3 Momentum Stocks to Snag for a Strong Q4

Wall Street's momentum is undeniably bullish as the fourth quarter rolls on, with the S&P 500 Index ($SPX) and Dow Jones Industrial Average ($DOWI) setting new record highs. With earnings season off to a robust start and the Federal Reserve steering toward a soft landing, analysts at Jefferies recommend betting on the momentum trade to stay strong into year-end.

Momentum investing banks on the idea that rising stocks tend to keep climbing while falling ones continue to drop. In a recent note, Jefferies U.S. small-mid cap strategist Steven DeSanctis said “momentum has been red-hot and tends to keep its momentum heading into the last few months of a year.”

Among the analyst’s top picks, here are three names - Howmet Aerospace Inc. (HWM), Onto Innovation Inc. (ONTO), and US Foods Holding Corp. (USFD) - that could be worth buying now to capitalize on continued upside.

Momentum Stock #1: Howmet Aerospace

Pittsburgh-based Howmet Aerospace Inc. (HWM) is an industrial supplier for the aerospace and transport industries. Valued at $43 billion by market cap, this company engineers precision components for jet engines and titanium structures that keep aircraft light, fast, and fuel-efficient, and provides forged aluminum wheels for heavy trucks.

Shares of Howmet have surged nearly 138% over the past 52 weeks and 95% on a YTD basis, hitting a fresh high of $106.76 in Friday’s session.

On Sept. 25, Howmet declared a quarterly dividend of $0.08 per share, payable to its shareholders on Nov. 25. HWM offers an annualized dividend of $0.32 per share, translating to a yield of 0.30%.

Shares of Howmet rose over 13% on July 30 after reporting stronger-than-forecast fiscal Q2 earnings results. Total revenue rose 14% year over year to $1.9 billion, fueled by 27% growth in the commercial aerospace market. Adjusted EPS climbed 52% annually to $0.67.

Howmet exited Q2 with cash and cash equivalents of $752 million, up from$610 million at the end of December 2023. Long-term debt amounted to $2.9 billion, down from $3.5 billion at the end of fiscal Q4 2023.

Management also raised its full-year 2024 guidance, which now calls for revenue between $7.40 billion and $7.48 billion, and adjusted EPS between $2.53 and $2.57.

Q3 earnings from Howmet are expected on Wednesday, Nov. 6.

HWM stock has a consensus “Strong Buy” rating overall. Among the 21 analysts in coverage, 18 suggest a “Strong Buy,” one advises a “Moderate Buy,” one analyst maintains a “Hold,” and the remaining one has a “Strong Sell” rating. 

Momentum Stock #2: Onto Innovation

Massachusetts-based Onto Innovation Inc. (ONTO) is involved in advanced semiconductor packaging. Onto’s advanced tech suite - spanning wafer quality, 3D metrology, and lithography solutions - shapes everything from nanometer transistors to massive die interconnects. By enhancing yield and performance, Onto plays a vital role in pushing the boundaries of semiconductor design.

Valued at around $10.3 billion by market cap, shares of this chip-manufacturing equipment company have rallied 66.7% over the past 52 weeks, and are up 37% in 2024.

Shares of Onto leaped over 8% on Aug. 9 following the company’s stronger-than-expected Q2 earnings report.  

Revenue grew 27% year-over-year to $242.3 million, led by expansions in high-performance computing and artificial intelligence (AI)-driven high-bandwidth memory (HBM) projects. Specialty and advanced packaging revenues set a new record at $164 million, driven by soaring demand from AI packaging clients.

Onto’s adjusted EPS of $1.32 jumped 67.1% annually, blowing past consensus estimates. 

With the company expected to release its Q3 earnings on Thursday, Oct. 31, after the market closes, Onto’s management forecasts revenue between $245 million and $255 million, while adjusted EPS is anticipated between $1.25 and $1.35. 

For the full year, analysts tracking Onto Innovation project profits to soar 38.9% year over year to $5.18 per share in fiscal 2024, and grow another 23.8% annually to $6.41 per share in fiscal 2025.

ONTO stock has a consensus “Strong Buy” rating overall. Out of the seven analysts offering recommendations, six suggest a “Strong Buy,” and one has a “Moderate Buy” rating.

Momentum Stock #3: US Foods Holding

US Foods Holding Corp. (USFD) is a key player in the U.S. food service industry. Based in Rosemont, Illinois, it supplies restaurants, hospitals, hotels, and more with fresh, frozen, and dry goods. Serving enterprises from local eateries to national chains, US Foods has a market cap of $15.3 billion.

Over the past 52 weeks, USFD stock has rallied 66.6%, and is up more than 37% in 2024. The stock hit a new all-time high of $63.13 on Oct. 15.

On Aug. 8, US Foods reported a mixed fiscal Q2 earnings report, as revenue topped estimates, while earnings missed the mark. Revenue climbed 7.7% year over year to $9.7 billion, driven by total case volume growth and food cost inflation. Adjusted EPS jumped 17.2% to $0.93, one penny short of the consensus.

EBITDA grew 13.2% to $489 million, hitting a 5% margin, up 25 basis points compared to the prior year. US Foods also marked its 13th consecutive quarter of market share gains in independent restaurant case volume, up 5.7%.

Notably, the company expanded its footprint in Q2 by acquiring IWC Food Service, strengthening its presence in central Tennessee with a $220 million deal.

US Foods Holding is set to report its fiscal Q3 earnings on Nov. 7, with management guiding for net sales between $37.5 billion and $38.5 billion, and adjusted EPS between $3.00 and $3.20.

Analysts tracking US Foods Holding project the company’s profit to surge 18.4% year over year to $2.90 per share in fiscal 2024, and increase another 20.3% to $3.49 in fiscal 2025.

USFD has a consensus “Strong Buy” rating overall. Of the 14 analysts in coverage, 11 recommend a “Strong Buy,” two suggest a “Moderate Buy,” and one maintains a “Hold.”

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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.