Back to top

Image: Bigstock

Sector Analysis: Energy, Financials Leading The Charge In 2022

Read MoreHide Full Article

Last year surprised many investors as 2021 was the inverse of 2020 with respect to leading market sectors. The three worst-performing S&P sectors in 2020 (energy, financials, and real estate) reversed course last year and were the three best performers as we can see below.

Zacks Investment ResearchImage Source: Zacks Investment Research

An important caveat with respect to this sector outperformance is that the majority of the gains for energy and financials in 2021 came in the first half of the year. From June to December, both sectors essentially moved sideways, notching only slight gains.

Zacks Investment ResearchImage Source: Zacks Investment Research

While this relative underperformance in the second half of the year can be viewed negatively, the two sectors may have simply been taking a needed breather after starting out last year extremely strong. Energy and financials are leading the charge on the first trading day of the year and appear set to resume their next leg up. The sector consolidation throughout the last six months looks like it is paving the way for a repeat of outperformance in the beginning months of 2022.

With bond yields spiking today, we’re going to focus on two financial companies that are breaking out to the upside. The Zacks Finance sector is currently ranked #1 out of all 16 sectors. Investing in the top sectors and industry groups provides a constant tailwind to your investing success.

Jefferies Financial Group, Inc. (JEF - Free Report)

Jefferies Financial Group is a global financial services company that engages in investment banking and capital markets, merchant banking, as well as alternative asset management. JEF offers financial advisory, debt and equity underwriting, equity research, wealth management, and corporate lending services. Jefferies Financial Group was founded in 1968 and is headquartered in New York, NY.

JEF trades at an attractive valuation (10.1 forward P/E) and has surpassed earnings estimates in each of the last eight quarters. A Zacks #1 (Strong Buy) stock, JEF most recently reported quarterly EPS back in September of $1.51, a +48.04% surprise over consensus. JEF has delivered an average earnings surprise of +222.85% over the past four quarters, supporting the stock’s climb of roughly 65% in the past year.

Jefferies Financial Group Inc. Price, Consensus and EPS Surprise

Jefferies Financial Group Inc. Price, Consensus and EPS Surprise

Analyst covering JEF have increased their full-year earnings estimates by 4.79% in just the past 30 days. The Zacks Consensus Estimate for 2021 EPS now stands at $6.34, representing growth of 139.25% relative to 2020. JEF is scheduled to report its final set of ’21 quarterly earnings after the bell today.

Bank of America Corp. (BAC - Free Report)

Bank of America is a leading financial institution that serves individual consumers, small and middle-market businesses, as well as large corporations. BAC provides a full range of banking, investing, asset management and related products and services. Headquartered in Charlotte, NC, Bank of America provides services to over 66 million clients and operates approximately 4,300 retail financial centers.

BAC has beaten earnings estimates in each of the last three quarters and trades at a very reasonable 12.73 forward P/E. The company has a trailing four-quarter average earnings surprise of +22.79%. BAC most recently reported earnings back in October when the firm posted EPS of $0.85, a +19.72% surprise over consensus. BAC stock has been a steady outperformer over the past year, returning north of 55%.

Bank of America Corporation Price, Consensus and EPS Surprise

Bank of America Corporation Price, Consensus and EPS Surprise

The opening of new branches along with enhanced digital capabilities should continue to support the stock’s run. BAC maintains a strong balance sheet and liquidity position, and as a result hiked their dividend last year by 17% to 21 cents per share. The company’s share repurchase plan of $25 billion was also renewed in October.

A Zacks #2 Buy, BAC revenues are expected to grow nearly 5% in 2022. Given its robust fundamentals, BAC’s impressive performance is expected to continue when the company reports earnings on January 19th.

These two financial firms are poised to continue their momentum as we start out the new year on a strong note.


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Bank of America Corporation (BAC) - free report >>

Jefferies Financial Group Inc. (JEF) - free report >>

Published in