As the stock market navigates its twists and turns, certain S&P 500 stocks are positioned to outperform and climb higher, capturing the attention of investors eager for growth. Below, I have highlighted three leading S&P 500 stocks, namely, Eli Lilly and Company (LLY), Howmet Aerospace Inc. (HWM), and NetApp, Inc. (NTAP), that are poised to climb higher.
After a choppy Monday, the broader index closed slightly higher, with investors eyeing upcoming earnings reports, the Federal Reserve's potential decision on interest rates, and key labor data. The S&P 500 gained nearly 0.1%, while the tech-heavy Nasdaq Composite rose just above the flatline.
The week began on a positive note, thanks to a promising inflation report that fueled optimism about possible interest rate cuts. Yet, after a series of volatile trading sessions and a significant sell-off in tech stocks, there’s a palpable sense of uncertainty. While the Federal Reserve is expected to hold off on any immediate rate changes, many market watchers believe the central bank will wait until September to make its move.
Consumer discretionary stocks, led by Tesla, Inc. (TSLA)’s recent surge, have been major contributors to the S&P 500’s performance. This reflects a broader trend of investors seeking opportunities beyond the tech sector. Moreover, investors' interest is evident from the SPDR S&P 500 ETF Trust’s (SPY) 32.4% returns over the past nine months and 15.8% year-to-date.
In this evolving landscape, LLY, HWM, and NTAP emerge as stocks with strong potential to climb higher. Let's dig deeper into the fundamentals of these stocks in detail:
Eli Lilly and Company (LLY)
LLY discovers, develops, and markets human pharmaceuticals worldwide. The company offers a range of medications targeting diabetes, obesity, rheumatoid arthritis, atopic dermatitis, and cancer. Some of its well-known products include Basaglar, Humalog, Humulin, Jardiance, Trajenta, Erbitux, Retevmo, Tyvyt, Emgality, and Reyvow, among others.
On July 8, 2024, LLY agreed to acquire Morphic Holding, Inc. (MORF), a biopharmaceutical company developing oral integrin therapies for treating serious chronic diseases. This acquisition, expected to close in the third quarter of 2024, will enhance the company's immunology pipeline with promising oral integrin therapies.
On June 5, the company announced a collaboration with OpenAI to leverage OpenAI’s generative AI for inventing novel antimicrobials to treat drug-resistant pathogens. Antimicrobial resistance (AMR) is a major global health threat, and this partnership aligns with LLY's commitment to addressing this issue through its Social Impact Venture Capital Portfolio.
For the first quarter that ended March 31, 2024, LLY’s revenue increased 26% year-over-year to $8.77 billion. Its non-GAAP gross margin rose 32.5% from the year-ago value to $7.23 billion. Also, the company’s non-GAAP net income and non-GAAP EPS were $2.34 billion and $2.58, up 59.5% and 59.3% from the previous year’s quarter, respectively.
According to its updated 2024 financial guidance, LLY expects revenue in the range of $42.40-$43.60 billion, up from the prior guidance of $40.40-$41.60 billion. Its non-GAAP earnings per share are expected to be between $13.50 to $14, compared to the previous guidance of $12.20-$12.70.
Street expects LLY’s revenue for the second quarter (ended June 2024) to increase 20.2% year-over-year to $9.99 billion. Its EPS for the about-to-be-reported quarter is expected to grow 31.2% year-over-year to $2.77. Moreover, the company surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
LLY’s stock has gained 72.3% over the past year and 35.6% year-to-date to close the last trading session at $790.21.
LLY’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
It has a B grade for Growth and is ranked #33 out of 154 stocks in the Medical - Pharmaceuticals industry. Click here to see the additional ratings for LLY (Value, Momentum, Stability, Sentiment, and Quality).
Howmet Aerospace Inc. (HWM)
HWM provides advanced engineered solutions for the aerospace and transportation industries globally. It operates through four segments: Engine Products; Fastening Systems; Engineered Structures; and Forged Wheels.
On July 30, the company’s Board of Directors declared a quarterly dividend of $0.08 per share, marking a 60% increase from the previous quarter’s dividend of $0.05. This dividend will be paid on August 26, 2024, to shareholders on record as of August 9, 2024.
HWM pays an annual dividend of $0.20, which translates to a yield of 0.24% at the current share price. Moreover, the company’s dividend payouts have increased at a CAGR of 3.6% over the past five years.
