Looming recession fears are causing headaches for companies and threatening corporate profits. Nevertheless, analysts expect certain stocks currently trading at cheap valuations to grow earnings this year. Companies are nervously eyeing how far the Federal Reserve will go if it continues to hike interest rates, with concerns that tighter monetary policy may tip the economy into a recessionary period. And, while inflation has been steadily easing, it still remains well above the Fed’s 2% target. These pressures have analysts expecting the first earnings decline for the S & P 500 since the throes of the pandemic. According to FactSet, analysts see fourth-quarter S & P 500 profits declining by 4.6%, which would mark the worst earnings season since the third quarter of 2020. Still, there are some stocks trading at cheaper valuations than the S & P 500 that are also expected to see strong earnings growth in 2023. We screened the S & P 500 for stocks that meet the following criteria: Forward price-to-earnings ratio of less than 14 Expected 2023 earnings per share growth of 20% or more Here are the names that made the cut, using data from FactSet: Albemarle, a specialty chemicals company, made the list. The stock has a forward P/E ratio of 9, and the company’s earnings are expected to jump by 30.3%. The company owns the only lithium plant operating in the US The stock fell more than 7% in 2022, notching its first annual decline in three years. Albemarle shares doubled in 2020 and popped another 58% in 2021. Analysts at Deutsche Bank recently added a catalyst call buy on the stock ahead of a corporate strategy update slated for Tuesday. Delta Air Lines and United Airlines are also expected to see strong earnings growth this year, with analysts forecasting expansions of 37.3% and 29%, respectively. Both stocks are trading at much lower valuations than the broader market, with their respective forward P/Es coming in at 7.3 and 6.3. Airlines got battered as the Covid-19 pandemic halted global travel. However, an easing of pandemic-era travel restrictions could mean big gains for both stocks. FedEx is another name that made the cut, with its earnings expected to surge by 24% in 2023. The stock also trades at a forward multiple of 12. The stock was recently named by Credit Suisse a top pick for 2023. “The most compelling opportunities often derive from an inflection in expectations,” the bank said.
