The stock markets have been rallying over the past couple of months, driven by the Fed’s unabated loose monetary policy and a strong, national vaccination drive. The major benchmark indexes are currently hovering near record highs, following Fed Chairman Powell’s statement that the U.S. job market “is still a ways off” from target levels. The S&P 500 has gained 36.6% over the past year and 16.3% year-to-date. And the tech-heavy Nasdaq Composite has gained 13.9% year-to-date and 39.9% over the past year.
Growth stocks have been the biggest beneficiaries of the bullish markets, as investors switch to growth stocks from value names in surging reflation trading amid declining Treasury yields.
Growth names Goldman Sachs Group, Inc. (GS), Zebra Technologies Corporation (ZBRA), and Nucor Corporation (NUE) have been among the best performers in their respective industries, with more than 40% gains year-to-date. And we believe these companies’ promising growth prospects should allow their shares to hit fresh highs soon.
The Goldman Sachs Group, Inc. (GS)
GS provides a range of financial services to corporations, financial institutions, governments, and individuals globally. The firm operates through four segments: Investment Banking, Global Markets, Asset Management, and Consumer & Wealth Management.
As a part of GS’ expansion strategy, it launched Transaction Banking (TxB) in the U.K. on June 21.
On May 17, GS collaborated with MSCI Inc., a leading provider of critical financial market decision support tools and services, to provide improved risk analytics for institutional clients. The companies’ combined expertise should enhance GS’ goodwill among its clients.
GS has an impressive growth history. Its revenues improved at a 14.7% CAGR over the past three years, while its net income increased at a 45.8% CAGR over this period. Its EPS has improved at a 56.1% CAGR over the past three years.
GS’ net revenues increased 16% year-over-year to $15.39 billion in its fiscal second quarter, ended June 30. Its net income improved 1,370.8% year-over-year to $5.49 billion. The company’s EPS increased 2,734% year-over-year to $15.02.
Analysts expect GS’ revenues to increase 14% year-over-year to $50.79 billion in the current year. A $45.85 consensus EPS estimate for the current year indicates an 85.3% rise from the last year. Also, GS surpassed the Street’s EPS estimates in three of the trailing four quarters. Shares of GS have gained 85.1% over the past year, and 44.3% year-to-date.
It is no surprise that GS has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Growth and Sentiment. Among the 25 stocks in the Investment Brokerage industry, GS is ranked #8.
To see additional GS ratings for Value, Quality, Stability, and Momentum, click here.
Zebra Technologies Corporation (ZBRA)
ZBRA is a global leader in enterprise asset intelligence solutions in the automatic identification and data capture solutions industry. The company operates primarily in two segments, Asset Intelligence & Tracking and Enterprise Visibility & Mobility.
On July 8, Reflexis Systems, a wholly owned subsidiary of ZBRA, announced that luggage and handbag design company Vera Bradley had selected ZBRA and Reflexis Systems to manage customer appointments. Earlier, in June, leading companies Sharp and Meverik selected ZBRA for its advanced solutions. This demonstrates the company’s dominance in the industry.
On July 1, ZBRA announced its plan to acquire Fetch Robotics, a pioneer in on-demand automation. If the acquisition is completed, ZBRA should be able to accelerate intelligent industrial automation and grow substantially in the near term.
ZBRA’s net income has improved at a 76% CAGR over the past three years, while its levered FCF increased at a 27.6% CAGR over this period. Its EPS has improved at a 76.4% CAGR over the past three years. ZBRA’s net sales increased 28% year-over-year to $1.35 billion in its fiscal first quarter, ended April 3. Its gross profit stood at $655 million, up 38.5% from the same period last year. Its net income grew 156.2% from the year-ago value to $228 million, and its EPS increased 155.8% year-over-year to $4.22.
A $1.31 billion consensus revenue estimate for the fiscal third quarter (ending September 2021) indicates a 15.2% increase year-over-year. The Street expects the company’s EPS to rise 20.2% from the prior year quarter to $3.93 in the current quarter. ZBRA has an impressive earnings surprise history also; it beat consensus EPS estimates in each of trailing four quarters. ZBRA has gained 110.3% over the past year and 42.6% year-to-date.
ZBRA has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. ZBRA has a B grade for Growth, Momentum, and Quality. It is ranked #22 of the 85 stocks in the A-rated Industrial - Machinery industry.
Click here to view additional ZBRA ratings for Value, Sentiment, and Stability.
Click here to check out our Industrial Sector Report for 2021
Nucor Corporation (NUE)
Nucor Corporation manufactures and sells steel and steel products. The company operates through three segments: Steel Mills, Steel Products, and Raw Materials. It is the most diversified steel and steel products company in North America.
On June 7, NUE agreed to acquire Cornerstone Building Brands' insulated metal panels (IMP) business. The move should allow NUE to expand its product offerings and improve its revenues and profit margins significantly.
In May, NUE announced a modernization project to upgrade its bar mill in Nebraska. NUE’s product quality should rise substantially with this mill modernization.
NUE’s EBIT has improved at a 9.5% CAGR over the past three years, while its levered free cash flow increased at a 34.1% CAGR over this period. Its EPS improved at a 9.6% CAGR over the past three years.
NUE’s net sales increased 24.8% year-over-year to $7.02 billion in the fiscal first quarter, ended April 3. Its net income improved 1,716% year-over-year to $987.51 million over the period, and its EPS increased 4,328.6% year-over-year to $3.10. Its cash and cash equivalents balance rose 106.9% from the prior year quarter to $2.58 billion over this period.
A $9.1 billion consensus revenue estimate for its fiscal third quarter, ending September 2021, indicates an 84.6% improvement from the same period last year. Analysts expect the company’s EPS to be $5.24 in the current quarter, representing a 706.2% rise year-over-year. Furthermore, NUE surpassed the Street’s EPS estimates in each of the trailing four quarters. NUE has gained 83.8% year-to-date and 141.7% over the past year.
NUE has an overall B rating, which equates to Buy in our proprietary rating system. It has an A grade for Growth and B for Quality and Momentum. Among the 35 stocks in the A-rated Steel industry, it is ranked #23.
Beyond what we’ve stated above, we have also rated NUE for Value, Sentiment, and Stability. Click here to view all NUE ratings.
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GS shares were trading at $373.21 per share on Wednesday afternoon, down $2.77 (-0.74%). Year-to-date, GS has gained 42.56%, versus a 17.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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