HWM’s sales increased 14.1% year-over-year to $1.88 billion during the second quarter that ended June 30, 2024. Its adjusted operating income, excluding special items, grew 37.5% from the year-ago value to $414 million.
The company’s adjusted EBITDA for the quarter stood at $489 million, up 37.7% year-over-year. In addition, HWM’s net income amounted to $266 million and $0.65 per share, reflecting an increase of 37.8% and 41.3% from the prior-year quarter, respectively.
According to the fiscal 2024 third-quarter guidance, HWM expects revenue between $1.85 billion and $1.87 billion. The company anticipates adjusted EBITDA ranging from $460 million to $470 million and adjusted EPS of $0.63 – $0.65.
For the full year 2024, the company's total revenue guidance is between $7.40 billion and $7.48 billion. Its adjusted EBITDA is projected to be $1.85 billion—$1.87 billion, while its adjusted EPS is expected to range from $2.53 to $2.57. Also, its free cash flow is set to be $750 million to $850 million.
Analysts expect HWM’s revenue for the third quarter (ending September 2024) to increase 11% year-over-year to $1.84 billion. Its EPS estimate of $0.65 for the ongoing quarter indicates a 41.5% growth from the prior year period. Moreover, HWM has an impressive surprise history, having topped consensus revenue and EPS estimates in each of the trailing four quarters.
Shares of HWM have surged 115.2% over the past nine months and 86% over the past year to close its last trading session at $93.81.
It’s no surprise that HWM has an overall B rating, equating to a Buy in our POWR Ratings system. The stock has earned a B grade for Growth, Momentum, and Quality. Out of 78 stocks in the A-rated Industrial – Machinery industry, it is ranked #28.
Beyond what I have stated above, we have also given HWM grades for Value, Stability, and Sentiment. Get access to all the HWM ratings here.
NetApp, Inc. (NTAP)
NTAP provides cloud-led and data-centric services to manage and share data worldwide on-premises and private and public clouds. It operates through two segments: Hybrid Cloud and Public Cloud, offering intelligent data management software and storage infrastructure solutions.
On July 10, NTAP introduced new capabilities to enhance cloud workload management, including GenAI and VMware, through tools like NetApp BlueXP Workload Factory and GenAI Toolkit. These updates aim to optimize deployment, performance, and cost efficiency in hybrid multi-cloud environments.
On June 4, the company announced the expansion of its partnership with Porsche Motorsport, becoming the exclusive Intelligent Data Infrastructure partner. This partnership will accelerate Porsche Motorsport’s data access, improving strategic decision-making on the track.
Additionally, NTAP will establish new relationships with Team Porsche Penske Motorsport in the IMSA WeatherTech SportsCar Championship (IWSC) and World Endurance Championship (WEC) while continuing to support the TAG Heuer Porsche Formula E Team.
For the fiscal fourth quarter, which ended April 26, 2024, NTAP’s net revenue increased 5.5% year-over-year to $1.67 billion. Its non-GAAP gross profit rose 9.3% from the year-ago value to $1.19 billion.
NTAP’s non-GAAP income from operations grew 13.3% from the prior-year quarter to $469 million. In addition, the company’s non-GAAP net income came in at $382 million or $1.80 per share, reflecting an increase of 14.4% and 16.9% year-over-year, respectively.
For the first quarter of fiscal 2025, NTAP expects revenue of $1.46-$1.61 billion. The company’s non-GAAP EPS for the ongoing quarter is expected to be $1.40-$1.50. For the fiscal year 2025, NTAP projects revenue and non-GAAP EPS of $6.45-$6.65 billion and $6.80-$7, respectively.
The consensus revenue estimate of $1.53 billion for the fiscal first quarter (ending July 2024) represents a 6.5% increase year-over-year. The consensus EPS estimate of $1.45 for the current quarter indicates a 26.4% improvement year-over-year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past nine months, the stock has gained 72.2% to close the last trading session at $122.57.
NTAP’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Quality and a B for Growth. In the 39-stock B-rated Technology – Hardware industry, NTAP is ranked #9. Click here to see NTAP’s Value, Momentum, Stability, and Sentiment ratings.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
LLY shares were trading at $798.39 per share on Wednesday afternoon, up $8.18 (+1.04%). Year-to-date, LLY has gained 37.44%, versus a 16.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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