October proved to be the best month for investors in some time. The S&P 500 rose 6.9% for the month, registering its best gain since November last year, owing to impressive third-quarter earnings reports from several companies. The expected passage of a $1.75 trillion human infrastructure bill soon, along with the anticipated passage of a $1 trillion traditional infrastructure spending bill, has contributed to the bullish market sentiment.
Mid-cap stocks tend to perform well when the economy exhibits growth potential, interest rates are low, and the stock market shows bullish tendencies. Investors’ interest in mid-cap stocks is evident in the SPDR S&P MIDCAP 400 ETF Trust’s (MDY) 47% returns over the past year versus the broader SPDR S&P 500 ETF Trust’s (SPY) 40.6% gains.
Given this backdrop, we think it could be wise to add fundamentally sound mid-cap stocks Compañía Cervecerías Unidas S.A. (CCU), Piper Sandler Companies (PIPR), and Newmark Group, Inc. (NMRK) to one’s portfolio.
Compañía Cervecerías Unidas S.A. (CCU)
CCU is a Santiago, Chile-based beverage company that operates through two segments: International Business and Wine. The company manufactures and sells alcoholic and non-alcoholic beer through its licensed brands and other non-alcoholic beverages, such as carbonated soft drinks, juices, energy drinks, and iced tea. CCU has a $3.12 billion market capitalization.
On October 28, CCU announced the opening of its bottling plant in Renca, Chile. The new 100% recyclable packaging facility should increase the company’s productive capability to a projected 12.7 million hectoliters of beverages and enhance the company’s long-term growth and sustainability.
CCU’s net sales increased 47.6% year-over-year to CLP470 billion ($577.41 million) in its second fiscal quarter. Its EBIT rose 564.9% from the same period last year to CLP34.67 billion ($42.59 million), while its EBITDA improved 213.3% from the prior-year quarter to CLP61.58 billion ($75.65 million). The company’s net income climbed 682.4% year-over-year to CLP18.97 billion ($23.30 million).
A $1.06 consensus EPS estimate for the current year (fiscal 2021) indicates a 60.6% year-over-year increase. Likewise, the $2.67 billion consensus revenue estimate for the current year reflects a 13.5% improvement from the prior year. Furthermore, CCU has an impressive surprise earnings history; it has topped consensus EPS estimates in three out of the trailing four quarters. The stock has gained 57.2% in price over the past year and 15% year-to-date to close Friday’s trading session at $16.91.
CCU’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
CCU has a Growth, Value, Sentiment, and Quality grade of B. In the 36-stock, B-rated Beverages industry, it is ranked #2. Click here to see the additional POWR Ratings for CCU (Momentum and Stability).
Piper Sandler Companies (PIPR)
PIPR is an investment banking company. Its services include investment banking, advisory regarding mergers and acquisitions, and research on various equity and fixed income products. The company, which is headquartered in Minneapolis, Minn., has a $2.97 billion market capitalization.
On October 14, PIPR announced that it had agreed to acquire an independent research firm, Cornerstone Macro. The acquisition is expected to bolster the company’s position as an institutional equities research platform.
In July, PIPR advised private investment firm Falcon Private Holdings, LLC on its sale of Aristech Surfaces LLC to Trinseo S.A. (TSE). Over the past couple of months, PIPR has been chosen by several companies for its advisory services on acquisitions and sales. This demonstrates the company’s solid position in the financial advisory space.
In its fiscal third quarter, ended September 30, PIPR’s adjusted net revenues rose 47.9% year-over-year to $440.33 million. The company’s adjusted operating income improved 90.6% from the same period last year to $116.02 million. Its adjusted net income increased 94% year-over-year to $82.81 million, while adjusted EPS came in at $4.55, up 91.2% from the prior-year quarter.
A $4.84 consensus EPS estimate for the current quarter (ending December 2021) indicates a 16.1% year-over-year increase. Likewise, the $473.70 million consensus revenue estimate for the current quarter reflects an 18.6% rise from the prior-year quarter. In addition, PIPR has topped the consensus EPS estimate in each of the trailing four quarters. The stock has gained 97.4% in price over the past year to close Friday’s trading session at $164.69. It has gained 63.2% year-to-date.
PIPR’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which translates to Strong Buy in our POWR Rating system. PIPR has a Growth grade of A, and a Value and Quality grade of B. In the 22-stock Investment Brokerage Industry, it is ranked #1. The industry is rated B.
In addition to the POWR Rating grades we’ve stated above, one can see the PIPR Ratings for Momentum, Stability, and Sentiment here.
Newmark Group, Inc. (NMRK)
NMRK in New York City is an international provider of commercial real estate services. Its offerings include investor/owner services and products for capital markets, property management services, and consulting and advisory services. The company has a $2.91 billion market capitalization.
On October 13, NMRK announced the expansion of its International Capital Markets group, hiring two executives, Frederick Wong and Joseph Morris. Regarding the expansion, Newmark Chief Executive Officer Barry Gosin said, "As geographical barriers for cross-border investment continue to disappear, we're eager to reinvest in this growing vertical with two key executive hires, both of which fortify our reach in some of the most dynamic global markets."
On October 8, NMRK declared an arrangement to sell the North County Corporate Center (NCCC) in Vista, California to Black Creek Group. The sale of the 100% occupied facility, with a solid cash flow and diverse rent roll, may result in significant real-estate services income for NMRK.
For its second fiscal quarter, ended June 30, NMRK’s total revenues increased 64.1% year-over-year to $629.87 million. Its post-tax adjusted earnings and post-tax adjusted EPS came in at $789.75 million and $2.89, respectively, registering 2,925.1% and 2,790% increases, respectively, from the prior-year quarter.
Analysts expect its EPS to increase 33.3% from the same period last year to $0.40 in the current quarter (ending December 2021). Likewise, the Street expects revenue to improve 25.8% from the prior-year quarter to $756.40 million in the current quarter. In addition, NMRK has beaten consensus EPS estimates in each of the trailing four quarters. NMRK’s stock has gained 214.3% in price over the past year and 104.1% year-to-date to close Friday’s trading session at $14.88.
It’s no surprise that NMRK has an overall A rating, which equates to Strong Buy in our proprietary rating system. NMRK also has an A grade for Sentiment, and a B grade for Growth, Value, Momentum, and Quality. It is ranked #1 among 43 stocks in the Real Estate Services industry.
To see the additional POWR Rating for Stability for NMRK, click here.
Note that NMRK is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
CCU shares were trading at $17.25 per share on Monday morning, up $0.34 (+2.01%). Year-to-date, CCU has gained 21.12%, versus a 23.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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