In short, this is the chance to benefit from the short-term troubles of an established company.
The S&P 500 index has returned 14% so far in 2024. Yet, not all stocks participated in this rally, and some well-known stocks are still trading near their 52-week lows. Savvy investors know that current valuations for these large-cap shares may not necessarily reflect their long-term potential.
Such downturns in the stock price are often temporary. As market conditions improve, these stocks could rebound significantly. For those ready to take advantage of market inefficiencies, here are three large-cap stocks at 52-week lows with promising recovery potential for the latter half of 2024.
Estee Lauder (EL)
First up on today’s list of large-cap stocks at 52-week lows is the beauty industry behemoth Estee Lauder (NYSE:EL). The company is known for its premium skincare and beauty products, including iconic brands like La Mer, Clinique, Tom Ford Beauty, and Jo Malone London.
Estee Lauder’s third-quarter fiscal 2024 earnings showed a 5.9% year-over-year increase in organic net sales to $3.94 billion, with double-digit growth in the Europe, Middle East and Africa (EMEA) region. Adjusted earnings per share jumped 117% to $1.02. However, macroeconomic headwinds, including weakness in China’s prestige beauty market and geopolitical issues, led to a lowered financial outlook.
Looking forward, the company’s profit recovery plan aims to expand profit margins through an improved product mix, increased efficiencies, and higher price realization. The recent acquisition of Deceim Beauty Group is expected to enhance the company’s skincare offerings.
Despite these efforts, market sentiment remains cautious. In recent days, EL shares hit 52-week lows following target price cuts from analysts at Goldman Sachs and Barclays. Since January, EL shares declined nearly 32%. EL stock offers a 2.6% dividend yield, while shares are trading at 25.6 times forward earnings and 2.4 times sales. Analysts project over 32% potential upside for Estee Lauder, setting a 12-month median price forecast of $132.
Deere & Company (DE)
Next on our list of large-cap stocks at 52-week lows is Deere & Company (NYSE:DE), a major player in agricultural machinery with nearly two centuries of history. Deere operates through four segments: Production and Precision Agriculture, Small Agriculture and Turf, Construction and Forestry, and Financial Services.
In its recent second-quarter 2024 earnings report, Deere posted mixed results. Worldwide revenues fell 12% to $15.24 billion, and net sales in Production and Precision Agriculture fell 16% due to lower shipment volumes. Net income dropped 17% from a year ago to $2.37 billion, with EPS falling 12% to $8.53.
Deere announced workforce reductions in response to softening demand as part of a strategic review, affecting production and salaried positions. This follows recent downward revisions to its profit forecast and equipment sales projections. Despite these challenges, potentially more favorable macroeconomic conditions and a cyclical recovery suggest a rebound could happen in the weeks ahead.
The current pessimistic outlook appears temporary, creating a buying opportunity in Deere, a stable stock with growth potential and rising dividends.
DE stock dropped nearly 7% this year while offering a current dividend yield of 1.6%. Trading at a 15.5 times forward earnings and 1.9 times sales, it presents an appealing opportunity. Analysts forecast a 12-month median price of $422.35, indicating over 13% potential upside.
Yum China (YUMC)
Rounding out our discussion of large-cap stocks at 52-week lows is Yum China (NYSE:YUMC), a prominent player in the Chinese fast-food sector. The company operates two main segments, KFC and Pizza Hut, and also manages several other brands, including Little Sheep, Huang Ji Huang, Lavazza, COFFii & JOY, and Taco Bell.
In the first quarter of 2024, YUMC achieved a record revenue of $3 billion, driven by a 6% year-over-year increase in system sales, following a strong 17% growth the previous year. Core operating profit rose 1% to $396 million, and adjusted EPS grew 3% to 71 cents. However, investor sentiment has been dampened by falling same-store sales, decreased operating margins, and a challenging macroeconomic environment.
The company aims to open 1,500 to 1,700 new stores this year, having already opened 378 new locations in the first quarter, bringing its total to over 15,000. Management projects reaching 20,000 stores by the end of 2026.
Despite near-term challenges, Yum China’s competitive edge and ambitious expansion plans support future growth. The stock has dropped about 30% in 2024 but offers a 2.1% dividend yield. Shares currently trade at 14.2x forward earnings and 1.2x sales. Analysts have set a 12-month price target of $49.71 for YUMC stock, suggesting over 66% upside potential from current levels.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil, PhD, began contributing to InvestorPlace in 2018. She brings over 20 years of experience in the U.S. and U.K. and has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Publicly, she has contributed to investing.com and the U.K. website of The Motley Fool.