Morningstar

10 Stocks with the Largest Fair Value Estimate Increases During Q1 Earnings

NRG and Paccar saw the largest valuation increases.

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Eric Risberg via AP
Securities in This Article
Cloudflare Inc
(NET)
Intesa Sanpaolo ADR
(ISNPY)
Western Digital Corp
(WDC)
GE Aerospace
(GE)
PACCAR Inc
(PCAR)

Amid an earnings season marked by market and economic uncertainty, stocks have seen fewer fair value estimate increases on average than in previous quarters. Even so, some stocks saw their estimates bumped up. The names with the largest increases are retail energy provider NRG Energy NRG and heavy-duty truck manufacturer Paccar PCAR.

Across the 849 US-listed stocks covered by Morningstar, there was a 0.39% average decrease in fair value estimates for the first-quarter earnings season, down significantly from last quarter’s 1.98% average increase.

Among the stocks we scanned for changes, 4% saw increases of 10% or more. Over the past 10 years, 8% of the group had average quarterly fair value estimate increases of 10% or more. The financial services and industrials sectors saw the highest rate of increases. Roughly 9.8% of financial companies had a fair value increase of at least 10.0%, and the average increase across the sector was 1.3%. Among industrials companies, 9.0% had fair value increases of at least 10.0%, and the average increase was 1.3%.

The sector that had the highest average increase was utilities, at 2.1%. However, only 2.7% of these companies saw their estimates bumped by a meaningful 10.0% or more.

Here are the stocks with the largest percentage increases in their fair value estimates:

  • NRG Energy NRG
  • Paccar PCAR
  • Intesa Sanpaolo ISNPY
  • WW Grainger GWW
  • Cloudflare NET
  • GE Aerospace GE
  • Boeing BA
  • Cummins CMI
  • Southwest Airlines LUV
  • Western Digital Technologies WDC

Here’s more on what Morningstar analysts had to say about each stock.

NRG Energy

“NRG Energy announced it plans to acquire a large portfolio of power generation assets from LS Power for $12 billion, including debt, accelerating near-term growth and providing an industry-leading platform to benefit from electricity demand growth,” says Morningstar strategist Travis Miller. “NRG will double the size of its power generation fleet if it closes the LS Power deal and the Rockland deal announced in March. We think NRG’s mostly gas fleet gives it a big advantage over peers as electricity demand grows.”

NRG is trading at a 79% premium to its new fair value estimate and has a Morningstar Rating of 1 star.

Read Miller’s full take on NRG here.

Paccar

“After taking a fresh look at Paccar, a leading manufacturer of heavy- and medium-duty trucks, we’ve raised our fair value estimate to $129 per share from $93 to reflect a more constructive view on the inevitable pull-through of truck sales in advance of US emissions regulations and also the company’s evolving parts strategy,” says Morningstar analyst George Maglares. “We’ve assigned the firm a Standard Capital Allocation Rating and maintained its narrow moat rating.”

Maglares continues: “We anticipate that Paccar’s top line will broadly track the modestly GDP-plus growth trends of the heavy-duty truck market and continue to gradually take share from peers. Given its financial strength, we are highly confident the company will keep up, if not lead the way, as the trucking industry continues to pursue alternative powertrain and autonomous technologies. Perhaps most interesting, however, will be the company’s engine strategy and whether it continues to insource and reduce reliance on key supplier Cummins. To the extent it does so, the positive flow through to Paccar’s more profitable parts business could imply meaningful upside to our fair value estimate.”

Paccar is trading at a 25% discount to its new fair value estimate and has a Morningstar Rating of 4 stars.

Maglares has more about Paccar stock here.

Intesa Sanpaolo

“Intesa’s first-quarter net profit rose 14% year on year as higher fee income offset an 8% drop in net interest income, keeping revenue flat,” says Morningstar senior analyst Johann Scholtz. “Lower regulatory charges drove an 8% decline in expenses, boosting earnings. It kept its 2025 guidance, which implies at least a 5% higher net income in 2025.”

Scholtz continues: “Intesa will update the market on its share buyback plans at year-end. Strong profitability fuels organic capital generation and robust shareholder returns. Alongside a 70% earnings payout in dividends, we anticipate a buyback announcement of EUR 2 billion.”

Intesa is trading near its new fair value estimate and has a Morningstar Rating of 3 stars.

Investors can find more of Scholtz’s take on Intesa here.

WW Grainger

“We’re transferring coverage of Grainger, one of the largest global distributors of maintenance, repair, and operations, or MRO, supplies to industrial businesses,” says Morningstar analyst Nicholas Lieb. “We raise Grainger’s fair value estimate to $910 per share from $700, primarily due to an economic moat rating upgrade to wide from narrow. We also upgrade Grainger’s Capital Allocation Rating to Exemplary from Standard.”

Lieb continues: “Grainger benefits from a cost advantage driven by its unparalleled breadth of products and scale of its distribution network. These economies of scope and scale allow it to generate higher margins and returns over smaller peers. Grainger’s rock-solid balance sheet, successful investment strategy, and appropriate distributions give us confidence in assigning an Exemplary Capital Allocation Rating. We maintain the firm’s Medium Uncertainty Rating, given its diverse end market exposure amid rising economic uncertainties.”

Grainger is trading at a 20% premium to its new fair value estimate and has a Morningstar Rating of 2 stars.

Lieb has more about Grainger stock here.

