In most bull markets, the largest profits come in the smallest packages. But this isn’t your ordinary, run-of-the-mill uptrend. This bull run is well into its eighth year and is the second-longest in history...and right now the big guys are leading the pack. Investors really appreciate this asset class’ relative safety and lower volatility, especially amid such an old bull that many feel “can go at any minute”.
But just like their smaller counterparts, not all large-caps are created equal. The best way to find the big boys with the biggest futures is through the Zacks Rank, and our “XL Large-Caps with the Best Zacks Rank” is the perfect screen to use. It only deals with companies that have a market cap over $25 billion AND a Zacks Rank of #2 (Buy) or #1 (Strong Buy). There are also several other parameters to this screen that you can see by clicking here.
In this article, three large-cap tech names are featured. Sure, tech has run into some problems lately, but the size of these stocks provide better insulation while their proven technologies will always leave them in a good position to rally once the environment improves. And we here at Zacks DO believe that tech will ultimately improve and lead the market higher again in 2017 just as it did in 2016...so don’t let some short-term turbulence stunt your long-term success.
Micron Technology (MU - Free Report)
Let’s hope that Micron Technology (MU - Free Report) doesn’t get a big head moving forward, because this memory chip manufacturer is #1 in a lot of ways. Firstly, it is part of the semiconductor – memory space, which is #1 (out of 256) in the Zacks Industry Rank. Impressively, the company has kept up with its industry as they have both jumped by about 33% year to date. MU is also #1 in average volume on this extra-large cap screen with more than 35 million shares trading hands. And of course, the stock is a Zacks Rank #1 (Strong Buy).
Its earnings report last week showed why this company is at the top of so many lists. Earnings per share of $1.40 beat the Zacks Consensus Estimate by 2.2%, bringing the four-quarter average up to 17.2%. It has now beaten our expectations for eight straight quarters and in 14 out of the last 15. Due to strong results for both its DRAM and NAND products, revenues skyrocketed by 92.1% year over year to $5.566 billion, which was also ahead of the Zacks Consensus Estimate at $5.37 billion. DRAM products (key components for PCs) accounted for 64% of revenue and grew 20% sequentially, while NAND products (key for portable electronic devices) made up 31% of revenue and increased 21% sequentially.
Most importantly though, MU plans to keep these good times going. It forecast revenues between $5.7 billion and $6.1 billion for its fiscal fourth quarter, along with earnings per share of $1.73 to $1.87. Both of these outlooks were ahead of Zacks expectations at $5.53 billion and $1.37 per share, respectively.
Analysts don’t think the company will have any problems hitting its targets. In the past 7 trading days, earnings estimates have been on the rise. The Zacks Consensus Estimate for this fiscal year (ending in August) has climbed 4.3% to $3.85. Our expectations for next fiscal year (ending August 2018) has increased by 4.4% in the same time. However, the most impressive thing is that next year’s earnings are expected to soar 35% over this year to $5.20.
Oracle (ORCL - Free Report)
As far as Oracle (ORCL - Free Report) is concerned, sunny days are overrated. This computer technology giant is no spring chicken; in fact, its 40 years old, which might as well be 40,000 in tech years. However, its future lies in one of the newest, most innovative and most lucrative areas…the cloud. In its just completed fiscal 2017, ORCL’s total cloud revenue jumped 68% in constant currency to $4.74 billion. And this is just the beginning. The company’s SaaS and PaaS offerings continue to gain momentum and should be a big boon to the top-line for years to come.
The cloud’s fingerprints were all over ORCL’s fiscal fourth quarter report, which saw earnings per share of 82 cents beat the Zacks Consensus Estimate by 12.3%. This was the company’s second straight quarter with a double digit surprise. Revenues of $10.94 billion also beat Zacks estimates at $10.5 billion. Total cloud revenue soared more than 64% year over year to $1.41 billion and accounted for nearly 13% of total revenue. Looking toward the fiscal first quarter, cloud revenues are expected to jump between 48% and 52%.
ORCL is the biggest company on this list, which is really saying something when you’re talking about an extra large-cap screen. It has a market cap of more than $203 billion. That’s a lot of weight to carry around, but the success of its cloud business was on full display in its earnings estimates over the past month. The Zacks Consensus Estimate for this fiscal year (ending May 2018) is now $2.71 per share, which has advanced 3.8% over the last 30 days. Next fiscal year is still a far way off (not ending until May 2019), but analysts expect this momentum to continue and grow by nearly 9% to $2.95. This estimate has climbed 4.2% in 30 days.
Applied Materials (AMAT - Free Report)
There are a lot of great things that can be said about Applied Materials (AMAT - Free Report) , but perhaps the most impressive is in regards to its industry. The company is part of the semiconductor equipment – wafer fabrication industry, which is in the top 1% of the Zacks Industry Rank with the third spot out of 256. It is up 28.5% year to date. Yet AMAT has easily beaten its group by surging 35.6% so far in 2017 with four straight quarters of all time highs for earnings and revenue. And it doesn’t look like these impressive performances are going to end anytime soon. AMAT’s strong pipeline of enabling technologies in semis and display put it in a great position to grow sustainably and profitably for the foreseeable future.
But maybe you’re more impressed with AMAT’s 15 consecutive quarters of positive earnings surprises. Most recently, it beat the Zacks Consensus Estimate by 4% in its fiscal second quarter with earnings per share of 79 cents. Revenues soared nearly 45% over last year to $3.5 billion, which also surpassed our expectations and improved more than 8% sequentially. Its ramp up of 3D NAND has led to significant market share gains. Next month, the company will go for its 16th straight surprise. Revenues are expected between $3.60 billion and $3.75 billion, while EPS is seen at 79 cents to 87 cents. Both of these outlooks were ahead of our estimates at the time, signaling that the good times are far from over.
With such a guidance, earnings estimates could go nowhere but up. The Zacks Consensus Estimate for this fiscal year (ending in October) is at $3.09 per share, which is up 16.6% in the past two months and 3% in the past 30 days. After the quarterly report, all 11 covering analysts raised their estimates. Right now, earnings are only expected to grow an additional 4.5% to $3.23 for next fiscal year, but there’s a long time until that year ends in October 2018 and you can bet analysts will raise their expectations even higher. Nevertheless, the trajectory is the same, as earnings estimates for next fiscal year are up 15.6% in 2 months with an advance of 1.9% in 30 days. Now look at this chart:
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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