U.S. News & World Report

Analysts recommend these upgraded stocks for January.

The S&P 500 dropped more than 5% in December to finish a brutal 2022 down 19.4%, its worst year since 2008. The Federal Reserve raised interest rates by another 0.5% in December as it continues to battle inflation. The higher interest rates rise, the more difficult it becomes for S&P 500 companies to grow earnings. In fact, many economists now fear a recession is just around the corner. Fortunately, analysts say the chaotic macroeconomic environment has created a handful of fresh investment opportunities in the market. Here are nine recently upgraded stocks to buy, according to CFRA.

FactSet Research Systems Inc. (ticker: FDS)

FactSet Research Systems provides software solutions and economic data to the global financial sector. Analyst Alexander Yokum upgraded FactSet and says the company has a long track record of successfully navigating downturns in the U.S. economy. FactSet has grown its revenue for 42 consecutive years and its net income for 26 consecutive years, demonstrating the value of its stable, reliable business. In addition, Yokum says more than 98% of FactSet’s revenue is recurring, and he projects 14% revenue growth in fiscal 2023. CFRA has a “buy” rating and $470 price target for FDS stock, which closed at $401.21 on Dec. 30.

Advance Auto Parts Inc. (AAP)

Advance Auto Parts is one of the largest U.S. auto parts retailers. Analyst Garrett Nelson upgraded Advance and says the stock has an attractive valuation in an environment in which inflation appears to finally be easing. Nelson is bullish on aftermarket auto parts retailers in the medium term given the number of higher-maintenance used vehicles currently on the highway. In addition, he says the stock’s dividend and buybacks are a big positive for income investors. Nelson projects revenue growth will rebound from 1% in 2022 to 4% in 2023. CFRA has a “buy” rating and $185 price target for AAP stock, which closed at $147.03 on Dec. 30.

New Oriental Education & Technology Group Inc. (EDU)

New Oriental Education & Technology is one of China’s leading for-profit education companies, offering K-12 after-school tutoring services. The stock is down 71% over the past three years after Chinese regulators specifically banned for-profit private tutoring in July 2021. After a horrible few years for New Oriental, analyst Aaron Ho upgraded the stock and says the company’s digital education offerings and net cash position will help it maintain both regulatory compliance and profitability. Ho says demand for after-school tutoring in China will remain high. CFRA has a “buy” rating and $35 price target for EDU stock, which closed at $34.82 on Dec. 30.

Berry Global Group Inc. (BERY)

Berry Global manufactures rigid, flexible and nonwoven packaging used in a variety of consumer and industrial end markets. Analyst Matthew Miller upgraded Berry and says the company’s strong balance sheet, attractive valuation and robust free cash flow make it an attractive long-term investment. Miller projects a fiscal 2023 free cash flow yield of 13% and says revenue growth will rebound from a 1.3% decline in fiscal 2023 to a 3% increase in fiscal 2024. About 70% of Berry’s packaging products are tied to nondiscretionary products, making the company recession-resistant. CFRA has a “buy” rating and $68 price target for BERY stock, which closed at $60.43 on Dec. 30.

Tencent Music Entertainment Group (TME)

Tencent Music Entertainment is a leading online music-streaming platform in China and is the parent of QQ Music, Kugou Music, Kuwo Music and WeSing. Analyst Ahmad Halim upgraded the stock and says online music services revenue will likely recover in coming quarters, boosting margins. Competition from NetEase, Cloud Music, Douyin and other services will continue to be a headwind, but Halim is bullish on the company’s long-term margin outlook given the company’s advertising revenue opportunities. He says the company’s new content investments will eventually pay off as well. CFRA has a “buy” rating and $6.50 price target for TME stock, which closed at $8.28 on Dec. 30.

WestRock is one of the largest U.S. corrugated-packaging companies. Analyst Matthew Miller upgraded the stock and says WestRock had robust free cash flow and an attractive valuation. Unfortunately, Miller says the company faces relatively weak demand in the near term that could weigh on sales growth. WestRock has significantly reduced its net debt since its 2019 Kapstone acquisition, however, and Miller says the company will still grow revenue by 1% in fiscal 2023 despite headwinds from tough comparisons, a weak economic outlook and high customer inventory levels. CFRA has a “buy” rating and $45 price target for WRK stock, which closed at $35.16 on Dec. 30.

CNH Industrial is a global equipment manufacturer that specializes in agricultural and construction machinery. Analyst Alan Lim Seong Chun upgraded CNH and says the company’s improving margins and consistent earnings in a difficult inflationary environment are indications of its stable long-term business outlook. Chun says secular growth in global food demand bodes well for CNH’s agricultural-segment sales, including tractors and other farm equipment. Chun projects 3% revenue growth in 2023 and says the company is committed to shareholder returns, including $76 million in quarterly buybacks. CFRA has a “buy” rating and $17 price target for CNHI stock, which closed at $16.06 on Dec. 30.

Hyatt Hotels is a global hotel owner and operator. Analyst Siye Desta upgraded the stock and says Hyatt shares are attractively valued relative to peers and should benefit from robust travel demand in 2023. Desta is bullish on Hyatt’s unit growth guidance and projects robust demand from higher-income customers and an acceleration in group and business travel. In addition, Desta says Hyatt has a strong balance sheet. Hyatt reported 111.6% revenue growth in the most recent quarter, and Desta projects full-year 2022 revenue growth of 90%. CFRA has a “buy” rating and $107 price target for H stock, which closed at $90.45 on Dec. 30.

Exact Sciences is a leading cancer-screening and diagnostics company that is known for its Cologuard colorectal cancer test. Analyst Ana Garcia upgraded the stock and says inventors may underappreciate Exact’s Cologuard sales outlook. Garcia says competing liquid biopsy blood-based tests are a “second-line diagnostic tool.” Following Exact’s 2021 acquisition of Thrive, Garcia says Exact has an opportunity to expand outside of Cologuard and become a market leader in liquid biopsy. She projects Cologuard tests will continue to be a key growth driver in coming years. CFRA has a “strong buy” rating and $60 price target for EXAS stock, which closed at $49.51 on Dec. 30.

9 upgraded stocks to buy in January:

— FactSet Research Systems Inc. (FDS)

— Advance Auto Parts Inc. (AAP)

— New Oriental Education & Technology Group Inc. (EDU)

— Berry Global Group Inc. (BERY)

— Tencent Music Entertainment Group (TME)

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9 Upgraded Stocks to Buy in January originally appeared on usnews.com

Update 01/03/23: This story was previously published at an earlier date and has been updated with new information.

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