Why Microsoft, Intel and Boeing Are This Fund Manager's Top Picks After Earnings

Investing

Published: November 2, 2015 10:45 am

Last Updated: January 13, 2020 5:40 pm

Earnings season has been in full swing, and most of the Dow Jones Industrial Average and S&P 1500 stocks have reported earnings. Some are serious winners as a result of how their earnings and guidance went out, but there were also some serious losers.

24/7 Wall St. has been speaking with portfolio managers and investment professionals about which large companies with systemic significance look to be best positioned ahead after their earnings. Kim Forrest, who is a vice president and senior equity analyst at Fort Pitt Capital Group, has responded with three of her top reports for earnings season.

Microsoft Corp. (NASDAQ: MSFT) and Intel Corp. (NASDAQ: INTC) both were selected here, as they came through on flying colors despite some of the concerns that might have been there over the personal computing market in years past. Boeing Co. (NYSE: BA) also was selected as a top stock for earnings, and the 787 Dreamliner had an obvious role. Interestingly enough, outside of having passed their earnings bars with flying colors, Microsoft, Intel and Boeing all three share the characteristic of being Dow Jones Industrial Average components.

Forrest focuses on portfolio management for the Fort Pitt Capital Total Return strategy. She is a senior analyst for the Fort Pitt Capital Total Return Fund. 24/7 Wall St. has been given access for direct quotes on the matter. We have included recent trading history and provided consensus analyst targets for the record here to put things in perspective on a relative basis.

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Shares of Microsoft, which were listed here as the top pick so far in earnings season, were recently trading at $52.64, with a consensus analyst price target of $54.50 and a 52-week trading range of $39.72 to $54.37. Microsoft has a market cap of $420 billion and a dividend yield of 2.7%. Her initial commentary on Microsoft said:

Microsoft is my favorite company out of this earnings season – so far! We like that the company beat expectations on both the top and bottom line, however, we are more excited that the analysts following the company seem to have come to our view of what the company really is. It’s not, nor has it ever really been, a consumer-focused company. It has always been focused on creating software for business. The success of Microsoft’s cloud offering and the gains in revenue from Office seem to be the things that changed the opinion of the sell side.

Boeing shares recently traded at $148.00. The stock has a consensus price target of $162.83 and a 52-week range of $115.14 to $158.83. The dividend yield is 2.5% and the market cap is $99 billion. Forrest said:

Boeing is a large holding that did very well in the quarter. The company delivered more planes than it forecast earlier in the year and so it’s deferred production costs rose, moving the 787 (program) closer to profitability. This quarter’s results show that the company should be more profitable in the coming year, which we cheer as long-time holders of the stock.

Intel’s shares were recently trading at $33.75. It has a consensus price target of $35.01 and a 52-week range of $24.87 to $37.90. The market cap is $160 billion and the dividend yield is2.8%. Forrest’s commentary on Intel said:

Intel is another company that reported results higher than anticipated, especially in light of the continuing lack of demand for new PCs. Like Microsoft, investors have linked the company inexorably to the rise and fall of the PC market. As more consumers use phones and tablets instead of PCs, investors have expected Intel’s decline. However, the company benefitted from continued sales of servers, likely to cloud-oriented companies, and it has shown some gains in selling CPUs in other non-PC markets.

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In a closing remark, with Microsoft being Forrest’s top pick after earnings, she said:

We have long had this opinion about Microsoft and it has been difficult at times explaining why we kept the stock in our portfolios. We always kept watch on areas like server and tools and the Office franchise when the company issued earnings reports, to make sure they were still creating software that businesses want and need. Too often in the past analysts had focused on the very rich margin area of PC operating systems. It was reasonable for the sell-side to dislike Microsoft if you were only looking at PC shipments. This quarter seems to have changed many investors’ minds.

Charts from StockCharts.com for Microsoft, Intel and Boeing have been included below.