For Immediate Release
Chicago, IL – March 31, 2022 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Micron Technology Inc. MU, Tyson Foods Inc. TSN, Target Corp. TGT, Devon Energy Corp. DVN and Occidental Petroleum Corp. OXY.
Here are highlights from Wednesday’s Analyst Blog:
5 Must-Buy Stocks as Major Indexes Hover Near 6-Week Highs
U.S. stock markets are showing signs of recovery after nearly two and half months of a downtrend. Market participants seem already factored in the stock market’s valuation of a 2% interest rate hike this year by the Fed. Positive development on the geopolitical conflicts between Russia and Ukraine and a sharp fall of commodity prices from their peaks two weeks ago have restored investors’ faith in risky assets like equities.
At this stage, it will be prudent to invest in U.S. corporate bigwigs with a favorable Zacks Rank to tap the market rally going forward. Several good stocks are available for investment. We have applied our VGM Style Score to narrow the search to five stocks. These are — Micron Technology Inc., Tyson Foods Inc., Target Corp., Devon Energy Corp. and Occidental Petroleum Corp.
Rate Hike Seems Factored in Market Valuation
The Fed hiked the benchmark interest rate by 25 basis points in its March FOMC. Moreover, Fed Chairman Jerome Powell said that the central bank will not hesitate to take further harsh measures if its proposed interest rate hike fails to control inflation. Several economists and financial researchers have said that in the next two FOMC meetings, the Fed may increase interest rate by 50 basis point as inflation is likely to be elevated due to the ongoing Russia-Ukraine war.
A higher market interest rate is detrimental to stock investment as it raises the discount rate thereby reducing the net present value of investment. Despite this, on Mar 29, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — hit a 6-week high. The S&P 500 has recovered from the correction territory. It seems, that a 2% hike in the interest rate this year is already priced in market valuation.
Russia-Ukraine Peace Talk Continues
On Mar 29, the first negotiations meeting between Russia and Ukraine in two weeks held in Turkey. This was the sixth round of meeting between the two warring countries after Russian troops invaded Ukraine on Feb 24. So far, this meeting was the most fruitful.
In the meeting, Russia said that it would significantly reduce its military operations around Ukraine’s capital of Kyiv and the northern city of Chernihiv. Instead, Russian troops will concentrate more on the eastern part of Ukraine. On the other hand, Ukraine has decided to follow the path of neutrality and will not join the U.S.-led alliance of NATO.
Consequently, the price of the U.S. benchmark — West Texas Intermediate — crude future for May delivery dropped 1.6% to settle at $104.24 per barrel, marking the lowest closing for a front-month WTI contract since Mar 17.
Ease in Commodity Prices
The ongoing war between Russia and Ukraine has complicated the inflationary situation in the United States, which is currently at its 40-year high. The imposition of sanctions on Russia by the United States and European Union resulted in higher commodity prices. Russia is a major supplier of commodities like crude oil, natural gas, copper, nickel, platinum and palladium. Ukraine is a major supplier of wheat.
Therefore, higher commodity prices had aggravated the global inflationary situation. However, as the war between Russia and Ukraine cooled down to some extent, commodity prices have also reduced from their recent peaks two weeks ago.
Our Top Picks
We have narrowed our search to five U.S. corporate giants that have strong growth potential for 2022. These stocks have seen positive earnings estimate revisions in the last 30 days. Moreover, these companies are regular dividend payers. Finally, each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Tyson Foods has been gaining on strategic growth efforts, including its focus on protein-packed brands and capacity expansion endeavors. TSN is also benefiting from robust demand in its retail core business lines. Moreover, continued recovery in the foodservice channel is a driver.
Tyson Foods has undertaken a number of operational and supply chain efficiency programs to place itself better for the long run. In this regard, TSN is investing in capacity expansion and automation technology.
The Zacks Rank #1 Tyson Foods has an expected earnings growth rate of 5.6% for the current year (ending September 2022). The Zacks Consensus Estimate for current-year earnings improved 2.6% over the last 30 days. TSN has a current dividend yield of 2.1%.
Occidental Petroleum continues to increase hydrocarbon production volumes from its high-quality asset holdings and lower outstanding debts through the proceeds from non-core assets sale. The acquisition of Anadarko, investments to strengthen infrastructure and its Permian Basin exposure continue to boost the performance of OXY.
Occidental Petroleum has achieved the $10-billion divestiture goal through non-core assets sales. Its cost-management initiatives will boost margins going forward. OXY is also working to lower emissions and aims for net-zero emissions by 2050.
The Zacks Rank #1 Occidental Petroleum has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 5.2% over the last 7 days. OXY has a current dividend yield of 0.9%.
Devon Energy aims for strong oil production from the Delaware Basin holdings. Devon Energy’s presence in Delaware has expanded due to its all-stock merger deal with WPX Energy. DVN is using new technology in production process to lower expenses.
Devon Energy’s divestiture of Canadian and Barnett Shale gas assets will allow it to focus on its five high-quality oil-rich U.S. basins assets. DVN’s stable free cash flow generation allows it to pay dividend and buy back shares. Devon Energy has ample liquidity to meet near-term debt obligations.
The Zacks Rank #1 Devon Energy has an expected earnings growth rate of 88.7% for the current year. The Zacks Consensus Estimate for current-year earnings improved 2.1% over the last 7 days. DVN has a current dividend yield of 6.6%.
Micron Technology is witnessing growing demand for memory chips from cloud-computing providers and acceleration in 5G cellular network adoptions. The rising mix of high-value solutions, enhancement in customer engagement and improvement in cost structure are the other growth drivers of MU.
Further, 5G adoption beyond mobile is likely to spur demand for memory and storage, particularly in Internet of Things devices and wireless infrastructure. These will act as major positives for Micron Technology going forward.
The Zacks Rank #2 MU has an expected earnings growth rate of 49% for the current year (ending August 2022). The Zacks Consensus Estimate for current-year earnings improved 1.5% over the last 30 days. Micron Technology has a current dividend yield of 0.5%.
Target has been deploying resources to enhance omni-channel capabilities, come up with new brands, refurbish stores and expand same-day delivery options to provide customers a seamless shopping
experience. TGT has been making multiple changes to its business model to adapt and stay relevant in the ever-evolving retail landscape.
In fourth-quarter fiscal 2021 Target’s comparable sales grew for the 19th quarter in a row, gaining from strength in both store and digital channels. TGT envisions low-to-mid single-digit revenue growth, an operating margin rate of 8% or higher, and high single-digit increase in adjusted earnings per share for fiscal 2022.
The Zacks Rank #2 Target has an expected earnings growth rate of 6.7% for the current fiscal year (ending January 2023). The Zacks Consensus Estimate for current-year earnings improved 9.3% over the last 30 days. TGT has a current dividend yield of 1.6%.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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