The stock market took a much-needed respite from buying this week and could see more selling during the first five weeks of 2023, given the S&P 500 and Nasdaq’s massive moves in the near term.
The overall upbeat market action appears to be based, in large part, on the premise that the Fed’s inflation battle has essentially been won and earnings will come down in short order.
The bullish start to the year is promising and more investors are likely to buy shares in February and throughout 2023. It’s definitely time for long-term investors to reevaluate their portfolios and possibly go back to growth names that have fallen. Out of favor in 2022.
Instead of focusing on Tesla and other beaten-down growth names, especially after the insane YTD climb, a more prudent approach might be to consider that the US economy hasn’t quite reached the Goldilocks zone everyone is hoping for.
Today we dig into three highly ranked stocks that outperformed the market amid turmoil in 2022 and look set to remain higher in 2023, even if Wall Street takes its foot off the growth pedal. have been forced to.
McKesson Corporation (mck,
McKesson is a healthcare products distributor that has benefited from both the COVID pandemic and a return to normal as more people begin to receive regularly scheduled medical care, screenings and more. McKesson helps hospitals, doctors’ offices, pharmacies, manufacturers and distributes drugs, medical products and healthcare services, and much more.
McKesson grows through an overall expansion of health care, pharmaceuticals, biotech and medical products without undertaking the large-scale research and development that many innovators in the space do. McKesson is the largest of the three major pharmaceutical distributors in the US, along with AmerisourceBergen and Cardinal Health. MCK has recorded more than 20 consecutive years of sales growth outside of a small (-0.1%) pullback.
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McKesson topped Zacks Q3 FY23 estimates on February 1 and provided upbeat EPS guidance to help propel it to its current Zacks Rank #2 (Buy). Zacks estimates that its sales will grow 4.3% in FY23 and another 4% in FY24 to $286 billion, which should help its adjusted earnings grow by 8% and 3%, respectively. MCK also receives an “A” VGM grade and its industry is currently in the top 12% of over 250 Zacks industries.
McKesson shares are up roughly 1,300% over the past 20 years, compared to 395% for the S&P 500. MCK has also jumped 100% in the past two years to erase the benchmark’s 4% decline and its industry’s 3% gain. MCK stock is up 35% over the past 12 months yet trades 18% below its average Zacks price target.
Wall Street is high on MCK stock and for good reason, considering it’s trading near its 10-year average and at a 25% discount to its industry despite massively outperforming forward earnings at 13.7 times. And its dividend yields 0.6%.
Jabil (jbl,
Jabil provides manufacturing services with a client list that includes Apple, SolarEdge and other giants in important and game-changing industries. JBL has been a somewhat under-the-radar tech superstar during the past five years.
Jabil prides itself on working in the background, working with hundreds of the world’s biggest brands to help build everything from smartphones and home appliances to healthcare technology. JBL is also set to benefit from a broader onshoring/reshoring push from US companies and the federal government.
Jabil’s diversification has helped it grow steadily over the years, including 14% growth in its FY2022 quarter. Most recently, JBL topped our estimates for Q1 FY23 in the mid-December quarter and raised its guidance once again.
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JBL stock is up 215% over the past five years versus the benchmark’s 55% and the Zacks Tech sector’s 64%. This run includes an 83% gain over the past 24 months as the tech declined 17%. Jabil has also managed to outperform Teck in 2023 (up 20% versus 15% annually) to trade near new record highs.
Jabil’s valuation is surprising given his superior performance. The JBL 10.1X trades at a 55% discount to the Zacks Tech Sector to forward 12-month earnings and is 14% below its 10-year average and 45% below its high.
Zacks estimates JBL’s revenue will climb 3% in both FY23 and FY24, to reach $35.4 billion. This growth comes on top of a 12% average sales expansion over the past five years. Jabil’s adjusted earnings are forecast to climb more than 9% and 6%, respectively.
JBL’s bottom-line positivity helps it currently rank #1 (Strong Buy) on Zacks. Jabil’s Electronics – Manufacturing Services segment is in the top 15% of all Zacks industries, and six of Zacks’ seven brokerage recommendations are “Strong Buys.” And Jabil pays dividends.
Halliburton (HAL,
Halliburton is an oilfield service standout that works throughout a project’s lifecycle. Halliburton’s products and offerings help oil and gas companies with everything from exploration and well construction to abandonment activities. The entire oil and energy sector benefited from rising prices last year, and oil prices have remained better than expected, albeit well off their record highs.
The ongoing Russian aggression has severely disrupted global oil and gas supplies. More importantly, the fighting and sanctions have forced a reevaluation of the status quo. Oil exploration and drilling slowly expanding after years of slow production as more countries race toward greater energy independence is all music to Halliburton’s ears.
Perhaps most important to near-term and long-term investors, oil is without a doubt going to play a significant role in the coming years in the US and around the world, even as alternative and renewable energy booms. . Halliburton once again topped our EPS estimates on January 24, and HAL executives raised their outlook, calling for “strengthening earnings power through 2023 and beyond.”
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Zacks estimates Halliburton’s FY23 sales to grow 16% and FY24 11% to $26.14 billion. Also, its adjusted earnings are projected to grow by 43% this year and 22% in FY24.
This outlook reflects its growth runway, stability and niche within the oil sector as many face a pending downturn after a stellar year. And Halliburton posted 33% revenue growth and 99% adjusted earnings expansion in 2022.
Halliburton’s earnings growth revision has helped propel it to its current Zacks Rank #2 (Buy). HAL’s industry ranks in the top 32% of more than 250 Zacks industries, and it recently increased its dividend by 33% to $0.16 per share. The stock sports an overall “A” VGM grade and 13 out of 15 brokerage recommendations are “Strong Buy” at Zacks with two “Buy” ratings.
Halliburton stock has soared 99% over the past two years to blow away 55% of the Zacks Oil & Energy sector. HAL shares have gained 30% in the last six months and are still trading about 35% below their average Zacks price target at about $39 per share. On the valuation side, HAL trades at 15% discount to forward earnings of 11.8 times to its industry. It also offers a 20% discount on its own mid-five year term.
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Source: finance.yahoo.com
