wrote. Ohmes believes the deal has the potential to push Home Depot’s Pro strategy ahead of its main competitor, Lowe’s. “A growth company buying a growth company,” he said of the deal. Home Depot shares are down 3.2% this year. The Atlanta-based company is scheduled to report earnings in mid-May. Fidelity National Information Services Shares of the fintech and financial product services company have plenty more room to run, analyst Jason Kupferberg recently wrote. Bank of America sees upside potential heading into the company’s investor day on May 7 and its first quarter earnings report in late April or early May. “For 1Q, we anticipate solidly in-line revenues with a potential modest EPS beat from buybacks,” Kupferberg said. The investor day, according to the analyst, will “enhance the Street’s understanding of competitive positioning and product/growth strategy.” Looking ahead, the bank sees “significant recurring revenues” and a “return of cash to shareholders.” The stock is up 18% this year, but shares are still “attractive” at current prices. “FIS remains a top pick,” Kupferberg said. Home Depot “A growth company buying a growth company. … .Improvements to productivity and supply chain should help to drive margin improvement, partially offset by near-term investments to drive future growth and deepen HD’s competitive moat. … .We expect the acquisition to accelerate growth and expand HD’s share of wallet with the complex pro.” Cisco “Upgrade to Buy on three growth drivers, low expectations, and valuation support. … .Favorable setup for the next few years. … .Lastly, Splunk’s integration should benefit from go-to-market synergies, with 5,000 customers identified and targeted, international growth opportunities, and greater channel presence.” CoStar Group “We rate CSGP a Buy because of its industry dominance, recession resiliency and strong balance sheet. CoStar is a diversified commercial real estate (CRE) data, analytics and marketplace company. It provides critical real estate data, maintains a 90% average renewals and sustained pricing power in the market.” Fidelity National Information Services “FIS remains a top pick. … .For 1Q, we anticipate solidly in-line revenues with a potential modest EPS beat from buybacks. … Reiterate Buy on ‘new’ FIS’ significant recurring revs, return of cash to shareholders, and attractive valuation.” Adobe “Continue to view Adobe as an AI beneficiary. … .Adobe looks well positioned to continue gaining share across its product suite given its competitive advantages: 1) large Creative Cloud subscriber base 2) distribution channel of 4,900 sales & marketing personnel 3) breadth & depth of the digital content and experience software suite.”
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