The impending recession fears are giving companies headaches and threatening corporate profits. Nevertheless, analysts expect certain stocks currently trading at low valuations to show earnings growth this year. Businesses are nervous about how far the Federal Reserve will go as it continues to raise interest rates amid concerns that tighter monetary policy could push the economy into recession. And while inflation is steadily declining, it still remains well above the Fed’s 2% target. Due to this pressure, analysts expect the first profit drop for the S&P 500 since the outbreak of the pandemic. According to FactSet, analysts see earnings of the S&P 500 fall 4.6% in the fourth quarter, which would mark the worst earnings season since the third quarter of 2020. Still, there are some stocks trading at lower valuations than the S&P 500 that also expect strong earnings growth in 2023. We screened the S&P 500 for stocks that met the following criteria: Future price-to-earnings ratio of less than 14 Expected earnings growth per share in 2023 of 20% or more Here are the names that made the cut created, using data from FactSet: Albemarle, a specialty chemicals company, made the list. The stock has a forward P/E ratio of 9 and the company’s earnings are expected to rise 30.3%. The company owns the only lithium plant operating in the US. The stock fell more than 7% in 2022, marking its first annual decline in three years. Albemarle shares doubled in 2020 and are up another 58% in 2021. Deutsche Bank analysts recently added a catalyst call-buy to the stock ahead of a corporate strategy update scheduled for Tuesday. Delta Air Lines and United Airlines are also expected to see strong earnings growth this year, with analysts predicting growth of 37.3% and 29%, respectively. Both stocks trade at much lower valuations than the broader market, with their respective forward P/Es at 7.3 and 6.3. Airlines were battered as the Covid-19 pandemic halted global travel. However, an easing of pandemic-era travel restrictions could see big gains for both stocks. FedEx is another name that has made the cut, with earnings expected to rise 24% in 2023. The stock also trades at a forward multiple of 12. The stock was recently named a top pick for 2023 by Credit Suisse. “The most attractive opportunities often come from a bend in expectations,” the bank said.
These stocks are cheap compared to the S&P 500 and are expected to see major earnings growth in 2023