Mid-cap stocks MTSI, MASI, DRS, INGR and CRS all have the potential to become large-cap stocks next year.
Large-cap stocks have a market capitalization of $10 billion or more.
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U.S. stock markets have witnessed renewed momentum in 2024 after an impressive 2023. The bull run continued for the past 21 months, barring some minor fluctuations. Meanwhile, market participants are expecting a 70% chance for another 25 basis points by the Fed in December. If this materializes, then the central bank will reduce the benchmark lending rate by 1% in 2024.
Aside from the three major stock indexes, the mid-cap-centric S&P 400 index has also rallied 21.4% year to date. Within the mid-cap space, a handful of stocks (market capital > $9 billion< $10 billion) have the potential to become large caps in 2025.
Five such stocks are – MACOM Technology Solutions Holdings Inc. MTSI, Masimo Corp. MASI, Leonardo DRS Inc. DRS, Ingredion Inc. INGR and Carpenter Technology Corp. CRS.
Investment in mid-cap stocks is often recognized as a good portfolio diversification strategy. These stocks combine the attractive attributes of both small and large-cap stocks. Top-ranked, mid-cap stocks have a high potential to enhance their profitability, productivity and market share. These may also become large-cap over time.
If the economic growth slows down due to any unforeseen internal or external disturbance, mid-cap stocks will be less susceptible to losses than their large-cap counterparts owing to less international exposure.
On the other hand, if the economy continues to thrive, these stocks will gain more than small caps due to established management teams, a broad distribution network, brand recognition and ready access to the capital markets.
These stocks have strong revenues and earnings growth potential for 2025. Moreover, these stocks have seen positive earnings estimate revisions over the last 30 days. Each of our picks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
MACOM Technology Solutions is benefiting from solid momentum across telecom, data center, and industrial and defense markets. Growing 5G network deployments, rising demand for RF and microwave products and strength across defense applications are positives for MTSI.
Growing proliferation of cloud services is bolstering both domestic and international deployments of MTSI. Solid demand for 100G per lane, 400G and 800G short-reach optical connectivity solutions, is boosting MTSI’s prospects in the data center market. Strong adoption of high-performance analog components such as TIAs, CDRs and drivers which are required in 100G deployment, is another positive for MTSI.
MACOM Technology Solutions has an expected revenue and earnings growth rate of 22.5% and 31.3%, respectively, for the current year (ending September 2025). The Zacks Consensus Estimate for current-year earnings has improved 3.7% in the last 30 days.
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Masimo’s products have been the subject of various studies over the past few months, which is promising. MASI’s focus on patient monitoring and its ongoing R&D efforts are impressive. A solid product suite is likely to aid MASI in solidifying its business globally, as evidenced by its various tie-ups with healthcare providers.
A strong liquidity position is an added plus for MASI. The Zacks model anticipates the total revenues and adjusted earnings per share to improve between 2023 and 2026 and exhibit a CAGR of 4.8% and 5.9%, respectively. Masimo has an expected revenue and earnings growth rate of 6.1% and 12.8%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 0.2% in the last seven days.
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Leonardo DRS provides defense electronic products and systems, and military support services for the U.S. military intelligence agencies and allies. DRS operates through Advanced Sensing and Computing segment, and Integrated Mission Systems segments. DRS’ broad technology portfolio focuses on advanced sensing, network computing, force protection and electric power and propulsion as well as a range of key defense priorities.
Leonardo DRS has an expected revenue and earnings growth rate of 7.4% and 16.9%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 0.9% in the last seven days.
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Ingredion is an ingredients solutions provider specializing in nature-based sweeteners, starches and nutrition ingredients. INGR serves diverse sectors in food, beverage, brewing, pharmaceuticals and other industries.
INGR’s sweetener products include dextrose, glucose, polyols, HFCS and Maltodextrin. INGR’s nutrition solutions include prebiotic fibers, resistant starch, soluble fibers and Inulin fibers. INGR’s starch-based products include both industrial and food-grade starches.
Ingredion has an expected revenue and earnings growth rate of 1.3% and 6.1%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 3.7% in the last 30 days.
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Carpenter Technology’s backlog was near-record levels in the first quarter of fiscal 2025, indicating strong demand. CRS’ fiscal 2025 results are expected to reflect the impacts of the ongoing momentum across its end-use markets. CRS’ financial position has been strong, providing it the flexibility to invest in the emerging technologies of additive manufacturing and soft magnetics.
CRS’ cost-reduction initiatives are also anticipated to boost its margins. Although CRS has been facing supply-chain challenges, it will be offset by the gains. Backed by solid backlog levels, CRS’ near and long-term outlooks for each end-use market remained positive. CRS’ strategic acquisitions will boost its performance in the coming quarters.
Carpenter Technology has an expected revenue and earnings growth rate of 6.9% and 42.2%, respectively, for the current year (ending June 2025). The Zacks Consensus Estimate for current-year earnings has improved 2% in the last seven days.
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