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3 Top Momentum Stocks to Buy for Q4 Success

3 Momentum Stocks to Snag for a Strong Q4

The Bullish Momentum on Wall Street

As the fourth quarter progresses, Wall Street’s momentum remains undeniably bullish, with the major market indices, including the S&P 500 and the Dow Jones Industrial Average, setting new record highs. With a robust start to the earnings season and the Federal Reserve navigating toward a soft landing, analysts at Jefferies recommend that investors capitalize on the momentum trade, which has historically tended to strengthen as the year comes to a close.

Momentum investing is centered on the belief that stocks that are currently rising will continue to do so, while those in decline will keep falling. Jefferies’ small-mid cap strategist, Steven DeSanctis, recently noted that “momentum has been red-hot and tends to keep its momentum heading into the last few months of a year.” Among the analyst’s top recommendations, here are three stocks worth considering as potential investments for continued upside.

Momentum Stock #1: Howmet Aerospace Inc. (HWM)

Pittsburgh-based Howmet Aerospace Inc. (HWM) is a significant player in the aerospace and transport sectors. Valued at approximately $43 billion, the company specializes in engineering precision components for jet engines and titanium structures, enhancing the lightness, speed, and fuel efficiency of aircraft while also supplying forged aluminum wheels for heavy trucks.

Howmet’s stock has skyrocketed nearly 138% over the past year and is up 95% year-to-date, recently reaching a high of $106.76. On September 25, Howmet announced a quarterly dividend of $0.08 per share, set for payment on November 25, marking an annualized dividend of $0.32 per share and offering a yield of 0.30%.

The company’s Q2 earnings, reported on July 30, surpassed expectations. Total revenue increased by 14% year-over-year to $1.9 billion, propelled by a 27% rise in the commercial aerospace market. Adjusted EPS also saw a notable 52% increase, reaching $0.67. As of Q2, Howmet possessed $752 million in cash and cash equivalents, an increase from $610 million at the end of 2023, with long-term debt reduced to $2.9 billion from $3.5 billion. Management has raised its 2024 revenue guidance to between $7.40 billion and $7.48 billion, with adjusted EPS estimated between $2.53 and $2.57. Howmet’s Q3 earnings are anticipated on November 6. The stock holds a consensus “Strong Buy” rating, with 18 out of 21 analysts supporting this bullish outlook.

Momentum Stock #2: Onto Innovation Inc. (ONTO)

Based in Massachusetts, Onto Innovation Inc. (ONTO) specializes in advanced semiconductor packaging. The company’s technology suite, which includes wafer quality control, 3D metrology, and lithography solutions, is essential in the production of everything from nanometer transistors to substantial die interconnects, significantly enhancing yield and performance in semiconductor design.

Onto has seen its market capitalization rise to approximately $10.3 billion, with its stock climbing 66.7% over the past year and appreciating 37% in 2024 alone. Following a strong Q2 earnings report on August 9, shares surged by over 8%, with revenue increasing by 27% year-over-year to $242.3 million. This growth was driven primarily by high-performance computing and AI-related high-bandwidth memory projects, with specialty and advanced packaging revenue hitting a record high of $164 million.

With expected Q3 earnings set for October 31, Onto’s management forecasts revenues between $245 million and $255 million, while adjusted EPS is projected between $1.25 and $1.35. Analysts predict a 38.9% year-over-year profit increase to $5.18 per share in fiscal 2024, escalating further by 23.8% to $6.41 per share in fiscal 2025. ONTO possesses a consensus “Strong Buy” rating, with six out of seven analysts recommending a strong buy.

Momentum Stock #3: US Foods Holding Corp. (USFD)

US Foods Holding Corp. (USFD) plays a critical role in the U.S. food service industry, supplying restaurants, hospitals, and hotels with a variety of food products. Based in Rosemont, Illinois, the company has achieved a market cap of $15.3 billion, with stock performance reflecting a 66.6% increase over the past year and more than 37% gain in 2024. The stock reached a new all-time high of $63.13 on October 15.

US Foods’ recent fiscal Q2 earnings report, released on August 8, revealed substantial revenue growth—up 7.7% year-over-year to $9.7 billion, driven by case volume growth and food cost inflation. Adjusted EPS saw a 17.2% jump to $0.93. Moreover, US Foods recorded its 13th consecutive quarter of market share gains in independent restaurant case volume, up 5.7%, and made strides in expanding its presence through the acquisition of IWC Food Service for $220 million.

Looking ahead, US Foods will report fiscal Q3 earnings on November 7, with management projecting net sales between $37.5 billion and $38.5 billion and adjusted EPS between $3.00 and $3.20. Analysts expect a profit surge of 18.4% to $2.90 per share in fiscal 2024, with a further uptick of 20.3% to $3.49 in fiscal 2025. USFD also maintains a “Strong Buy” consensus rating, with 11 out of 14 analysts offering a strong buy recommendation.

Conclusion

As the year-end approaches, the momentum in the stock market appears to remain strong, with highlighted opportunities in Howmet Aerospace, Onto Innovation, and US Foods Holding. Investing in these momentum stocks could provide a strategic play for investors looking to capitalize on projected growth in Q4 and beyond. As always, it is essential to conduct thorough research and consider your investment strategy before diving in.

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