Stocks that have missed analysts’ expectations on both the top and bottom lines this earnings season could be good candidates to sell, according to Wolfe Research. For the most part, the second-quarter earnings season has blown away Wall Street expectations. Approximately 94% of the S & P 500 has already reported, and 82% of companies have delivered a positive earnings surprise. About 79% of companies have posted revenue exceeding analysts’ estimates. But several stocks have lagged their numbers. A recent report from Wolfe Research shared a list of companies that investors might consider selling — stocks that missed both revenue and earnings expectations this quarter, while also having negative year-to-date earnings revisions for 2025. One name on Wolfe’s list was Southwest Airlines , down 8% this year. Last month, Southwest reported adjusted earnings of 43 cents per share on revenue of $7.24 billion in its latest quarter, while analysts polled by FactSet had estimated earnings of 51 cents and revenue of $7.30 billion. Afterward, Evercore ISI downgraded the Dallas-based carrier to an in-line rating from outperform. Still, analyst Duane Pfennigwerth’s $40 price target implies Southwest shares could soar 28% from the Wednesday close. “Trading at 36x ’25E, 11x ’26E EPS, we believe shares are now much closer to fair value and are beginning to more fully price in clean execution of these initiatives into next year,” Pfennigwerth wrote. “We also wonder if the company’s aggressive pace of buyback (likely a big contributor to YTD outperformance) can be sustained at this rate.” Another stock that Wolfe says investors might avoid is Align Technology . Shares of the maker of Invisalign orthodontics have tumbled 32% in 2025. In July, Align’s second-quarter earnings and revenue missed analysts’ estimates. The company also guided for current-quarter revenue in the range of $965 million to $985 million, below the FactSet consensus among analysts of $1.04 billion. In the wake of the report, Morgan Stanley downgraded Align to equal weight from overweight, slashing its 12-month price target to $154 per share from $249. The new forecast implies shares might add another 7% from the Wednesday close. “Our prior [overweight] thesis was based on ALGN’s leadership in a high growth category, but growth has been challenged for years, w/ limited clarity on [the] path from here,” wrote analyst Erin Wright. “We view a re-rate lower as warranted, closer to the Dental peer average.” Defense prime contractor Lockheed Martin is another sell, according to Truist. The investment bank downgraded Lockheed to a hold from buy after second-quarter revenue at the maker of the F-35 fighter-bomber fell short of Wall Street estimates, and it lowered its full-year guidance below prior estimates. Truist also slashed its price target to $440 per share from $554, implying the stock won’t do much in the coming year. “We are downgrading LMT shares now as we have little confidence that management will be able to execute on its multi-year growth framework, and we can not be certain that more charges will not materialize in the coming quarters,” wrote analyst Michael Ciarmoli. “We expect shares will trade flat for the balance of the year given a lack of catalysts and believe LMT shares will continue to trade at a discounted multiple vs its larger peers.” Shares of Lockheed Martin, which yields almost 3%, are down 8% on the year.
