The Zacks Analyst Blog Highlights: Seagate, Kohl’s, Boeing, Marathon Petroleum and ConocoPhillips
For Immediate Release
Chicago, IL – January 25, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Seagate Technology plc STX, Kohl’s Corporation KSS, Boeing Company BA, Marathon Petroleum Corporation MPC and ConocoPhillips COP.
Here are highlights from Wednesday’s Analyst Blog:
S&P 500 Beats 54-Year-Old Record: Top 5 Gainers
The S&P 500 topped a 54-year old record for all-time highs in January. The broader index, in fact, met and exceeded Wall Street analysts’ projected average of 2,819 by the end of this year in just about 14 days of trading. Such relentless rally is merely an indication of a bull market that has an ability to discard any geo-political headwind.
The index has been supported by a flurry of tailwinds. Corporate earnings results have so far exceeded expectations, assuring investors that in spite of anxieties over high valuations, demand remains healthy. A series of strong economic data and euphoria over the Republican-led tax cut also helped the benchmark scale north.
Given the bullish trend, investing in sound stocks listed on the index seems alluring at the moment. These stocks not only outpaced the broader index so far this year but are also slated to gain further in the near term.
S&P 500 Tops 54-Year Old Record
The S&P 500 scaled the 12th record close so far in January, topping the previous high of 11 since 1964, according to the WSJ Market Data Group. The broader index ended in the green in 12 of the 15 trading sessions this year.
In fact, the index has posted its longest stretch without a 5% pullback. This reflects the equity market’s resilience in recent times. The index had risen 19.4% in 2017, its best year since 2013. The index has continued its winning run for 14 straight months. It also posted 62 record closing highs last year, the second-highest number in its history. In fact, the index posted 77 record closes in 1995, the best year so far.
Equities Supported by a Series of Tailwinds
The index’s stellar run came at a time when market volatility has essentially been nonexistent. Astute investors have shrugged off all kind of political uncertainty. Instead, they focused on upbeat corporate earnings results, accelerating economic growth both domestically and abroad, and the recently passed tax overhaul policy.
Q4 Earnings to See Strong Growth
The Q4 earnings season kicked off on a positive note. For the 53 S&P 500 members that have reported results already, earnings are up 11.7% from the same period last year on 7.5% higher revenues, with 81.1% beating EPS estimates and 75.5% surpassing revenue estimates. In fact, Q4 earnings among all sectors are expected to be up 10.3% from the same period last year on 7.1% higher revenues. This will follow the 6.7% earnings growth recorded in the Q3 of 2017 on 5.9% higher revenues.
Estimates for Q4 earnings for most of the sectors are expected to be positive, with Energy, Industrial Products, Basic Materials and Technology poised to post strong gains. An uptick in oil output is expected to boost the energy sector, while a rise in sales on housing demand post-hurricanes will drive manufacturing activities. Meanwhile, substantial growth in cloud computing, the Internet of Things and artificial intelligence are cited to be some of the reasons that will benefit the tech sector.
Solid Economic Data
Economic recovery worldwide gave a boost to profitability, reduced the jobless rate to 4.1% and lifted consumer confidence to a 17-year high last November. Lynn Franco, director of economic indicators at the Conference Board, added that “consumers’ expectations remain at historically strong levels, suggesting economic growth will continue well into 2018.”
Lest we forget, workers’ pay has increased 2.5% from December 2016 to December 2017. Such a low level of unemployment, rise in income and more confident consumers drove spending at both online and bricks-and-mortar stores as well as restaurants. In fact, spending might get a boost from the $1.5-trillion package of tax cuts approved by the Republican-controlled U.S. Congress and signed into law by President Trump last month. These massive tax cuts will drive household income and in turn increase the propensity to consume.
Tax Overhaul Effects
The corporate tax rate will be lowered from 35% to 21% and will be implemented this year, instead of being delayed till 2019. At the same time, any income brought back from overseas will be taxed 8-15.5%, instead of the current 35%.
Lowering of domestic tax rates will boost profits, while a one-time low tax rate on foreign profits will encourage companies to bring funds held overseas back to the United States. This will help such companies carry out a combination of share buybacks, dividend payments and M&A activities.
5 Top Winners
Given the S&P 500’s record breaking run, investors should double down on the hottest stocks from the said index. We have, therefore, selected five such companies that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Seagate Technology plc provides data storage technology and solutions in the United States and internationally. The stock has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings increased 8.7% over the last 60 days. The company’s expected growth rate for the current year is 9.7%, higher than industry’s rally of 1.7%. Seagate Technology has outperformed the broader S&P 500 index on a year-to-date basis (+29.2% vs +6.2%).
Kohl’s Corporation operates department stores in the United States. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 9.4% in the last 60 days. The company’s expected growth rate for the current year is 8.5%, in contrast to the industry’s projected decline of 6.3%. Kohl’s has outperformed the broader S&P 500 index on a year-to-date basis (+27.1% vs +6.2%).
The Boeing Company — a Zacks Rank #2 company — manufactures commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch systems and services worldwide. The Zacks Consensus Estimate for its current-year earnings increased 0.4% over the last 60 days. The company’s expected growth rate for the current year is 31.7%, higher than industry’s rally of 17.4%. Boeing has outperformed the broader S&P 500 index on a year-to-date basis (+13.8% vs +6.2%). You can see the complete list of today’s Zacks #1 Rank stocks here.
Marathon Petroleum Corporation engages in refining, marketing, retailing, and transporting petroleum products primarily in the United States. The stock sports a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 1.1% over the last 60 days. The company’s expected growth rate for the current year is 78.5%, higher than industry’s rally of 20.4%. Marathon Petroleum has outperformed the broader S&P 500 index on a year-to-date basis (+10.8% vs +6.2%).
ConocoPhillips produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG), and natural gas liquids worldwide. The stock has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings increased 5.6% in the last 60 days. The company’s expected growth rate for the current year is 121.4%, higher than industry’s rally of 33.4%. The stock has outperformed the broader S&P 500 index on a year-to-date basis (+10.2% vs +6.2%).
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it’s predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce “the world’s first trillionaires,” but that should still leave plenty of money for regular investors who make the right trades early.
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