Morningstar

10 Undervalued Stocks That Crushed Q2 Earnings

Pfizer, Bristol-Myers Squibb, and DraftKings are among the names that are still cheap despite impressive earnings beats.

Exterior view of the Pfizer headquarters building.
Kena Betancur/VIEWpress via Getty
Securities in This Article
Bio-Rad Laboratories Inc Class A
(BIO)
Fortrea Holdings Inc
(FTRE)
Lamb Weston Holdings Inc
(LW)
Regeneron Pharmaceuticals Inc
(REGN)
DraftKings Inc Ordinary Shares - Class A
(DKNG)

Amid a solid earnings picture for the second quarter, many US-listed companies are beating their estimates. Combining the results of firms in the Morningstar US Market Index that have reported earnings with the analyst expectations for those yet to publish, earnings are on track to grow 12.8% from the first quarter of 2025, slightly above last quarter’s 11.3% growth and the second-highest rate in over three years.

At the same time, more than half of the US-listed stocks covered by Morningstar that reported earnings as of Aug. 11 beat FactSet consensus estimates by 5% or more. Even better for investors looking to put their money to work, analysts believe some of these stocks remain undervalued.

To highlight these opportunities, we ran a screen for undervalued stocks that crushed expectations for earnings and revenue for the quarter. More details on our screen and comments from Morningstar analysts can be found later in this article.

10 Undervalued Earnings Crushers

  • Fortrea FTRE
  • Biogen BIIB
  • Pfizer PFE
  • Lamb Weston LW
  • BioMarin Pharmaceutical BMRN
  • Bristol-Myers Squibb BMY
  • Regeneron Pharmaceuticals REGN
  • DraftKings DKNG
  • Polaris PII
  • Bio-Rad Laboratories BIO

How Do Second-Quarter Earnings Stack Up?

As of the time of writing, 88% of the 845 US-listed stocks covered by Morningstar analysts have reported earnings. Of those, 52% beat the FactSet mean estimates for their earnings by 5% or more—a slight uptick from the 49% last quarter. About 12% missed earnings estimates by 5% or more—a downtick compared with the 15% last quarter and the lowest rate in over a year. Slightly fewer companies reported in line with expectations—36% versus 37% last quarter.

How We Did Our Stock Screen

While Morningstar analysts pay close attention to earnings, they focus on long-term results and valuations. One quarter doesn’t usually lead to a change in a stock’s fair value estimate, unless new material information affects the assumptions behind that valuation. For example, new data on a drug could raise the probability of its approval, or pricing gains on a key product line could affect an analyst’s long-term thinking. Still, looking at quarterly earnings with valuations in mind can help long-term investors identify opportunities.

We screened for stocks that beat earnings expectations by 30% or more but remain undervalued. To help keep the focus on companies with truly strong results that did not beat expectations through accounting gimmicks or one-time factors, we also screened for revenue beats of 5% or higher. We filtered those results for stocks with economic moats and a Morningstar Rating of 4 or 5 stars.

Of the 699 US-listed stocks covered by Morningstar analysts that have reported earnings so far, 10 companies met the criteria. We’ve highlighted what our analysts had to say about their earnings.

Fortrea

  • Earnings Per Share: Gain of $0.19 versus the consensus estimate of $0.08
  • Revenue: $710 million versus the consensus estimate of $632 million
  • Morningstar Rating: ★★★★★
  • Discount to Fair Value: 39%

“Fortrea delivered second-quarter revenue of $710 million, representing a 7% increase compared with the prior-year period. Management raised its 2025 revenue guidance by 6% at the midpoint. Backlog as of the quarter-end stood at $7.5 billion, and the book/bill ratio for the quarter was 0.79 times.

“The raised guidance reflects management’s more optimistic outlook for the year as cancellations in the second quarter were slightly lower sequentially, even amid macroeconomic and sector challenges.

