Stocks to Consider Following Fed Rate Cut and Growth Prospects

Investors are eyeing opportunities with Pentair, United Airlines, and ON Semiconductor as the recent cut in the fed funds rate opens potential for growth. Each company has unique factors influencing its stock, signaling a strategic investment approach amid changing market conditions.

Date: 06-10-2024

AI Rating: 7

The report highlights three companies—Pentair, United Airlines, and ON Semiconductor—that are seen as attractive growth stocks, particularly in light of a recent cut in the fed funds rate.

Pentair (NYSE: PNR) is projected to experience growth mainly due to lower interest rates, which are expected to alleviate pressures in the housing market and new pool construction. The company's expected mid-single-digit sales growth is fueled by a recovering housing market and aftermarket servicing of pools. Additionally, Pentair aims to enhance its return on sales from 20.8% in 2023 to 24% by 2026 through transformational initiatives, which is promising for profit margins as operational efficiencies are implemented.

United Airlines (NASDAQ: UAL) faces challenges typical of the airline industry, characterized by its cyclical nature and struggles to generate sufficient profits. However, the company is expected to achieve significant net income, projected at $3.1 billion in 2024. The industry forecast from IATA indicates potential profitability, aided by rational management and improved revenue metrics. Thus, while the broader context may seem negative, United Airlines appears well-positioned to capitalize on a stable environment.

ON Semiconductor (NASDAQ: ON) is focusing on long-term growth prospects, particularly in industrial and automotive markets, anticipating that low interest rates will spur investment in electric vehicles and renewable energy. However, current high interest rates have led to a slowdown in these areas, impacting near-term sales. Despite this, the company is investing heavily in expansion, such as a $2 billion manufacturing plant, suggesting overall optimism for future revenues.

In summary, while all three companies have their challenges, there are valuable opportunities tied to recovery and growth, particularly due to the influence of the recent fed funds rate cut. These factors are likely to affect investor sentiment and stock prices positively in the near term.

Stocks: PNR UAL ON