Morningstar

5 Undervalued Stocks That Crushed Q3 Earnings

Nike and Blackstone are among the names that are still cheap despite impressive earnings beats.

Nike logo is seen on the facade of a store exterior.
Li Hongbo/VCG via Getty
Securities in This Article
Nike Inc Class B
(NKE)
Corteva Inc
(CTVA)
Biogen Inc
(BIIB)
Blackstone Inc
(BX)
Royalty Pharma PLC Class A
(RPRX)

Amid a solid earnings picture for the third 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 second quarter, slightly below last quarter’s 13.0% but still the third-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 Nov. 19 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.

5 Undervalued Earnings Crushers

How Do Third-Quarter Earnings Stack Up?

As of the time of writing, 87% of the 847 US-listed stocks covered by Morningstar analysts have reported earnings. Of those, 51% beat the FactSet mean estimates for their earnings by 5% or more, a slight uptick from the 50% seen last quarter. About 14% missed earnings estimates by 5% or more, just above the 13% last quarter. Slightly fewer companies reported in line with expectations: 35% 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 15% 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 847 US-listed stocks covered by Morningstar analysts that have reported earnings so far, five met the criteria. We’ve highlighted what our analysts had to say.

Biogen

“Biogen reported 3% year-on-year revenue growth and 18% non-GAAP earnings per share growth. Sales of Leqembi (for Alzheimer’s) in the United States were $69 million, or 9.5% sequential growth. Management lowered its full-year guidance range for non-GAAP EPS by 6% (using the midpoints) from July.

“Although management’s new non-GAAP EPS guidance is nominally lower, it is actually a 1.5% improvement after removing $1.25 per share of charges for in-process research and development, which will be recognized in the fourth quarter.

“We maintain our fair value estimate 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.

Blackstone

“Blackstone ended September with $906.2 billion in fee-earning assets under management, up 2.2% sequentially and 10.5% year over year. Total revenue declined 15.7% year over year to $3.1 billion during the third quarter, with fee-related earnings increasing 26.0% to $1.5 billion.

“Blackstone continues to generate positive flows as its mix of alternative products—through its real estate, private equity, multi-asset investing, and credit and insurance segments—benefits from ongoing demand for nontraditional products.

“With $1.242 trillion in total AUM, Blackstone remains the largest alternative asset manager in the world. Effective fundraising, deployment, and realization activity has allowed the firm to continue to grow organically, despite the more volatile market environment of late.”

—Greggory Warren, senior equity analyst

Investors can find more of Warren’s take on Blackstone here.

Corteva

“Corteva reported strong third-quarter results driven by volume growth. Corteva shares were up 3% on Nov. 5 at the time of writing as the market reacted positively to management’s raised guidance for 2025 and 2026.

“Corteva has historically generated an operating EBITDA loss during the third quarter. Yet, the company generated a profit this quarter driven by higher volumes and reduced in-unit costs in both the seed and crop protection businesses.

“We raise our fair value estimate to $80 per share from $75 for wide-moat Corteva. Our increase is driven by our higher near-term outlook for Corteva in both the seeds and crop protection businesses and higher long-term seed profit margins as royalties go from a net cost to net income over time.”

—Seth Goldstein, senior equity analyst

Take a deeper dive into Goldstein’s outlook for Corteva.

Nike

  • Earnings Per Share: Gain of $0.49 versus the consensus estimate of $0.27
  • Revenue: $11.7 billion versus the consensus estimate of $11.0 billion
  • Morningstar Rating: ★★★★
  • Discount to Fair Value: 40%

“Nike overcame a 9% sales decline in Greater China (13% of total) to post 1% growth in fiscal 2026’s first quarter. Its gross margin fell 320 basis points to 42.2% due to higher markdowns and tariffs, and led to an EBIT margin that declined to 7.7% from 10.9% despite a 1% cut in operating costs.

“Nike outpaced our estimate for a 5.5% sales decline as it continues to implement CEO Elliott Hill’s ‘Win Now’ plan. The firm is prioritizing its connections to sports, rebuilding relationships with wholesale partners, clearing overexposed lifestyle products, and innovation.

“Wide-moat Nike’s shares are undervalued relative to our $104 per share fair value estimate, which we do not expect to change materially. We think investors are overlooking its potential to build to midteen operating margins through product releases, new marketing, and price hikes.”

—David Swartz, senior equity analyst

Swartz has more about Nike stock here.

Royalty Pharma

“Royalty Pharma’s third quarter delivered sustained revenue growth with portfolio receipts rising 11% year over year. Management increased guidance during the call, as 2025’s midpoint for portfolio receipt growth is now expected to be 15%, up from 10.5%.

“Growth in portfolio receipts allows Royalty Pharma to remain active on the transaction front, fueling future collections. It announced $1 billion in capital deployment during the quarter and repurchased another $152 million worth of shares.

“We raise our fair value estimate to $51 per share for narrow-moat Royalty Pharma, up 8.5% from $47 after accounting for time value of money, increased near-term guidance, and the firm’s ability to offset patent losses. Shares traded up 6%, but we continue to view it as undervalued.”

—Rachel Elfman, equity analyst

Read Elfman’s full take on Royalty Pharma 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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