As the second-quarter earnings season draws to a close, a large share of US-listed companies have topped analyst estimates. Combining the results of firms in the Morningstar US Market Index that have reported earnings with analysts’ expectations for those yet to publish, earnings are on track to grow 44.6% from the first quarter, above the three-year quarterly average of 13.9% and the highest rate since the third quarter of 2021.

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 a few of these stocks remain undervalued.

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

6 undervalued earnings crushers

  • Albemarle ALB
  • Atlassian TEAM
  • Baxter International BAX
  • CarMax KMX
  • Ionis Pharmaceuticals IONS
  • Sanofi SNY

How do second-quarter earnings stack up?

At the time of writing, 83% of the 835 US-listed stocks covered by Morningstar analysts have reported earnings. Of those, 55% beat FactSet mean estimates for their earnings by 5% or more, nearly the same as the 54% last quarter. About 14% missed earnings estimates by 5% or more, in line with last quarter. Roughly the same number of companies reported in line with expectations: 31% versus 32% last quarter.

How we screened for stocks that beat earnings expectations

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 10% 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, a Morningstar Rating of 4 or 5 stars, and a price/fair value ratio of 0.7 or lower.

Of the 695 US-listed stocks covered by Morningstar analysts that have reported earnings so far, six met the criteria.

Albemarle

  • Earnings Per Share: Gain of $3.75 versus the consensus estimate of $3.20
  • Revenue: $1.74 billion versus the consensus estimate of $1.61 billion
  • Morningstar Rating: ★★★★
  • Discount to Fair Value: 36%

“Albemarle reported strong second-quarter results as higher lithium prices drove more than 150% profit growth year over year. The huge profit increase is in line with our view that Albemarle’s low-cost lithium operations, which underpin our narrow-moat rating, will allow the company to generate strong profits and positive free cash flow.

“We maintain our $200 fair value estimate for narrow-moat Albemarle. We forecast Albemarle will continue to generate strong profits in 2026 and beyond, buoyed by lithium prices around midcycle levels.”

—Seth Goldstein, senior equity analyst

Atlassian

  • Earnings Per Share: Gain of $1.87 versus the consensus estimate of $1.50
  • Revenue: $1.77 billion versus the consensus estimate of $1.66 billion
  • Morningstar Rating: ★★★★
  • Discount to Fair Value: 30%

“Atlassian reported fourth-quarter results that once again crushed guidance, with revenue up 28% year over year to $1.766 billion and non-GAAP operating margin of 36.0%, versus the high end of guidance at $1.661 billion and 30.5%, respectively.

“Atlassian continues to report results that blow consensus estimates away. Revenue upside was largely driven by cloud acceleration, broad-based seat expansion, and cross-selling, and not revenue pull-forwards, which is a very high-quality beat in our view.

“We maintain our fair value estimate for narrow-moat Atlassian at $220 per share. Considering the AI data points, quarterly results, good guidance, and accelerating buybacks, we continue to see shares as attractive.”

—Dan Romanoff, senior equity analyst

Baxter International

  • Earnings Per Share: Gain of $0.56 versus the consensus estimate of $0.37
  • Revenue: $2.96 billion versus the consensus estimate of $2.79 billion
  • Morningstar Rating: ★★★★
  • Discount to Fair Value: 33%

“Baxter reported second-quarter results that included 5% organic revenue growth and adjusted EPS of $0.56, which was well above FactSet consensus of $0.37 even when excluding a one-time tariff refund benefit of $0.11. Management increased its top- and bottom-line outlooks for 2026, too.

“Continuing the nearly 60% climb since its recent low in March, Baxter shares rose over 15% in early trading July 30 on its improving organic growth trends across business lines and better-than-expected profitability.

“After incorporating mild adjustments to our near-term expectations related to this announcement, we are maintaining our fair value estimate on narrow-moat Baxter at $40 per share.”

—Julie Utterback, senior equity analyst

CarMax

  • Earnings Per Share: Gain of $1.31 versus the consensus estimate of $0.96
  • Revenue: $8.01 billion versus the consensus estimate of $7.43 billion
  • Morningstar Rating: ★★★★★
  • Discount to Fair Value: 39%

“CarMax’s fiscal 2027 first-quarter results reported diluted EPS of $1.31, beating the $0.95 LSEG consensus, but the stock fell over 9% during trading on June 17. New CEO Keith Barr announced four strategic pillars, which will be detailed at an investor event in late fall.

“The market is eagerly awaiting details of the new strategy, which we think caused the stock’s June 17 decline despite the EPS beat. The pillars focus on offering a broad selection with an easier online experience that complements the in-store experience, all while reducing overhead.

“We are lowering our fair value estimate for narrow-moat CarMax to $96 from $99. The change is from raising our weighted average cost of capital by 50 basis points to 9.5% and is a more granular expression of our existing risk assessment rather than a more negative view of the firm.”

—David Whiston, senior equity analyst

Ionis Pharmaceuticals

  • Earnings Per Share: Loss of $0.69 versus the consensus estimate of $1.08
  • Revenue: $268.0 million versus the consensus estimate of $189.1 million
  • Morningstar Rating: ★★★★
  • Discount to Fair Value: 33%

“Ionis posted revenue of $268 million in the second quarter, up 56% year over year, excluding last year’s one-time sapablursen upfront payment. Ionis maintained its 2026 guidance of roughly $890 million of revenue at the midpoint, including Tryngolza (olezarsen) net product sales of $105 million.

“Ionis continues to demonstrate progress in its transformation from a partnership-driven biotechnology company to a scaled commercial organization supported by four independent product launches underway.

“We maintain our fair value estimate of $84 per share for narrow-moat Ionis. Shares are currently trading 39% below our valuation. We continue to see Ionis’ recent pullback following the phase 3 ATTR-CM trial miss as creating an attractive entry point.”

—Rachel Elfman, equity analyst

Sanofi

  • Earnings Per Share: Gain of $2.09 versus the consensus estimate of $1.90
  • Revenue: $12.30 billion versus the consensus estimate of $11.31 billion
  • Morningstar Rating: ★★★★★
  • Discount to Fair Value: 30%

“Sanofi reported second-quarter net sales growth of 18% and business EPS growth of 33% at constant currencies, fueled by Dupixent’s outstanding performance. Management updated full-year guidance to around 10% sales growth and slightly faster business EPS growth. Sanofi’s Paris-listed shares fell 9%.

“Sanofi reported second-quarter net sales growth of 18% and business EPS growth of 33% at constant currencies, fueled by Dupixent’s outstanding performance. Management updated full-year guidance to around 10% sales growth and slightly faster business EPS growth. Sanofi’s Paris-listed shares fell 9%.

“We maintain our fair value estimates of EUR 107/$63 for narrow-moat Sanofi. Despite the negative market reaction, we agree with the thrust of Garijo’s strategic overhaul. However, we think investors need more clarity on Sanofi’s R&D strategy, as well as a tighter timeline for Dupixent’s loss of exclusivity.”

—Jay Lee, senior equity analyst