Wall Street has been witnessing a free fall since the beginning of this year. The day-to-day fluctuations of the major indexes are higher than what we saw in February-March 2020, during the coronavirus outbreak. Extreme volatility has gripped the U.S. stock markets and Wall Street remained capricious even though we are just two trading days away from completing the first half of 2022.
A series of global headwinds like mounting inflation, slowing economic growth, concerns about a recession, a higher interest rate regime along with tougher monetary policies adopted by major central banks and prolonged devastation of the supply-chain system have significantly dented market participants’ confidence.
Higher commodity prices, especially prices of crude oil and natural gas, due to the lingering war between Russia and Ukraine and uncertainty about China’s recovery from COVID-19 and its economic prosperity in the near term made investors jittery. In the United States, a large section of economists and financial experts apprehend a recession either in 2022 or next year.
Despite these strong headwinds, a handful of U.S. corporate bigwigs have kept the banner flying high and provided double-digit returns in first-half 2022. Investment in such stocks with a favorable Zacks Rank should be lucrative in the near-term. Five of them are
Archer-Daniels-Midland Co. ( ADM Quick Quote ADM - Free Report) , Marathon Petroleum Corp. ( MPC Quick Quote MPC - Free Report) , Valero Energy Corp. ( VLO Quick Quote VLO - Free Report) , The Hershey Co. ( HSY Quick Quote HSY - Free Report) and Lockheed Martin Corp. ( LMT Quick Quote LMT - Free Report) . Markets Heading Toward the Worst 1H in 50 Years
On Jun 28, U.S. stock markets witnessed severe volatility. The Dow, the S&P 500 and the Nasdaq Composite slumped 1.6%, 2% and 3%, respectively. At intraday high, the Dow, the S&P 500 and the Nasdaq Composite advanced 1.4%, 1.2% and 1%, respectively.
The reason for this volatility was weak economic data. The Conference Board reported that the U.S. consumer confidence index came in at 98.7 in June, marking its 16-month low. The consensus estimate was 100. The index for May was revised downward to 103.2 from 106.4 reported earlier.
The Present Situation Index— based on consumers’ assessment of current business and labor market conditions— dropped marginally to 147.1 from 147.4 in May. The Expectations Index— based on consumers’ short-term outlook for income, business, and labor market conditions— tumbled to 66.4 from 73.7 in May, reflecting its lowest level since March 2013.
Per Lynn Franco, the Conference Board’s senior director of economic indicators, said “Consumers’ grimmer outlook was driven by increasing concerns about inflation, in particular rising gas and food prices. Expectations have now fallen well below a reading of 80, suggesting weaker growth in the second half of 2022 as well as growing risk of recession by year end.”
The S&P 500 — popularly known as the broad-market index — has tanked 19.8% year to date and is heading for its worst first-half since 1970. The other two major benchmarks — the blue-chip Dow and the tech-laden Nasdaq Composite — have slid 14.85 and 28.5%, respectively.
Our Top Picks
We have narrowed our search to five U.S. corporate giants that have offered more than 10% returns year to date with more upside left for the rest of 2022. These stocks have seen positive earnings estimate revisions in the last 30 days indicating market’s expectations of strong business going forward.
Moreover, these companies are regular dividend payers, offering an income stream during market’s downturn. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see
. the complete list of today’s Zacks #1 Rank stocks here
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research Archer-Daniels-Midland has been gaining from solid demand, improved productivity and product innovations. Persistent growth in the Nutrition segment of ADM, driven by significant gains in the Human and Animal Nutrition units, remained the key growth drivers.
Archer-Daniels-Midland expects the nutrition segment’s operating profit growth of 20% in 2022. The company has been significantly progressing on its three strategic pillars — optimize, drive and growth.
Zacks Rank #1 Archer-Daniels-Midland has an expected earnings growth rate of 22% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.3% over the last 30 days. The stock price of ADM has surged 12.5% year to date. The current dividend yield is of 2.10%.
Marathon Petroleum is poised for further price gains based on a slew of positives. MPC’s $21 billion sales of its Speedway retail business provided it with a much-needed cash infusion. The deal also comes with a 15-year fuel supply agreement under which Marathon Petroleum will supply 7.7 billion gallons of gasoline per year to 7-Eleven, thus ensuring a steady revenue stream.
MPC’s exposure to more stable cash flows from the logistics segment diversifies the earnings stream and offers a buffer against the volatile refining business. Consequently, Marathon Petroleum is primed for significant capital appreciation and is viewed as a preferred downstream operator to own now.
Zacks Rank #1 Marathon Petroleum has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 24.4% over the last 30 days. The stock price of MPC has jumped 38.6% year to date. It has a current dividend yield of 2.64%.
Valero Energy is the largest independent refiner and marketer of petroleum products in the United States. VLO offers the most diversified refinery base with a capacity of 3.2 million barrels per day in its 15 refineries throughout the United States, Canada and the Caribbean.
The majority of Valero Energy’s refining plants are situated in the Gulf coast area from where there is easy access to the export facilities. VLO’s Gulf coast presence helped it to expand export volumes over the past years and gain from high distillate margins.
Moreover, Valero Energy intends to quadruple renewable diesel production capacity by 2023. With low-carbon fuel policies being adopted by economies around the globe, demand for renewable fuel is expected to rise in the coming days. Also, VLO is expected to capitalize on the increasing demand for distillate fuel.
Zacks Rank #1 Valero Energy has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 16.6% over the last 30 days. The stock price of VLO has soared 54.8% year to date and the current dividend yield is of 3.49%.
Lockheed Martin is the largest U.S. defense contractor with a steady inflow of orders from its leveraged presence in the Army, Air Force, Navy and IT programs. Consistent level of contract flows and subsequent backlog growth bolster the long-term revenue prospects for LMT. Expansionary U.S. budgets will also boost its business. The F-35 program continues to be a key growth program for Lockheed Martin’s Aeronautics business unit.
Zacks Rank #2 Lockheed Martin has an expected earnings growth rate of 18.6% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.1% over the last 30 days. The stock price of LMT has climbed 18.4% year to date. It has a current dividend yield of 2.67%.
The Hershey has raised its top and bottom-line view due to robust first-quarter results and greater visibility in 2022. Earnings and sales improved year over year, gaining from higher pricing, volumes and buyouts.
The buyouts of Pretzels, Dot's and Lily's boosted net sales of HSY. Management expects pricing to remain strong in 2022. Also, Hershey has been gaining on its focus on innovation and capacity expansion.
The Zacks Rank #2 Hershey has an expected earnings growth rate of 11.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 30 days. The stock price of HSY has advanced 12.9% year to date. It has a current dividend yield of 1.63%.