The stock market played out a familiar theme on Friday, with major market benchmarks initially losing ground but clawing back losses as the day progressed. Market participants aren't sure how to handle the current inflationary pressures hitting the economy, but central bank policymakers show no signs of changing their strategy in managing monetary policy. As of 12:30 p.m. EDT, the Dow Jones Industrial Average (DJINDICES:^DJI) was down 77 points to 34,910. The S&P 500 (SNPINDEX:^GSPC) fell 7 points to 4,353, and the Nasdaq Composite (NASDAQINDEX:^IXIC) was lower by 14 points to 14,529.
Even when the market is struggling, smart investors continue to look at the fundamental prospects for businesses. Several Wall Street analysts gave positive comments on individual stocks on Friday, and two of the most interesting calls were on Cintas (NASDAQ:CTAS) and Alcoa (NYSE:AA). Below, we'll look at what the analysts had to say and investors' reactions to the news.
Shares of Cintas were up 4% on Friday at midday. The uniform and business services provider has been hitting record highs ever since shortly after the coronavirus bear market in early 2020, and things are looking up for the company's future.
Today's positive comments about Cintas came from a host of analysts. Baird upgraded the stock from neutral to outperform, saying it believes that Cintas offers true growth opportunities that should help boost the stock, with valuations that aren't unreasonably high. Barclays and Credit Suisse boosted their price targets on the stock, while analysts at William Blair argued that Thursday's brief sell-off following the company's fiscal fourth-quarter earnings report offered a rare bargain opportunity.
Cintas does well when the economy does well, and with people going back to work, the company has a chance to shine. Moreover, its facility services include cleaning, and the pandemic's heightened awareness of public health issues should lead to more growth in that arena even if COVID-19 case counts diminish further.
Investors looking for a stock with a great track record of gains should look closely at Cintas. The business isn't sexy, but the returns longtime shareholders have earned certainly are.
Can Alcoa shine?
Elsewhere, Alcoa's stock fell 4%. The move came despite favorable analyst comments, as investors reacted to the aluminum specialist's latest earnings.
Alcoa's results looked good. The company set records for quarterly net income and earnings per share, bouncing back from losses a year ago. Sales jumped 32% from year-earlier levels, as Alcoa benefited from an environment of higher prices and demand that led to greater shipment volume.
Analysts at Citi jumped on the bandwagon, upgrading Alcoa from neutral to buy and setting a $52-per-share price target. As Citi sees it, Alcoa's approach to capital allocation is a big asset for the company, and shareholders can expect a mix of dividends, buybacks, and reinvestment into its aluminum business.
However, Alcoa is in a cyclical business, and when investors get skeptical about future growth, they often punish cyclical stocks. The market might be getting too pessimistic about a potential reversal in the turnaround that the global economy is undergoing, but until more optimism prevails, Alcoa might not see its stock rebound as much as some think it should.