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5 Must-Buy U. S. Bigwigs for Solid Returns in the Near Term

U.S. stock markets have witnessed rangebound trading in May. Investors seem confused about the movements of the market. The primary reason is that the economy is currently facing a dichotomy. At present, the positive factors and the negative factors carry equal weight. This makes market participants decisions tough.

Market participants remained concerned about the next move that the Fed would announce after its June FOMC meeting. At present, the CME FedWatch is showing an 80% probability that the central bank will keep unchanged the benchmark lending rate at 5-5.25%. However, 20% of respondents have projected that the rate will be hiked by another 25 basis points.

A few Fed officials have already started saying that an abrupt termination of the ongoing rate hike regime will not take inflation to the 2% target rate. However, more rate hikes will have severe consequences on the regional banking industry. In his post-FOMC statement in May, Fed Chair Jerome Powell acknowledged that the current banking turmoil in the United States has led to tighter credit conditions, and is likely to impact economic activities.

Meanwhile, defying a rangebound market, a handful of stocks of U.S. corporate behemoths have provided double-digit or near double-digit returns in the past three months with more upside left. These stocks carry a favorable Zacks Rank indicating solid returns in the near-term.

Our Top Picks

We have narrowed our search to five U.S. corporate giants (market capital > $50 billion), which have seen positive earnings estimate revisions in 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.

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The chart below shows the price performance of our five picks in the past three months.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Meta Platforms Inc. META is benefiting from steady user growth across all regions, particularly Asia Pacific. Increased engagement for its products like Instagram, WhatsApp, Messenger and Facebook has been a major growth driver. META is considered to have pioneered the concept of social networking.

However, as developed regions mature, Meta Platforms will take measures to drive penetration in the emerging markets of South East Asia, Latin America and Africa. Of all places, India deserves a-special mention in terms of user growth. The world’s most populated country offers tremendous potential for META. With China off the radar, India can prove to be a terrific growth engine for Meta.

Meta Platform has an expected revenue and earnings growth rate of 9% and 22.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 15.2% over the last 30 days. The stock price of META has soared 45.3% in the past three months.

Booking Holdings Inc. BKNG is benefiting from a substantial improvement in its booking trends. Solid growth in domestic bookings is contributing well. Further, BKNG is experiencing solid momentum in international regions, which is a positive. Strong growth in rental car, airline ticket units and booked room nights is another positive.

Also, solid momentum across the agency, merchant, and advertising and other businesses is a tailwind for BKNG, with an expected year-over-year revenue rise of 2.3%, 18.7% and 8.2%, respectively, in 2023. Further, strengthening alternative accommodation business and flight capabilities are major positives. We expect 2023 total revenues to be up 9.5% from 2022.

Booking Holdings has an expected revenue and earnings growth rate of 19.9% and 36.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.6% over the last 30 days. The stock price of BKNG has surged 10% in the past three months.

Chipotle Mexican Grill Inc. CMG has been benefiting from its strong comparable restaurant sales growth, digital efforts, Chipotlane add-ons and menu innovation. Moreover, strength in digital sales, rise in menu prices, new restaurant openings and higher restaurant-level operating margin have been driving CMG’s performance.

CMG reported solid benefits from Project Square One with improvements, including throughput on the frontline, on-time and accuracy on the digital make line. CMG also emphasizes smarter pickup times to boost growth.

Chipotle Mexican Grill has an expected revenue and earnings growth rate of 14% and 33.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.9% over the last 30 days. The stock price of CMG has jumped 42.4% in the past three months.

McDonald's Corp. MCD continues to impress investors with robust comps growth. MCD’s increased focus on menu innovation and loyalty program expansion is commendable. MCD is also undertaking every effort to drive growth in international markets. Robust digitalization is likely to help McDonald's in driving long-term growth and capture market share. MCD plans to open more than 1,900 restaurants globally in 2023.

McDonald's has an expected revenue and earnings growth rate of 7.7% and 9.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.7% over the last 30 days. The stock price of MCD has advanced 9.8% in the past three months.

ServiceNow Inc. NOW has been benefiting from the rising adoption of its workflows by enterprises undergoing digital transformation. NOW had 1,682 total customers with more than $1 million in annual contract value at the end of the first quarter.

NOW’s expanding global presence, solid partner base and strategic buyouts are positives. New solutions — Automated Service Suggestions, Service Request Playbook and Workplace Scenario Planning — are helping it win new customers. Strategic alliances with the likes of Microsoft act as tailwind.

ServiceNow has expected revenue and earnings growth rates of 21.6% and 26.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last seven days. The stock price of MCD has climbed 20.2% in the past three months.

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McDonald's Corporation (MCD) : Free Stock Analysis Report

Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report

ServiceNow, Inc. (NOW) : Free Stock Analysis Report

Booking Holdings Inc. (BKNG) : Free Stock Analysis Report

Meta Platforms, Inc. (META) : Free Stock Analysis Report

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