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Investing has advanced beyond chasing returns. Some investors have pursued aligning their strategies with their values and concerns in society and the environment. This has pushed the financial markets to shift into a more sustainable and equitable market that moves from a traditional return-focused investment into a long-term sustainable one. With this pursuit of qualitative data, the need to assess a company’s viability for investment beyond the financial statements has proved the importance of the new metric called ESG scores.
ESG scores, or Environmental, Social, and Governance scores, help assess the company’s environmental impact, contribution to society, and internal governance. Various institutions offer these metrics to help investors understand the company’s goals and impact on the environment and society.
In this article, we’ll look into three highly-rated stocks by ESG providers.
Microsoft (MSFT)
Microsoft is one of the most well-known companies. It is a technology that became popular for its Windows operating systems and Microsoft Office. The company later expanded its services to cater to different technological markets and gaming. Today, Microsoft owns other office-related solutions like LinkedIn, Office Commercial, and Dynamic Business Solutions.
MSFT is also at the forefront of AI with its investment in ChatGPT and Cloud segment services like Azure. Its XBOX gaming is one of the three major consoles in the market, while its devices, like the Surface line of laptops and tablets, also play a significant role in the company's success. The company is one of the most highly rated ESG companies in its sector, garnering high ESG and sustainability scores from providers.
Microsoft recently announced its latest quarterly financials, and they were stellar. Revenue was up 13% YoY, Net income was up 27% YoY, and Diluted EPS was up 27% YoY.
The company has also been at the forefront of the responsible use of AI, promoting job skills to enhance further potential employees ' careers in line with their goals for corporate social responsibility. Bill Gates, its former CEO, has been a philanthropist who pursued the betterment of society, and his vision lives on through the company he has built.
Analyst Ratings
Analysts rate MSFT as a “Strong Buy” based on the consensus of 36 analysts composed of 30 Strong buys, 3 Moderate buys, and 3 Hold recommendations. The mean target is $386.14, and a high target of $440.00, an upside of 29.16%.
Target Corp (TGT)
Target Corporation is one of America’s top retailers, offering trend-following brands at a lower cost. It provides various merchandise, home furnishing, decor, and groceries in its 1958 stores across the U.S. Target also has small format stores offering an assortment of merchandise and groceries. Finally, the company carries brands like Auden, Joylab, and Sonia Kashuk.
TGT has been the go-to store of most Americans during the Thanksgiving and Black Friday seasons due to its discounts and promotions that have become a hit with consumers.
Its latest financials have shown Target as a resilient business over the years. It grew its operating income margins at 3% YoY and increased its GAAP adjusted EPS by a factor of 4 over the last year, proving to investors its ability to recover.
Today, the company is very active in its sustainability and governance strategy as it sets science-based emissions targets and commits to meaningful impacts in its emission reduction policies and renewable energy goals. Target also conducts voluntary donations of its time, money, and talent as part of its long-standing tradition that can be traced back to the founding of the Dayton Foundation. These initiatives have given the company high ESG scores from various ESG vendors.
Analyst Ratings
Analysts rate TGT as a “Moderate Buy” based on 12 Strong buys, 3 Moderate buys, and 14 Holds from analyst consensus. The mean target is $159.59, and the high target is $202.00, an upside of 83.04%.
Lowe's Companies, Inc. (LOW)
Lowe's Companies, Inc. is known as one of the biggest home improvement retailers in the United States. Its products range from appliances, top-selling category, bathroom and building supplies, electrical supplies, and flooring to various tools and equipment that any homeowner would require. The company also offers bathrooms, windows, doors, and other specialized installation services.
Lowes has performed well in its latest financial quarter. It met financial targets and beat analyst expectations by 1.56%. Sales grew by 11.67%, and net income increased by 18.27%.
The company has a strong ESG drive; today, they get top marks. Indeed, Lowes has always been active in its corporate responsibility and a cornerstone of the company. It offers strong safety practices in addition to environmentally safe products, protecting workers and communities by ensuring its products are sourced and manufactured based on its responsible sourcing commitments.
Analyst Ratings
Analysts rate LOW as a “Moderate Buy” based on 15 Strong buys, 1 Moderate buy, and 10 Hold recommendations from analysts. The mean estimate is $248.17, and the high target price of $289.00, an upside of 55.30%.
Conclusion
As the markets continue to adopt their vision and personal values into their investment process, this has increased the importance of ESG as another way of looking at long-term investments and the impact of deployed capital on society. The continued awareness of the connection between financial success and sustainability has given investors other avenues for making an impact when deploying their capital.
On the date of publication, Rick Orford had a position in: MSFT . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
