[Music] Stocks our strategists feel are poised to deliver positive returns are featured now in their top stock picks of the week. Welcome to another edition of Zach's top stock picks. I'm Brian Bolan.I'm the aggressive growth stock strategist here at Zachs. I've got a top stock pick and later on Andrew Ro is going to join me and he has got a top stock pick for the week. All right, let's get right into it, shall we.My top stock pick for the week is Microsoft and that's MSFT. If you're following along at home ...

Group 1: Stock Split Overview - A stock split is an action where a company splits its existing shares into multiple new shares, making the stock more accessible to investors [1] - A forward stock split lowers the price per share, with examples such as a 2-for-1 split or a 10-for-1 split, which do not alter the company's market capitalization or total value of holdings [1] - While a stock split may lead to short-term increases in trading volume and positive investor sentiment, it does not guarantee long-term performance improvements [1] Group 2: Market Insights from Bob Keiser - Bob Keiser, co-chief investment officer at Aspire Strategist Portfolios, has been bullish on large-cap core and growth stocks for two years, citing them as primary drivers of earnings growth [2] - Keiser believes that a predicted Fed interest rate cut will not significantly alter the macro trend of growth in these sectors, although it will be a positive factor [2] - The top 10 stocks in the index account for approximately 40% of its market capitalization, driven by the tech and growth sector expected to post four consecutive quarters of double-digit earnings growth [3] Group 3: Earnings Growth Projections - Consensus expectations forecast a third consecutive year of double-digit earnings growth in 2026, with S&P 500 earnings projected to reach $300 per share [3] - The anticipated broadening of earnings growth beyond the tech sector includes contributions from industrials, materials, and financials, which is necessary for achieving the $300 per share target [3] Group 4: Stock Recommendations - A list of stocks trading over $400 that could potentially split was compiled, focusing on those with significant price surges and a history of stock splits [6] - The methodology emphasizes stocks popular among elite hedge funds, with a strategy that has outperformed the market significantly since May 2014 [7] Group 5: Company-Specific Highlights - Parker-Hannifin Corporation (NYSE:PH) reported total revenue of $19.9 billion for FY2025, with a record adjusted segment operating margin of 26.1% and a backlog of $11 billion [10][11] - W.W. Grainger Inc. (NYSE:GWW) achieved total sales of approximately $4.6 billion in Q2 2025, marking a 5.6% year-over-year increase, despite a decline in operating margin to 14.9% [13][14]

Core Insights - Recent fiscal quarter results from Oracle and Adobe are included in the September-quarter tally, with major banks set to report on October 14 [1] - Adobe's results exceeded estimates but did not alleviate the bearish sentiment surrounding the stock, primarily due to concerns about its ability to maintain its software niche in an AI-driven market [2] - Alphabet faces similar skepticism regarding the sustainability of its search dominance, although it has other business segments to rely on [3] Company Performance - Adobe shares have decreased by approximately one-third over the past year, underperforming the broader market and the Tech sector [3] - Oracle's quarterly results were exceptionally strong, with a backlog increase and management's outlook surpassing even the most optimistic estimates [4] - Adobe's earnings for the current fiscal year are projected to rise by 12% on a revenue increase of 9.6%, with expectations of 12.8% earnings growth and 9.2% revenue growth for the next year [5] Earnings Estimates and Trends - Q3 earnings estimates for the S&P 500 are expected to grow by 5.1% on 6% higher revenues, marking the lowest growth pace since Q3 2023 if actual results align with expectations [7][9] - The estimate revisions trend has been positive since April, with Q3 earnings growth expectations for the Tech sector projected at 12% on 12.5% higher revenues [10][15] - Despite positive trends in the Tech and Finance sectors, 11 of the 16 Zacks sectors have faced downward pressure on estimates since the start of the quarter [11][12] Sector Analysis - The Tech sector is anticipated to continue as a key growth driver, contributing significantly to overall S&P 500 earnings growth for Q3 [15] - Without the Tech sector's strong performance, total S&P 500 earnings growth would only be 2% instead of the expected 5.1% [15]

Core Insights - Target's stock has decreased approximately 40% over the past year due to stagnating earnings growth, increasing competition, and an upcoming leadership change [2] - The company has a history of underperforming during economic downturns, with significant stock declines during inflation shocks and financial crises [3] - Current fundamentals indicate potential further declines, with projections suggesting a possible drop to $45 per share, representing a 50% decrease from current levels [4] Revenue Performance - Target's revenue has been declining, with an average annual decrease of 0.3% over the last three years; FY 2024 reported $106 billion, a 0.7% decrease from the previous year [5] - The latest quarter recorded a further decline of 0.8%, driven by low discretionary demand and competition from value-oriented retailers like Walmart and Costco [6] Margin Analysis - Profitability is declining, with an average operating margin of 5.4% over the last year and a gross margin of 29% in Q2, down from 30% the previous year [8][9] - A shift towards lower-margin essentials and reliance on promotions have diminished pricing power, with potential gross margin contraction to 25-26% leading to a 40% reduction in operating income [9][10] Valuation Concerns - At a current price of $92 per share, Target faces substantial downside risk if revenues contract by approximately 2% annually and gross margins revert to lower levels [10] - If investor sentiment deteriorates, Target's valuation could reassess to 8x earnings, implying an equity value of around $45 per share, reflecting a 50% downside [11] Future Outlook - The upcoming third-quarter results will be critical; stabilization in comparable store sales or gross margin could alleviate some pressure, while continued weaknesses may increase investor skepticism [12] - Target's potential for recovery lies in enhancing its affordable, style-centric private labels, which may require a long-term perspective from both investors and customers [13]