Cloudflare

“Cloudflare kicked off 2025 with a solid set of financial results, with the firm’s sales growing 27% year over year to $479 million and adjusted margins staying mostly flat year over year,” says Morningstar analyst Malik Ahmed Khan. “Large clients constituted 69% of the firm’s top line for the first quarter, up from 67% a year ago.”

Khan continues: “Despite the macro uncertainty, Cloudflare’s sales engine remains strong. Alongside strong enterprise penetration, we continue to see robust adoption of newer products such as Workers that stand to become a larger part of Cloudflare’s overall business in the medium to long term.”

Cloudflare is trading near its new fair value estimate and has a Morningstar Rating of 3 stars.

Take a deeper dive into Khan’s outlook for Cloudflare.

GE Aerospace

GE Aerospace saw two fair value estimate increases during the quarter. The most recent—to $238 from $198—is due to large recent orders for Boeing jets powered by GE engines, signaling “that future US aerospace exports are less likely to be saddled with high tariffs or other trade disputes than seemed so a month ago,” according to Morningstar analyst Nicolas Owens. “Boeing and GE Aerospace typically export as much as $50 billion annually, 2.5% of total US goods exported in 2024,” Owens says. “Their commercial backlogs amount to five years of sales. This makes them potentially vulnerable to being caught in the “crossfire” of trade negotiations. We see recent large purchases of aircraft from the UK and Qatar, as well as permission from Chinese authorities for Boeing to resume deliveries there, as lowering the risk that trade disputes will mar aerospace exports in the long term.”

The first increase—to $198 from $195—came after the company reported first quarter earnings and was due to the time value of money, according to Owens. “GE Aerospace’s first-quarter commercial engines segment revenue grew 15% and earned a 27.5% operating margin,” he says. “Defense revenue and margin were flatter, but management reaffirmed its full-year revenue and profit expectations, notwithstanding recent macroeconomic turbulence.”

GE Aerospace is trading near its new fair value estimate and has a Morningstar Rating of 3 stars.

Investors can find more of Owens’ take on GE Aerospace here.

Boeing

Boeing saw two fair value increases during the quarter. The latest increase—from $202 to $242—coincided with the GE Aerospace fair value raise, driven by signs that US aerospace exports may be less affected by tariffs than previously expected, according to Owens. “While we always forecast Boeing and GE profits over the long term benefiting from their demonstrated pricing power, we now have more confidence their backlogs will likely be more affordable to customers and thus more profitable,” Owens notes.

The first increase—to $202 from $200—came after the company reported first quarter earnings and was due to an updated forecast for near-term commercial get deliveries and defense margins, according to Owens. “Boeing delivered 104 737 MAX and 13 787 jets in the first quarter, a solid start toward its goal of delivering around 400 and 80 of its most popular aircraft in 2025,” he says. “Defense recorded a small operating profit and no charges, while services contributed nearly $1 billion in operating profit.”

Boeing is trading at a 14% discount to its new fair value estimate and has a Morningstar Rating of 4 stars.

Read Owens’ full take on Boeing here.

Cummins

“After taking a fresh look at Cummins, a leading global supplier of diesel and other engines serving heavy- and medium-duty trucks and other industrial end markets, we’ve raised our fair value estimate to $336 per share from $281,” says Maglares. “This reflects our more constructive view on heavy-duty truck demand and the company’s efforts to diversify into truck components and other industrial applications. We’re maintaining our narrow economic moat rating and Standard Capital Allocation Rating.”

Maglares continues: “Intangible assets and switching costs give Cummins a narrow economic moat. The company has decades of leadership producing diesel engines for the trucking industry, but we also struggle with the company’s business model in which it competes directly with truck manufacturers that can disintermediate Cummins. We believe this had led Cummins to diversify more aggressively into truck components and expand its offerings in its power systems segment, which has seen meaningful tailwinds from data center demand. The company maintains moderate financial leverage, which we think affords it ample flexibility to invest in product leadership and add-on acquisitions. Net-zero emissions ambitions appear increasingly distant in the trucking space, which should allow Cummins to preserve capital and retain market share in engines.”

Cummins is trading near its new fair value estimate and has a Morningstar Rating of 3 stars.

Take a deeper dive into Maglares’ outlook for Cummins.

Southwest Airlines

“Southwest reported its first-quarter results and clarified how its modernized seating and ticketing practices will change the passenger experience beginning later in 2025,” says Owens. “Uncertainty about travel spending later in the year prevented management from reaffirming most of its 2025 guidance. Late in 2025, the airline will introduce seats with extra legroom and, in 2026, will commence assigning seats with ticket purchase, priced according to the desirability of their location in the cabin, just like other airlines. It will also sell basic economy tickets, available via internet travel aggregators, thus matching the industry standard for bargain air travel. We believe that matching industry practices will restore Southwest’s competitiveness and increase its average revenue yield.”

Southwest is trading near its new fair value estimate and has a Morningstar Rating of 3 stars.

The rest of Owens’ take on Southwest can be found here.

Western Digital Technologies

“Western Digital reported its first stand-alone quarterly results after the spinoff of SanDisk,” says Morningstar director Eric Compton. “The company saw year-over-year revenue growth of 38% and instituted a quarterly dividend. Despite tariff fears, management believes it will see minimal impact for now, although we don’t think the industry is completely out of the woods yet. Hard disk drives are technically exempt from tariffs for now, so we wouldn’t expect any effects just yet. The true test will come once the tariffs take effect.”

Western Digital is trading near its new fair value estimate and has a Morningstar Rating of 3 stars.

Compton has more about Western Digital stock here.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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