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The Zacks Analyst Blog Highlights: Chevron, Exxon Mobil, Advanced Micro Devices, Costco Wholesale and Deere & Co

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For Immediate Release

Chicago, IL – February 8, 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: Chevron Corp. (CVX - Free Report) , Exxon Mobil Corp. (XOM - Free Report) , Advanced Micro Devices Inc. (AMD - Free Report) , Costco Wholesale Corp. (COST - Free Report) and Deere & Co. (DE - Free Report) .

Here are highlights from Monday’s Analyst Blog:

U.S. Economy Firing on All Cylinders: Top 5 Picks

The U.S. economy is going through an astonishing recovery from the coronavirus-ridden last two years. The labor market is gradually approaching the pre-pandemic period and the product market (both manufacturing and services segments) is witnessing expansionary activities.

Higher activities in foreign trade are expected as the global economy is recovering from the pandemic. In the money market, the anticipation of a relatively hawkish Fed and a higher tax regime, after two years of a nearly 0% tax level, are unlikely to create market turbulence for a longer time.

At this stage, it will be prudent to invest in a U.S. corporate behemoth with a favorable Zacks Rank and strong potential for 2022. Five of them are Chevron Corp., Exxon Mobil Corp., Advanced Micro Devices Inc., Costco Wholesale Corp. and Deere & Co.

A Recovering Labor Market

The U.S. labor market that suffered the most during the pandemic is quickly approaching the pre-pandemic level. The Department of Labor reported that nonfarm payrolls in January jumped to 467,000 compared with the consensus estimate of 116,000. Moreover, December and November’s data were revised upward to add a combined 709,000 more jobs to the previously released data.

Importantly, the labor force participation rate finally broke the 61.9% barrier and grew 0.3% sequentially to 62.2%. The unemployment edged up to 4% in January from 3.9% in December. However, the long-term unemployment (the number of Americans out of work for at least six months) dropped 317,000 since December to 1.7 million in January.

In January long-term unemployment was 25.9% of total unemployment compared with 31.7% in December, marking the largest monthly decline since March 2021. Notably, all these positives happened in the labor market at the peak of the Omicron infections of coronavirus.

Strong GDP and Corporate Earnings

In the fourth quarter of 2021, U.S. GDP climbed 6.9% compared with the consensus estimate of 5.4%. In 2021, U.S. GDP surged 5.7%, marking its best performance since 1984. The momentum is likely to continue as the average estimate of 2022 is currently at 3.5%.

Wall Street has seen solid fourth-quarter 2021 earnings results so far. Total earnings of the market’s benchmark the S&P 500 Index have skyrocketed in the two pandemic-ridden years of 2020 and 2021. Going forward this momentum is likely to continue. At present, total earnings and revenues of the S&P 500 Index have been estimated at 9.6% and 7.7%, respectively for 2022 and 9.6% and 5.5% in 2023.

Robust Government Spending

The U.S. economy will get more upside from the government’s infrastructure spending. On Nov 15, President Joe Biden signed a bipartisan infrastructure bill of $550 billion in addition to the previously approved funds of $450 billion for five years. Total spending may go up to $1.2 trillion if the plan is extended to eight years.

The infrastructure development project will be a key catalyst for the U.S. stock markets in 2022. Various segments of the economy such as basic materials, industrials, utilities and telecommunications should benefit immensely with further job creation.

Moreover, the White House has pressured on Congress to quickly pass legislation providing $52 billion to help computer chip manufacturers and ease the shortage of the components vital to many industries.

Our Top Picks

We have narrowed our search to five U.S. corporate behemoths (market capital >$50 billion) as these companies have a well-established business model across the world. These stocks have strong growth potential for 2022 and have seen solid earnings estimate revisions within the last 30 days indicating strong business opportunities.

Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chevron is one of the best-placed global integrated oil firms to achieve a sustainable production ramp-up. CVX’s existing project pipeline is one of the best in the industry, thanks to its premier position in the lucrative Permian Basin.

Chevron’s Noble Energy takeover has expanded its footprint in the region and the DJ Basin. CVX now has access to Noble Energy’s low-cost, proven reserves along with cash-generating offshore assets in Israel — particularly the flagship Leviathan natural gas project — thereby boosting its footing in the Mediterranean.

Zacks Rank #1 Chevron has an expected earnings growth rate of 36.2% for the current year. The Zacks Consensus Estimate for current-year earnings improved 6.2% over the last 7 days.

Exxon Mobil made multiple world-class oil discoveries at the Stabroek Block, located off the coast of Guyana. XOM has raised the estimate for discovered recoverable resources from the Stabroek Block to approximately 10 billion oil-equivalent barrels.

Exxon Mobile’s bellwether status and an optimal integrated capital structure, which have historically led to industry-leading returns make it a relatively lower-risk energy sector play. The integrated oil behemoth expects to reduce greenhouse gas emissions by 30% in its upstream business. By the same time, XOM expects to reduce flaring and methane emissions by 40%.

Zacks Rank #1 Exxon Mobile has an expected earnings growth rate of 29.9% for the current year. The Zacks Consensus Estimate for current-year earnings improved 4.6% over the last 7 days.

Advanced Micro Devices is riding on robust performance from the Computing and Graphics, and Enterprise Embedded and Semi-Custom segments. AMD is benefiting from the strong sales of its Ryzen and EPYC server processors, owing to the increasing proliferation of AI and Machine Learning in industries like cloud, gaming and supercomputing.

The growing clout of 7 nanometer products in the data center vertical, driven by work-from-home and online learning trends, is a key catalyst of Advanced Micro Devices. AMD has raised its 2021 guidance for revenues on the back of strong growth across all businesses.

Zacks Rank #1 Advanced Micro Devices has an expected earnings growth rate of 43.4% for the current year. The Zacks Consensus Estimate for current-year earnings improved 20.5% over the last 7 days.

Costco operates membership warehouses in the United States, Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Korea, Australia, Spain, France, Iceland, China, and Taiwan. COST offers branded and private-label products in a range of merchandise categories.

Costco’s growth strategies, better price management, decent membership trend and increasing penetration of e-commerce business reinforce its position. The strategy to sell products at discounted prices has helped Costco to draw customers seeking both value and convenience. These factors have been aiding in registering impressive sales numbers.

Zacks Rank #2 Costco has an expected earnings growth rate of 14.3% for the current year (ending August 2022). The Zacks Consensus Estimate for current-year earnings improved 0.2% over the last 7 days.

Deere is likely to benefit from growth in non-residential investment and strong order activity from independent rental companies. Focus on investing in new products equipped with the latest technology will make farming automated, which will drive Deere's growth in the long haul.

The ongoing rally in commodity prices will continue to fuel demand for agricultural equipment, encouraging farmers to boost spending on new farm equipment. Replacement demand triggered by the need to upgrade old equipment will continue to support DEs revenues.

Zacks Rank #2 Deere has an expected earnings growth rate of 17% for the current year (ending October 2022). The Zacks Consensus Estimate for current-year earnings improved 0.1% over the last 30 days.

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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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