Fears of a potential recession amid high inflation, geopolitical tensions, and the impact of China’s lockdowns have hurt investor sentiment. The S&P 500 (SPX) is down 16.5% year-to-date, while the tech-heavy NASDAQ Composite (NDX) has plunged nearly 27%.
During such uncertain times, many investors seek large-cap names with strong fundamentals that can fare better than the broader market. Large-cap stocks are ones with market capitalizations of more than $10 billion. Generally, many of the large-cap stocks are well-established players in their respective sectors.
Using the TipRanks Stock Comparison tool for large-cap stocks, we will compare Oracle, Energy Transfer and Coca-Cola, and select the stock that Wall Street analysts believe has a higher potential for upside.
Oracle (NYSE: ORCL)
Oracle offers products and services, including application and infrastructure offerings, for enterprise information technology environments.
Oracle has lagged its big-tech peers in addressing the need for cloud-based infrastructure and applications. However, the company is trying to catch up with its competitors by transitioning to the cloud, and capturing opportunities in the booming cloud market.
In December 2021, Oracle announced its proposed $28.3 billion acquisition of Cerner Corporation (CERN), a leading provider of digital information systems used within hospitals and health systems. The deal is expected to advance Oracle’s cloud business while giving it exposure to the lucrative healthcare market. Recently, Reuters reported that Oracle could win unconditional EU antitrust clearance for the Cerner deal.
Meanwhile, Oracle’s Q3 FY22 (ended February 28, 2022) adjusted earnings missed analysts’ expectations while its revenue was in line with estimates. Revenue grew 4.2% to $10.5 billion driven by strength in cloud services and license support revenues.
However, GAAP EPS declined 50% to $0.84 (adjusted EPS was down 2.6% to $1.13) due to a decline in the stock price of gene sequencing company, Oxford Nanopore (GB: ONT) and an operating loss at Ampere, an ARM Server chipmaker. That said, Oracle remains confident that these two investments will deliver strong returns.
Recently, Jefferies analyst Brent Thill slashed the price targets of many software companies, including Oracle, Microsoft (MSFT), and VMware (VMW) citing “stiffening economic headwinds” and the looming risk of recession.
Thill lowered the price target for Oracle stock to $75 from $80 and maintained a Hold rating. The analyst stated that while Oracle can grow as it shifts most of its installed customers to software-as-a-service (Saas) platforms, it will face challenges catching up to Microsoft’s Azure and Amazon’s (AMZN) AWS (Amazon Web Services).
Overall, the Street is cautiously optimistic on Oracle, with a Moderate Buy consensus rating based on six Buys, 11 Holds, and one Sell. The average Oracle price target of $91.35 implies 30.82% upside potential from early Thursday levels. Shares have declined 20% year-to-date amid a broader tech sell-off.
Energy Transfer (NYSE: ET)
Energy Transfer is an MLP (Master Limited Partnership) that owns and operates a diversified portfolio of energy assets in North America, with a strategic footprint in all of the major U.S. production basins.
Earlier this month, Energy Transfer reported better-than-anticipated Q1’22 results with higher transportation volumes across all its segments. Revenue grew nearly 21% to $20.5 billion.
Excluding the favorable impact from winter storms on the prior-year quarter results, Q1’22 adjusted EBITDA increased by nearly 25%. The company raised its full-year adjusted EBITDA guidance based on Q1 results and continued demand for its projects.
During the first quarter, Energy Transfer completed construction of the final phase of its Mariner East project, which increases its total natural gas liquids or NGL capacity on the Mariner East pipeline system to over 365,000 barrels per day, including ethane. The company also completed capacity expansions on its Cushing South crude oil pipeline and on its Permian Bridge Project.
Looking ahead, Energy Transfer continues to pursue a natural gas pipeline project from the Permian Basin to address strong demand in the region and is also exploring expansion in the petrochemical industry.
Following the Q1 print, Mizuho Securities analyst Gabe Moreen stated, “A significant guidance raise on strong underlying operating performance bolstered by ET’s overlooked direct leverage to commodity prices was impressive. Updates on a laundry list of organic projects were encouraging, with Lake Charles LNG and Permian nat [natural] gas pipelines rightfully garnering the most attention.”
Moreen reiterated a Buy rating on Energy Transfer stock and raised the price target to $15 from $14.
All other analysts covering Energy Transfer are also bullish, with the stock scoring a Strong Buy consensus rating based on 10 Buys. At $15.50, the average Energy Transfer price target implies 35.49% upside potential from early Thursday levels. Shares have surged 39% so far this year.
Coca-Cola (NYSE:KO)
Coca-Cola, one of the most well-known global brands, boasts a strong portfolio of still and sparkling beverages sold in over 200 countries. The consumer staples giant continues to transform itself by innovating new beverages based on evolving consumer tastes and health needs like reduced sugar levels.
Coca-Cola’s Q1’22 results smashed analysts’ expectations, with revenue growing 16% to $10.5 billion. With the reopening of the economy, Coca-Cola saw strong recovery in the away-from-home channels (like restaurants and movie theaters) and continued growth in its at-home consumption channels.
Despite an inflationary environment and higher marketing investments, Q1’22 adjusted EPS increased 16% to $0.64, thanks to robust top-line growth and higher prices.
Coca-Cola continues to expect organic revenue growth of 7% to 8% in the full-year despite suspension of its business in Russia. The company expects adjusted EPS growth of 5% to 6% in 2022, compared to $2.32 in 2021.
Guggenheim analyst Laurent Grandet increased his price target on Coca-Cola stock to $71 from $68 and reiterated a Buy rating following “very strong” Q1 results. Grandet believes that Coca-Cola is the best placed company in the food and beverage category to navigate a high inflation environment given its pricing power.
Overall, based on 12 Buys and four Holds, Coca-Cola earns a Strong Buy consensus rating. The average Coca-Cola price target of $71 implies 10.82% upside potential from early Thursday levels. Shares have risen 8.2% year-to-date.
Conclusion
Wall Street analysts seem more optimistic about Energy Transfer and Coca-Cola than Oracle. It’s worth noting that Energy Transfer has positive reviews from all the analysts covering the stock currently. Energy Transfer stock has significantly outperformed the broader market year-to-date and analysts see further upside potential in the backdrop of high oil and gas prices.
What’s more, Energy Transfer has an attractive forward dividend yield of about 7%, compared to Coca-Cola’s 2.75% and Oracle’s 1.83% yields.
Further, Energy Transfer scores a nine out of 10 from TipRanks’ Smart Score rating system, indicating that the stock is more likely to outperform the market.
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