Core Viewpoint - Royal Caribbean Cruises Ltd. has increased its quarterly dividend by 33% to $1.00 per share following stronger-than-expected earnings and an optimistic full-year outlook [1][2]. Financial Performance - The company reported second-quarter earnings of $4.38 per share, exceeding the analyst consensus of $4.05 by over 8% and showing a 36% increase from $3.21 per share in the same quarter last year [3]. - Revenue for the second quarter rose by 10% year-over-year to $4.54 billion, slightly surpassing Wall Street's estimate of $4.54 billion [3]. Future Guidance - Royal Caribbean raised its full-year adjusted earnings guidance to a range of $15.41 to $15.55 per share, up from the previous forecast of $14.55 to $15.55, which is above the average analyst estimate of $15.39 and indicates approximately 31% earnings growth over 2024 [4]. - For the third quarter, the company forecasts adjusted EPS between $5.55 and $5.65, which is below the consensus estimate of $5.97, citing timing of operating costs and a temporary drag from the introduction of Star of the Seas [5]. Stock Performance - Following the announcement, RCL stock increased by 3.59% to $353.76 [5].

Core Insights - Centene Corp confirmed its fiscal 2025 outlook of approximately $1.75 adjusted EPS, surpassing Wall Street's consensus of $1.69, despite previously pulling guidance due to actuarial data concerns [1] - The company reported a 22% year-over-year increase in second-quarter sales, reaching $48.74 billion, which exceeded the consensus estimate of $44.48 billion [1] - However, the revenue growth was impacted by significant increases in medical costs [1] Group 1 - CEO Sarah London acknowledged the challenges faced in the quarter but emphasized the company's commitment to restoring its earnings trajectory [2] - Medicaid results for July and August indicate an improved trajectory for the latter half of the year, with the company refiling in states covering 95% of its membership for 2026 [2] Group 2 - Analysts typically utilize earnings growth and fundamental research for valuation and forecasting, while traders may rely on technical analysis for predictive models regarding share price trajectory [3] - Investors can assess Centene's long-term prospects using moving averages and trend lines [4] Group 3 - The 200-day moving average for Centene is at $51.83, which is above the current stock price of $34.89, indicating potential bullish signals if the stock remains above this average [5] - Recent price action shows CNC stock is up 12.47% at $35.17 [6]

Deutsche Bank upping its target from 6550 to 7,000. That's back to its original forecast from the beginning of the year and that is now the second highest target on the street. Here with us with his call is Binky Chada, chief global strategist at Deutsch uh Deutsche Bank.Good to see you Binky. Good to see you Mike. So your the path of your target somewhat reflects the way the market has experienced this year, right.I mean it's a a major scare. We needed to re-evaluate a lot of things. tariffs, the economy, ...

Core Viewpoint - Texas Instruments (TI) is highlighted as one of the top picks in the semiconductor sector due to its strong margin and earnings growth potential, with an expected earnings growth of approximately 80% to 90% from current estimates [1] Company Performance - TI has demonstrated significant improvement in earnings growth estimates, which were previously projected at 100% two quarters ago, indicating strong operational performance [1] - The company is noted for having the second highest margin and earnings growth in the semiconductor universe, showcasing its competitive position within the industry [1] Management Insights - The presentation features key executives, including Rafael Lizardi, the CFO, and Mike Beckman, the newly appointed VP of Investor Relations, indicating a focus on investor engagement and communication [1]

Market Performance & Outlook - The market has experienced a significant rally of approximately 30% since the April lows [1][2] - The industry anticipates market consolidation in the coming month, influenced by seasonality and concerns regarding the Federal Reserve and the potential impact of AI on the labor force [5][6] - The industry expects to end the year higher, despite anticipating a period of consolidation [18] - The industry views that it's reasonable to expect the market to be up a couple of percentage points by the end of this year from current levels [19] Earnings & Growth - The industry expects high single-digit earnings growth for the full year 2025 and believes it's reasonable to expect similar numbers in 2026, even with a potential economic slowdown [7] - The industry's stock market return depends on multiple expansion, which is influenced by the Federal Reserve's actions [9] Interest Rates & Federal Reserve Policy - The industry anticipates a rate cut in September, with December being more likely than October [8] - The industry believes that the Federal Reserve is likely to pause and evaluate data, leading to macro volatility over the next 6 months [9] - The industry believes that expecting a rate cut at every meeting until mid-2026 may be unrealistic [9] Tariffs & Market Sentiment - The market is seeking certainty regarding tariffs, whether the original tariffs announced in April or a future version, to incorporate them into models [13] - The industry believes that the panic surrounding tariffs has subsided, and analysts are revising estimates upward, fading the worst-case scenarios [14]

Company Performance - The company has demonstrated consistent earnings growth over the past 12 years, with a compound annual growth rate of 9% in earnings over the last 5 years [3] - The return on invested capital for the company over the past 5 years has been 20%, indicating strong project execution and investment in high-return projects [4] Future Outlook - The company is positioned strongly for the future, with fundamentals supporting continued growth [5]