Wall Street has entered August after an impressive bull run in July. The July rally snapped six months of rigorous market meltdown. The investor community is divided about whether the market has bottomed out or it witnessed a bear market relief rally. Therefore, the market’s movement in August will be an important indicator.
The broad-market S&P 500 Index advanced 9.1% in last month. Despite the fact that the benchmark is still in correction territory, having declined 13.6% year to date, it may gather pace in the second half of 2022.
At this stage, it should be prudent to invest in the U.S. corporate behemoths from the S&P 500 stable. We have selected five such stocks with a favorable Zacks Rank. These are – Tesla Inc. TSLA, NextEra Energy Inc. NEE, Visa Inc. V, Chevron Corp. CVX and Exxon Mobil Corp. XOM.
Wall Street May Gain Some Pace in 2H 2022
A high dose of interest rate therapy and extremely tight monetary control by the Fed to combat the record-high inflation might show positive signals. The U.S. economy fell by 0.9% in second-quarter 2022 after declining 1.6% in the first quarter. The Bureau of Economic Analysis reported that both consumer and business spending dropped owing to mounting pieces for goods and services.
Recently released major economic data such as ISM manufacturing and services indexes, retail sales and industrial production dropped significantly. The housing market — one of the booming sectors during the pandemic — has been declining precipitously since April.
On Jul 27, the Fed Chairman Jerome Powell indicated that the central bank may reduce the magnitude of rate hikes going forward depending on economic data. However, both Powell and Treasury Secretary Janet Yellen said that despite two consecutive quarters of U.S. GDP contraction, the economy is not in recession as major macro-economic variables do not indicate so.
Our Top Picks
We have narrowed our search to five U.S. corporate giants (market capital >$100 billion) as these companies have a robust business model, a solid financial position and globally acclaimed brand value.
These stocks have strong potential for the rest of 2022 and have seen positive earnings estimate revisions in the last 30 days. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our five picks in the past month.
Image Source: Zacks Investment Research
Tesla has acquired a substantial market share within the electric car segment. Increasing Model 3 delivery, which forms a significant chunk of TSLA’s overall deliveries, is aiding its top line. Along with Model 3, Model Y is contributing to its revenues. The global auto industry is gradually moving toward electric vehicles. Tesla is expected to be the largest beneficiary of this trend.
Despite the chip crisis, Tesla reported strong deliveries of 254,695 units in second-quarter 2022, 27% year over year. Additionally, TSLA’s energy generation and storage revenues are growing, thanks to the positive reception of Megapack and Powerwall products.
TSLA has an expected earnings growth rate of 75.4% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.8% over the last 7 days.
Chevron is one of the best-placed global integrated oil firms to achieve a sustainable production ramp-up. CVX’s existing project pipeline is one of the best in the industry, thanks to its premier position in the lucrative Permian Basin. The WTI crude oil price is hovering around $100 per barrel. The price is likely to remain elevated as the Russia-Ukraine conflict is yet to be resolved.
Chevron’s Noble Energy takeover has expanded its footprint in the region and the DJ Basin. CVX now has access to Noble Energy’s low-cost, proven reserves along with cash-generating offshore assets in Israel — particularly the flagship Leviathan natural gas project — thereby boosting its footing in the Mediterranean.
CVX has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 3.9% over the last 30 days.
Exxon Mobil made multiple world-class oil discoveries at the Stabroek Block, located off the coast of Guyana. XOM raised the estimate for discovered recoverable resources from the Stabroek Block to approximately 10 billion oil-equivalent barrels. The WTI crude oil price is hovering around $100 per barrel. The price is likely to remain elevated as the Russia-Ukraine clash continues.
Exxon Mobil’s bellwether status and an optimal integrated capital structure, which have historically led to industry-leading returns, make it a relatively lower-risk energy sector play. The integrated oil behemoth expects to reduce greenhouse gas emissions by 30% in its upstream business. By then, XOM expects to reduce flaring and methane emissions by 40%.
Exxon Mobil has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 16.8% over the last 30 days.
NextEra Energy is expanding domestic clean energy assets through acquisitions and organic initiatives. NEE has stakes in natural gas pipelines in Texas and gains from an increase in natural gas production.
To enhance flexibility, NextEra Energy completed a few financing agreements to secure funds for acquisition. NEE benefits from declining installation costs and improving renewable technology. It has sufficient liquidity to meet obligations.
NextEra Energy has an expected earnings growth rate of 12.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 7 days.
Visa has undertaken mergers and acquisitions, partnerships, and minority investments to achieve growth. V’s investments in technology are solidifying its position in the payments market. A shift in payments to the digital mode is a boon for Visa.
The coronavirus vaccine rollouts and the gradual revival of consumer confidence should keep driving spending, expanding business volumes in turn. Backed by its strong cash position, Visa remains committed to boosting its shareholder value. V’s balance sheet strength is commendable.
Visa has an expected earnings growth rate of 24.4% for the current year (ending September 2022). The Zacks Consensus Estimate for current-year earnings has improved 2.5% over the last 7 days.
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NextEra Energy, Inc. (NEE) : Free Stock Analysis Report
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Tesla, Inc. (TSLA) : Free Stock Analysis Report
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