Six stocks Goldman Sachs likes ahead of earnings
Goldman Sachs' analysts have stocks they are confident about going into a new earnings season. CNBC Pro combed through Goldman's research reports looking for stocks the firm rates as "buy." The stocks we found are Amazon , ServiceNow , Colgate-Palmolive , Boeing , Microsoft and Cleveland-Cliffs . Amazon After losing nearly 50% of its value in 2022, analyst Eric Sheridan believes Amazon is worth buying despite immediate headwinds. A more challenging path ahead prompted Sheridan to recently cut his Amazon price target by $20 to $145. But that still implies a potential upside of 49% from where Amazon closed Friday. Sheridan expects fourth quarter revenue to match management guidance. That's lower than he previously expected, pushed down by a more conservative growth expectation for Amazon Web Services and a worsening international consumer environment. Ultimately, Sheridan expects e-commerce growth of 11.5% in the fourth quarter compared with the same quarter a year ago, before falling 10% in the first quarter year-over-year. "We modestly revise our Q4'22, 2023 & beyond operating estimates to inject a greater level of conservatism into our forecasts as the global macro and consumer environment remains volatile and the level of visibility into 2023 is low," he said in a Jan. 12 note to clients. Amazon is in the midst of its largest ever round of layoffs, affecting more than 18,000 workers . Amazon is scheduled to release earnings after the market close on Feb. 2. ServiceNow Though software stocks and their high valuations took a beating last year, analyst Kash Rangan said ServiceNow's defensive product suite will buoy growth. Rangan said the Santa Clara, California-based cloud computing platform tempered earnings expectations comparatively early, allowing it to meet or slightly exceed previous guidance for the fourth quarter. "While we don't see ServiceNow being insulated from the elongated sales cycles and weaker net new business dynamics (likely to have continued through December), we are encouraged by the company's quick-time-to-value, high ROI offerings," Rangan said in a Jan. 17 note to clients. The company reports Jan. 25. Rangan's price target of $640 implies 45% upside over where ServiceNow closed Friday. The stock lost 40% in 2022. While year-over-year comparisons will be hard to beat, he said ServiceNow should be able to maintain a "healthy top-line cadence" due to its value proposition, stable mix of workflows and penetration opportunities among current clients. Colgate-Palmolive Analyst Jason English raised estimates ahead of Colgate-Palmolive's Jan. 27 earnings as headwinds from foreign exchange turn in to tailwinds. Multinationals felt the sting of the stronger through most of 2022, but the currency weakened toward the back half of the year. The effect of currency has gone from an 8% headwind on English's 2023 full-year earnings per share estimate to nearly a neutral variable now. While English said the uncertain global environment could hurt Colgate's business, he still expects the toothpaste and soap maker to meet Goldman's 9% per-share earnings growth forecast for the year. "We raise our estimates ahead of the event to reflect recent currency, commodity and consumption trends," English said in a note to clients on Jan. 16. Colgate reports results on Jan. 27. Goldman Sachs also said pricing is staying stronger than previously expected, though Colgate has felt some impacts from leaning less on promotions than competitors. Colgate lost 7.7% last year, outperforming the almost 20% loss in the S & P 500 . English has a price target of $86, equal to 14% upside over where Colgate closed Friday. Other stocks where Goldman sees solid earnings outlooks are Boeing, Microsoft and Cleveland-Cliffs. Amazon For Q4'22, we are now expecting revenues of $146bn (vs. management guidance of $140-148bn), partially driven by more conservative AWS growth assumptions. Specifically, we are now forecasting AWS growth to decelerate to +21% YoY (vs. +27.5% YoY in Q3'22) with more subdued growth expectations in 2023. Additionally, we modestly adjust our NA vs. International revenue growth rates, assuming a more pronounced deterioration of the international consumer environment vs. a more stable environment in the U.S. ... Our estimates would imply North America eCommerce grows +11.5% YoY in Q4'22 and declines -20% QoQ in Q1'23. ServiceNow We view ServiceNow as well positioned to solidly meet (or slightly exceed) the 4Q expectations set in October (subscription revenue growth of 20.5%/26.5% in USD/CC, CRPO growth of 20/26% in USD/CC and operating margins of 26%). As we expect initial 2023 guidance to echo the conservatism of the last few quarters, management is likely to set top-line growth expectations at +19-21% USD, in-line with cRPO's 4Q performance. Colgate-Palmolive We raise our estimates ahead of the event to reflect recent currency, commodity and consumption trends. The biggest change is currency, which has gone from an 8% headwind to FY23 EPS in our model in late October to a roughly neutral contributor now. We raise our estimates accordingly and now expect a modest top-line driven beat for 4Q22 and initial FY23 guidance that brackets the Street with [mid single digit] to [high single digit] guided EPS growth. It is possible, however, that the company anchors only to a msd growth outlook given global uncertainty, but assuming spot currency and commodities hold steady we see no reason to believe that they will not ultimately be able to deliver on our now higher 9% EPS growth forecast for the year. Boeing We see strong 4Q free cash flow given the robust level of both orders and deliveries in the quarter. We expect the company to reiterate all of the outlook pieces it provided at its November investor day, while investor expectations still appear fairly low. Microsoft While we are trimming our Azure estimates as a result of the unpredictable nature of the consumption model, the strength of Commercial RPO (+30%) may lead to re-acceleration once recession concerns ease. The fact that Microsoft's install base largely comprises enterprise customers also provides stability and is a differentiating aspect vs peers Cleveland-Cliffs We expect CLF to benefit from its recently signed fixed-price contracts at levels above 2022, and coupled with expectations for some cost pressures easing (driven partly by lower maintenance activity and fewer lost volumes), see margins expanding into 2023 from 2H22 levels. While many investors remain skeptical around the company's ability to deliver substantial cost reduction (given the only moderate easing in cost pressures), we expect sequentially improving quarterly updates from the company would likely increase investor's confidence in the company's execution. Further, we expect volumes to increase in 2023, as automotive demand improves from 2022 levels — CNBC's Michael Bloom contributed to this report.