These 8 Beaten-Down Stocks Are Long-Term Winners. Consider Buying. 

That spells opportunity to Evercore. Strategists at the investment bank compiled a screen of stocks that have hit record highs this year and have dropped harshly from those levels, reasoning that some of those shares are solid bets.

To make Evercore’s list, a stock must be down between 10% and 25% from its high, but the fact that shares have plunged isn’t enough to qualify. The consensus Wall Street forecast for calendar 2023 earnings per share must also have risen by more since the end of June than the call for the entire S&P 500.

That makes the list a selection of beaten-down stocks that Wall Street is unusually optimistic about. The results include McDonald’s (ticker: MCD),
Apple
(ticker: AAPL), Yum! Brands (YUM),
PulteGroup
(PHM), Illinois Tools Works (
ITW
), and Eaton (ETN). 

Another name that qualifies is On Semiconductor (ON), a chip maker with a market value of $41 billion. The stock is down about 13% from its record high, hit in early August. Analysts’ consensus call for full-year EPS has risen by 8.2% since the end of June, compared with an increase of just over 1% for the
S&P 500.

The view on Wall Street is that the significant sales growth seen in the past several years will continue. According to FactSet, the consensus call is that sales will grow about 11% annually to reach some $11.7 billion by 2026.

On Semi is in a sweet spot because it is selling hardware into the growing electric-vehicle market, while the broader auto industry will need more chips as cars become more dependent on software. The chips On Semi is now selling are more valuable, with better margins than earlier ones, which should help make the company more profitable.

Including the effects of stock buybacks, earnings per share are expected to gain about 17% annually to around $8.48 by 2026, according to FactSet.

There is also
PepsiCo
(PEP) stock, which is down about 17% from the record level it hit in mid May. The losses have come partly because investors have grown more confident about the economic outlook, giving them a reason to shift toward growth-sensitive names. Concern about how weight-loss drugs will affect demand for snacks has hit the price as well.

And yet the consensus forecast for full-year EPS has risen about 2.3% since the end of June. Third-quarter sales and EPS, disclosed this month, were both better than expected. 

Pepsi, already a dominant snack-and-beverage brand, just continues to grow. Sales of about $23.5 billion in the quarter were almost 7% higher than a year earlier, while prices rose enough for profit margins to increase despite higher costs. EPS came in at $2.25, up 14% from a year earlier. 

The message is clear. These companies can keep winning and their stocks are beaten up. They could easily be buys. 

Write to Jacob Sonenshine at [email protected]