HSBC has high hopes for the third quarter earnings season and is sure that some stocks will do better than others. The latest quarter’s results kicked off in earnest on Friday following reports from BlackRock , JPMorgan and Wells Fargo . Financial firms from Citigroup to regional banks including PNC Financial Services will post their earnings in coming days, alongside this week’s blockbuster reports from Netflix and Procter & Gamble , among many others. Third-quarter numbers are likely to follow what was a positive second-quarter earnings season. In the three months ended June 30, nearly 79% of companies in the S & P 500 beat analysts’ earnings expectations, while 60% of companies in the index posted an upside surprise to Wall Street revenue forecasts. Ahead of the third-quarter earnings season, HSBC recently listed its favorite stocks to buy, where it believes market expectations are low and there are opportunities. Here are some of the names HSBC recommended: Shares of Target have risen 11% this year through Friday, and analyst Daniela Bretthauer’s $197 price objective implies that the stock could rally another 24% over the next 12 months. Bretthauer highlighted Target’s rising revenue and expanding gross profit margin as tailwinds for the Minnesota-based retailer’s fiscal third quarter. These catalysts contributed to net sales growth of 2.3% in Target’s third quarter, the analyst believes. “We expect positive earnings momentum from Q2 to continue into H2 as Target not only faces easy comps but also as its turnaround strategy should start to materialize,” Bretthauer wrote. More than half the analysts covering Target give the stock a buy rating, and the average price target implies 16% upside. HSBC also highlighted Oracle as a potential winner. Shares of the software company have already surged 67% this year, but could rally more than 19% to analyst Stephen Bersey’s $210 price target. In last week’s note, Bersey cheered Oracle’s scaling up of its Oracle Cloud Infrastructure (OCI) service in recent years. Opportunities for significant operating leverage could also help boost Oracle’s earnings. “Fueled by AI, Oracle has reported strong demand in its OCI business over the last few quarters, which has bolstered top-line growth for the company,” Bersey wrote. “We think that OCI will deliver a much-needed source of top-line growth which could last for several years.” Most analysts covering Oracle are similarly bullish, although the average price target implies that shares will trade in a relatively narrow range in the near future. HSBC analyst Wesley Brooks believes that shares of 3M Co. could rise almost another 14% from Friday’s close, to $153, adding to the Post-it note maker’s 47% advance so far in 2024. Brooks called 3M one of the higher-quality stocks in the industrials sector, although it’s no longer a “deep value play” following a 30% rally in the past three months. Still, 3M remains discounted. “Although 3M’s 3Q will face a tougher comparison than the first half, and the macro backdrop for industrial activity remains challenging, we see the potential for margins to surprise positively in the quarter given a combination of continued gradual top line recovery, operating leverage in a seasonally strong quarter, and lower restructuring charges,” Brooks wrote. “Our EBITDA and EPS estimates are 5% and 4% ahead of consensus.” Some 40% of analysts covering 3M rate the stock the equivalent of a buy, up from just 5% as recently as March, according to FactSet data. The average price target corresponds to upside of just 3% or so, based on the same FactSet survey. Other names in HSBC’s basket included Biogen and Morgan Stanley .
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