“We lowered our fair value estimate to $12.80 per share from $15.50, which reflects heightened risk in the near term due to the drop in bookings for new biotech customers, elevated delays, and a more competitive pricing environment.”

—Rachel Elfman, equity analyst

Read Elfman’s full take on Fortrea here.

Biogen

  • Earnings Per Share: Gain of $5.47 versus the consensus estimate of $3.90
  • Revenue: $2.6 billion versus the consensus estimate of $2.3 billion
  • Morningstar Rating: ★★★★★
  • Discount to Fair Value: 39%

“Biogen reported 7% year-on-year revenue growth and 4% non-GAAP earnings per share growth. Sales of Leqembi (for Alzheimer’s disease) in the US were $63 million, or 21% sequential growth. Management lifted its full-year guidance range for non-GAAP EPS by 5% (using the midpoints) from May.

“Leqembi’s sales over the next few years are crucial for Biogen as its multiple sclerosis franchise declines. Although there is still a lot of uncertainty on its launch trajectory, it looks to be on its way to exceeding our full-year forecast of $450 million for global sales.

“We maintain our fair value of $220 per share for narrow-moat Biogen. We view the current market as heavily undervalued, but note our high uncertainty rating as the future peak sales revenue for Leqembi has a very wide range of potential outcomes.”

—Jay Lee, senior equity analyst

The rest of Lee’s take on Biogen can be found here.

Pfizer

  • Earnings Per Share: Gain of $0.78 versus the consensus estimate of $0.58
  • Revenue: $14.7 billion versus the consensus estimate of $13.6 billion
  • Morningstar Rating: ★★★★★
  • Discount to Fair Value: 34%

“Pfizer’s second-quarter 10% revenue growth and adjusted EPS of $0.78 were ahead of consensus expectations. Management maintained full-year revenue guidance of $61 billion-$64 billion and raised adjusted EPS guidance by $0.10 at the midpoint (after absorbing a $0.20 licensing payment to 3SBio).

“Pfizer’s guidance absorbs current tariffs as well as potential US price adjustments tied to the Trump administration’s July 31 letter to pharma CEOs, which provides some reassurance that the firm does not expect a drastic change in US pricing policy tied to most-favored-nation pricing.

“We’re maintaining our $38 per share fair value estimate for narrow-moat Pfizer following the solid quarter, and despite the positive investor reaction, we think shares remain undervalued.

—Karen Andersen, director of equity research

Investors can find more of Andersen’s take on Pfizer here.

Lamb Weston

“Lamb Weston’s fiscal 2025 sales were roughly flat at $6.45 billion, and adjusted EBITDA margin fell 3 percentage points to 18.9%, but both were within guidance. Profitability largely fell due to cost inflation and temporarily curtailed production.

“Volume growth is of particular importance to profitability, given the high fixed costs of frozen potato processing. Price investments continued to drive higher growth in volumes, which bodes well for higher capacity utilization and long-term adjusted EBITDA margin recovery.

“Shares remain very undervalued. Further bolstered by its strategic plan, we continue to believe that a recovery in restaurant traffic will drive a recovery to durable low-20% adjusted EBITDA margins long term.”

—Kristoffer Inton, senior equity analyst

Inton has more about Lamb Weston stock here.

BioMarin Pharmaceutical

“BioMarin delivered second-quarter revenue of $825 million, representing a 16% increase from the prior year period. GAAP net income increased to $241 million in the second quarter, representing 125% growth year over year.

“BioMarin’s net income increase was attributed to lower selling, general, and administrative expenses (29% of net product revenue), attributed to restructuring costs, and lower research and development spending (20% of net product revenue) due to portfolio reprioritization.”

—Rachel Elfman

Take a deeper dive into Elfman’s outlook for BioMarin.

