As spring brings new buying opportunities to the market, with the S&P 500 Index ($SPX) pulling back from the new all-time highs set in March, Jefferies sees promise in mid-cap stocks. While big players dominated last year's rally, mid-caps fell behind. Mid-caps were sized at 10% of the U.S. equity market, falling short of the historical average of 15% since 1926.
However, Jefferies strategist Steven DeSanctis believes mid-caps look ready to make a comeback, as he predicts their earnings growth will pick up speed in the second half of the year, boosting relative performance.
Among the overlooked mid-cap stocks Jefferies highlighted, three that investors might want to consider right now are waste management company GFL Environmental Inc (GFL), healthcare services company Tenet Healthcare Corp (THC), and cross-border e-commerce platform Global-E Online Ltd (GLBE) – all of which are favored by Wall Street analysts, and have significant upside potential.
GFL Environmental Stock
GFL Environmental Inc (GFL), based in Vaughan, Canada, is a leader in non-hazardous solid waste management and environmental services across North America. Valued at $12.3 billion by market cap, the company offers a comprehensive range of services, including collection, transportation, recycling, and disposal for municipal, residential, commercial, and industrial customers.
GFL Environmental stock has gained 11% over the past six months.
Recently, the company declared a 10% increase to its regular quarterly cash dividend, from $0.013 to $0.014 per share, payable on April 30. The company offers an annualized dividend of $0.05 per share, resulting in a dividend yield of 0.16%.
GFL Environmental stock trades at 2.21 times sales, lower than its peers like Waste Connections (WCN), which trades at 5.31x.
The company reported Q4 revenue of $1.4 billion on Feb. 20, exceeding Wall Street's estimates by 1.9%. Solid waste revenue reached $1.5 billion with 4% organic growth primarily from core pricing, while environmental services revenue hit $371.2 million, with 1.5% organic growth driven by industrial activity and oil prices. Its adjusted net income from continuing operations stood at $17 million, or $0.05 per share.
GFL Environmental's management anticipates revenue of around $8 billion, adjusted EBITDA of approximately $2.2 billion, and adjusted free cash flow of roughly $800 million for fiscal 2024.
Analysts tracking GFL Environmental expect fiscal 2024 earnings to reach $0.82 per share, up 13.9% year over year, and increase further by 30.5% in fiscal 2025 to $1.07 per share. The company is expected to announce Q1 2024 earnings results on May 1.
GFL Environmental stock has a consensus “Strong Buy” rating overall. Out of the 17 analysts covering the stock, 13 rate it a “Strong Buy,” two advise a “Moderate Buy” rating, and two suggest “Hold.”
The average analyst price target of $41.54 indicates an upside potential of around 25.1% from current levels. The Street-high price target of $51 suggests that the stock could rally as much as 53.5%.
Tenet Healthcare Stock
Tenet Healthcare Corp (THC), headquartered in Dallas, is a leading healthcare services provider in the U.S., offering various acute care and specialized medical services. With a market cap of $9.4 billion, the company operates hospitals, ambulatory surgery centers, and other facilities across the country.
Shares of Tenet Healthcare have rallied 29.5% on a YTD basis, surpassing the SPX's 6.3% returns over the same time frame.
THC stock currently trades at 0.45 times sales, lower than its peers like Universal Health Services (UHS), which trades at 0.74x.
On Feb. 8, Tenet Healthcare reported Q4 earnings of $2.68 per share, surpassing Wall Street expectations by 69.6%. Also, the company's revenue of $5.4 billion beat the Street's forecast by 1.7%. Plus, the company produced free cash flow of $1.6 billion for fiscal year 2023, compared to $321 million for the year ended Dec. 31, 2022.
Management forecasts EPS to range between $1.24 and $1.62 for the fiscal Q1 of 2024, while revenue is projected between $5 billion and $5.2 billion. For the full fiscal year, EPS is projected to be between $5.76 and $6.90.
Analysts tracking Tenet Healthcare expect fiscal 2024 earnings to reach $6.30 per share and increase by 6.5% in fiscal 2025 to $6.71 per share. The company is expected to announce fiscal Q1 2024 earnings results on April 30.
Tenet Healthcare stock has a consensus “Strong Buy” rating. Out of the 17 analysts offering recommendations for the stock, 15 give a “Strong Buy,” one advises a “Moderate Buy” rating, and one suggests “Hold.”
The average analyst price target of $109.70 indicates a relatively modest upside potential of around 12.1% from current levels. However, the Street-high price target of $137 suggests that the stock could rally as much as 40%.
Global-E Online Stock
Israel-based Global-E Online Ltd (GLBE), with a market cap of $5.4 billion, provides a platform to enable and accelerate global, direct-to-consumer cross-border e-commerce. Global-E has a long list of big-name clients - including a long-running relationship with the global fashion conglomerate LVMH. In fiscal Q4, it roped in new customers like Jean-Paul Gaultier, Glossier, and EleVen by Venus Williams.
Global-E Online stock has gained 14% over the past 52 weeks.
GLBE stock currently trades at 9.51 times sales, lower than its own five-year average of 12x.
Global-E Online reported Q4 revenue of $185.4 million on Feb. 21, up 33% year over year and exceeding Wall Street's estimates marginally. Its adjusted EBITDA rose 62% annually to $35.2 million, while Gross Merchandise Value (GMV) crossed the milestone of $1 billion in a single quarter for the first time ever.
Management expects fiscal Q1 revenues to range between $138.5 million and $145 million, with adjusted EBITDA projected at $16 million to $20 million. For fiscal 2024, the company anticipates revenues between $731 million and $771 million, while adjusted EBITDA is expected to be between $121 million and $137 million.
Analysts tracking Global-E expect the company to swing to a profit of $0.15 per share by fiscal 2025.
Global-E stock has a consensus “Strong Buy” rating. Out of the 12 analysts offering recommendations, eight say it’s a “Strong Buy,” two advise a “Moderate Buy” rating, and two suggest “Hold.”
The average analyst price target of $43.42 indicates an expected upside potential of around 27.9% from current levels. The Street-high price target of $50 suggests the stock could rally as much as 47.4%.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
