The corporate earnings season is just around the corner, and expectations for corporate profits are muted at best. Data compiled by FactSet showed that third-quarter S & P 500 earnings are expected to grow by just 2.4% on a year-over-year basis. That lackluster forecast comes as corporations deal with rising interest rates and persistently high inflation. These conditions have raised concern that the U.S. could fall into a recession. On Sept. 28, billionaire investor Stanley Druckenmiller said he thinks the Federal Reserve’s attempts to wind down easy monetary policies could lead to a “hard landing” for the economy by the end of 2023 . “I will be stunned if we don’t have recession in ’23. I don’t know the timing but certainly by the end of ’23. I will not be surprised if it’s not larger than the so-called average garden variety,” he said. With this in mind, CNBC Pro set out to find which stocks could still do well in this environment of muted overall earnings growth and increasing odds of a U.S. recession. To this, we screened the S & P 500 for stocks that met the following criteria: Expected 2022 earnings per share growth of at least 20% Buy ratings from at least 70% of analysts covering the stock Analysts on average see upside of at least 20% for the stock Here are the names that made the list: Generac Holdings has the most potential upside of any stock on the list. Analysts on average expect the residential generator builder to rise more than 110% going forward, and its earnings are expected to grow by 25% in 2022. Cowen initiated the stock with an outperform rating on Sept. 30 , saying that housing market uncertainty is already priced into the stock. The firm also said that: “The instability of the grid continues to drive significant power outages across the U.S. during periods of extreme weather.” Generac shares have struggled in 2022, losing 56.2% in that time. Another stock that met our criteria is Disney . Analysts see 2022 earnings per share growing by 67%, and the stock advancing 42% from current levels. Nearly three-quarters of those covering the stock rate it a buy. To be sure, the media giant’s stock has been battered this year, losing 37.3%. The company has also faced pressure from activist investor Dan Loeb recently. In late September, Disney and Loeb’s Third Point reached a deal that included adding former Meta executive Carolyn Everson to its board. Energy stocks EQT and Diamondback Energy also made the list. EQT’s earnings are expected to grow by 420% in 2022, and 81% of analysts covering the stock rate it a buy. Diamondback’s earnings per share are also expected to more than double, and nearly three-quarters of analysts have buy ratings on the stock. Both stocks have handedly outperformed the broader market, with EQT up 97.9% year to date, and Diamondback Energy advancing 3.2%. The S & P 500, meanwhile, is in a bear market, down 23% year to date. Energy stocks have gotten a boost this year from rising oil prices. In 2022, West Texas Intermediate crude has gained nearly 24%. Other stocks that made our list are: Signature Bank, Monolithic Power Systems, ServiceNow, Synopsys, CDW, Assurant and Howmet Aerospace.
