The Federal Reserve’s recent shift towards easing monetary policy and lowering interest rates has created a new landscape for investors. To navigate this changing market, investors need to focus on stocks that offer growth, income, and potential for market capitalization expansion. Three stocks that fit this bill and could deliver strong returns in this new cycle are Knight-Swift Transportation Holdings Inc. (KNX), PotlatchDeltic Co. (PCH), and Brookfield Renewable Partners (BEP).
Transportation Leads the Way: Knight-Swift Stock Poised for a Breakout
The trucking and transportation sectors often act as barometers for the overall economy. As interest rates fall, businesses and consumers tend to increase their activity, leading to greater demand for transportation services. Knight-Swift, a $8.4 billion company, is well-positioned to benefit from this trend. Analysts at Barclays Bank believe Knight-Swift could reach $62 a share, representing an 18.8% upside from its current price. They also predict a new 52-week high, indicating strong bullish momentum. While the stock’s current dividend yield of 1.2% may not be inflation-beating, it is expected to grow as profits increase. Wall Street analysts anticipate Knight-Swift to reach $0.50 earnings per share (EPS) next year, a 108% increase from the current $0.24, suggesting significant upside potential.
Rising New Construction Could Spark a Rally in PotlatchDeltic Stock
Lower interest rates mean lower mortgage yields, which could incentivize new construction activity as homebuyers enter the market. Even if housing starts remain low, rising rental demand driven by high inventory per capita levels could fuel growth in the construction sector. No matter which segment of the real estate market takes off, there will be a need for timber, and PotlatchDeltic, with its vast timberlands, is poised to benefit. This $3.4 billion company has the potential to become a large cap as its earnings grow. Wall Street analysts project EPS growth of up to $0.30 for the next 12 months, translating to over 100% profit growth. Bank of America has placed a valuation of $51 a share on PotlatchDeltic, representing a 12% upside from its current price. As a real estate investment trust (REIT), PotlatchDeltic offers an attractive dividend yield of 3.95%, which could grow as profits double and the company expands its market capitalization.
Energy Supercycle Could Drive Surge in Renewable Energy Demand
The recent surge in trading volume for Brookfield Renewable Partners (BEP), from an average of $482,000 shares to $821,000 shares, indicates strong market interest. This $6.9 billion company could benefit from the potential surge in oil demand as business activity increases due to lower interest rates. Higher oil prices make alternative energy sources more attractive, driving demand for renewable energy. Wall Street analysts forecast EPS growth of up to 113% for BEP. Royal Bank of Canada has set a price target of $31 for the stock, representing a 17% upside from its current price. In addition to its growth potential, BEP offers investors a compelling 5.3% dividend yield, reflecting the company’s undervaluation and confidence in its future growth and stability.
