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The Zacks Analyst Blog Highlights: Caterpillar, Celanese, Micron Technology, QUALCOMM and Skyworks Solutions

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For Immediate Release

Chicago, IL – August 21, 2018 – 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 Caterpillar Inc. (CAT - Free Report) , Celanese Corporation (CE - Free Report) , Micron Technology, Inc. (MU - Free Report) , QUALCOMM Inc. (QCOM - Free Report) and Skyworks Solutions Inc. (SWKS - Free Report) .

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Here are highlights from Monday’s Analyst Blog:

U.S., China Look to Mend Trade Relations: 5 Winning Picks

U.S. stocks advanced on Aug 17 following reports that President Trump and China’s president Xi will hold trade discussions in November. For several months now, trade tensions are threatening to derail the Chinese economy and ruin the U.S. growth momentum.

This is why any encouraging news on this front eases investor tensions. Additionally, Trump’s top economic advisor Larry Kudlow has confirmed that trade talks with China will resume later this month.

Stocks of companies affected significantly by U.S.-China trade tensions should gain from these developments. Adding them to your portfolios makes for a prudent choice at this juncture. 

Trump, Xi to Discuss Trade in November

According to The Wall Street Journal, negotiators from the United States and China are working to create a roadmap for trade talks. These discussions will culminate in a series of meetings between Trump and Xi at multilateral summits in November, according to officials from both countries.

In fact, mid-level discussions should commence in Washington next week. China’s Vice Commerce Minister Wang Shouwen will lead a nine-member delegation which will hold talks with a team of U.S. officials, headed by the Treasury undersecretary, David Malpass, on Aug 22 and 23.

Reportedly, President Xi has instructed officials to work toward normalizing U.S.-China relations quickly. An extended phase of tensions with the United States would impede the Chinese leader’s plans to transform his country’s economy and make China a global superpower.

China Talks to Resume in August, Says Kudlow

On Aug 16, Trump’s top economic advisor Larry Kudlow confirmed to CNBC that trade talks between the United States and China would resume this month. However, Kudlow emphasized that President Trump is insistent that his administration should get a good deal.

At this point, there are two different viewpoints on how to take negotiations with China forward. Kudlow, who heads the National Economic Council and the Treasury have prepared a curtailed list of demands for China which they believe could lead to a successful agreement.

However, officials at the U.S. trade representative’s office, which oversees tariffs, think negotiations should not be pursued at this juncture. The imposition of further tariffs could increase the United States’ leverage by October, they believe.

Our Choices

Several indications have emerged that the United States and China will resume trade talks later this month. These discussions would culminate in meetings between the countries’ presidents in November. Though differing viewpoints exist within the Trump administration on how to proceed with talks, the willingness to find a solution to this lingering trade dispute is an encouraging sign.

In such a scenario, stocks of chipmakers, multinational industrials and basic materials stocks whose costs have been inflated by the trade conflict should benefit. Picking these stocks looks like a smart option right now. However, choosing winning stocks may be difficult.

This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score. 

We have narrowed down our search to the following stocks based on a good Zacks Rank and VGM Score.

Caterpillar Inc. generated nearly 21.5% of its revenue from China in 2017. Any retaliation from that country in the form of tariffs would affect its top line significantly. Additionally, steel and aluminum tariffs have raised its costs.

Caterpillar sports a Zacks Rank #1 (Strong Buy) and VGM Score of A. The company has expected earnings growth of 67.7% for the current year The Zacks Consensus Estimate for the current year has improved by 7.3% over the last 30 days.

Celanese Corporation announced on Aug 16 that it was hiking prices of its engineered materials polymer products. This was an effort to deal with rising input costs following the imposition of a 25% tariff on Chinese products.

Celanese has a VGM Score of B. The company has expected earnings growth of 40.8% for the current year. The Zacks Consensus Estimate for the current year has improved by 10.8% over the last 30 days. The stock sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Micron Technology, Inc. derived 50% of its revenues from China in 2017.  Prolonged tensions with China could harm the stock significantly.

Micron has a Zacks Rank #2 (Buy) and VGM Score of A. The company’s expected earnings growth for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved by 0.9% over the last seven days.

QUALCOMM Inc. derived 63% of its revenues from China in 2017.  Prolonged tensions with China could harm the stock significantly.

QUALCOMM carries a Zacks Rank #2 and has a VGM Score of B. The Zacks Consensus Estimate for the current year has improved by 15.3% over the last 30 days.

Skyworks Solutions Inc. derived nearly 80% of its revenues from China in 2017. An extended phase of trade tensions with China could grievously harm the stock.

Skyworks Solutions carries a Zacks Rank #2 and has a VGM Score of B. The company has expected earnings growth of 2.4% for the current year. The Zacks Consensus Estimate for the current year has improved by 4.3% over the last 30 days.

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Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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