Bristol-Myers Squibb

  • Earnings Per Share: Gain of $1.46 versus the consensus estimate of $1.09
  • Revenue: $12.3 billion versus the consensus estimate of $11.4 billion
  • Morningstar Rating: ★★★★★
  • Discount to Fair Value: 27%

“Bristol-Myers Squibb reported 1% revenue growth and a 29% decline in non-GAAP EPS in the second quarter. Management increased 2025 revenue guidance to $46.5-$47.5 billion (from $45.8-$46.8 billion) and lowered non-GAAP EPS guidance to $6.35-$6.65 (including the BioNTech licensing deal).

“Bristol’s shares were down 6% on July 31, as investors appear to have looked beyond the strong overall performance in the quarter and focused on risks to future growth, highlighted by the slow launch of the neuroscience drug Cobenfy for schizophrenia.

“We’re maintaining our $66 fair value estimate for wide-moat Bristol, as the company outperformed our expectations for the quarter, and we’re slightly raising our forecast for the whole year.”

—Karen Andersen

Read Andersen’s full take on Bristol here.

Regeneron Pharmaceuticals

“Regeneron’s second-quarter revenue grew 4% year on year, with declines in the Eylea franchise offset by growth in Dupixent revenue. US sales of original-dose Eylea declined 39% year on year but increased 2% sequentially, while US sales of Eylea HD increased 29% year on year and 28% sequentially.

“The Eylea franchise (ophthalmology) is one of the three key pillars of Regeneron’s story, along with Dupixent (immunology) and its innovative pipeline. Although the Eylea franchise remains challenged, it grew 10% sequentially, which suggests the worst may be behind it.

“We maintain our $730 fair value estimate for narrow-moat Regeneron and view the stock as undervalued. Although the Eylea franchise remains challenged, we view the steep selloff as overdone.”

—Jay Lee

Read Lee’s full take on Regeneron here.

DraftKings

“DraftKings’ second-quarter sales rose 37%, aided by 45% growth in sports betting. EBITDA margin expanded by 830 basis points to 19.9% on promotional efficiencies. The company now expects to reach the high end of its previous 2025 guidance for $6.2 billion-$6.4 billion in revenue.

“Even amid economic uncertainty, DraftKings’ product innovation and marketing expertise are yielding strong demand and profitability, allowing the company to reinvest in the business and offset tax headwinds.”

—Dan Wasiolek, senior equity analyst

Wasiolek has more about DraftKings stock here.

Polaris

“Polaris reported a sales decline of 6% to $1.85 billion in its second quarter, the smallest downtick since 2023. Massive profit contraction continues, with adjusted EPS falling 71% to $0.40 on lower absorption, negative product mix, and a promotional environment.

“Starting in March, industry retail sales have moderated to a low-single-digit decline according to SSI, which could signal the nearing of a trough in demand. Polaris’ innovation helped outperform the market with its own retail sales flat and share gains across all segments.

“Our fair value estimate for wide-moat Polaris is unchanged at $70 per share. We view shares as attractive even after a low-teens post-print pop. We think the market is discounting the potential of an innovative firm that has faced a multiyear industry downturn in demand.”

—Jaime Katz, senior equity analyst

Investors can find more of Katz’s take on Polaris here.

Bio-Rad Laboratories

“Bio-Rad reported year-on-year revenue growth of 1.0% at constant currency, which consisted of 3.8% growth in life sciences and a 0.7% contraction in clinical diagnostics. Management provided more optimistic guidance ranges to include its Stilla acquisition and a less adverse tariff environment, too.

“The results exceed our expectations due to double-digit growth in its process chromatography business, a key component of its life sciences segment. Although this was partly due to orders being pulled forward, management also noted signs of durable improvement in demand.

“We maintain our fair value estimate of $330 per share, which reflects conservative assumptions on midterm growth and profitability forecasts to reflect prolonged challenges in Bio-Rad’s businesses. Even with these conservative assumptions, we think shares are deeply undervalued.”

—Jay Lee

Take a deeper dive into Lee’s outlook for Bio-Rad.

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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