Wall Street has witnessed a tough 2022 after an astonishing rally in the last two pandemic-ridden years. The economic pain of coronavirus has been felt for the first time this year as the U.S. government has stopped its fiscal stimulus and the Fed has turned ultra-hawkish from ultra-dovish in its monetary policies.

Mounting Inflation and Rigorous Rate Hike

Inflation remains at a 40-year high despite an increase in the Fed Fund rate from almost zero to 2.5% from March to July. A large section of economists and financial experts were expecting a decline in inflation in August due to a significant drop in energy prices and travel costs. However, food, shelter (housing and home building), vehicles and medical services drove costs higher in August.

Fed Chairman Jerome Powell and various other top Fed officials with voting rights have indicated that the rigorous rate hike will continue until inflation is at least down close to the Fed’s 2% target rate.

After August’s CPI data, market participants are expecting another 75 basis point hike in the benchmark interest rate in the September FOMC of the Fed is a foregone conclusion. Some investment analysts are also expecting a 1% rate hike this month. Powell will deliver the post-FOMC lecture today.

As a result, market participants are highly concerned about a recession in the U.S. economy in the near future. Fed Chair Jerome Powell admitted that he cannot give any guarantee for a soft landing of the economy under a higher interest rate regime.

Stock Selection Process

Year to date, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have plummeted 15.5%, 19.1% and 27%, respectively. Despite these headwinds, several good stocks are available for investment. We have applied our VGM Style Score to narrow the search.

We have narrowed our search to five U.S. corporate that have strong growth potential for the rest of 2022. These stocks have seen positive earnings estimate revisions in the last 30 days. Finally, each of our picks carries a Zacks Rank #1 (Strong Buy) and a VGM Score of A.  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 in the past three months.

Image Source: Zacks Investment Research

Marathon Petroleum Corp. (MPC Quick QuoteMPC - Free Report) 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.
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 2.1% over the last 30 days.

Unum Group’s (UNM Quick QuoteUNM - Free Report) conservative pricing and reservation practices have contributed to overall profitability. The sustained increase in premiums is being fueled by high persistency levels in core business lines and strong sales volume along with solid expansions.

The continued rollout of dental products and geographic expansion have been paying off for UNM as its acquired dental insurance businesses are growing in the United States and the U.K. UNM has consistently enhanced shareholder’s value. Unum Group expects 2022 premiums to grow about 2%. Adjusted operating EPS is expected to grow 15-20%.

Unum Group has an expected earnings growth rate of 40.5% for the current year. The Zacks Consensus Estimate for current-year earnings improved 1.3% over the last 7 days.

Avis Budget Group Inc. (CAR Quick QuoteCAR - Free Report) provides car and truck rentals, car sharing, and ancillary services to businesses and consumers. The ability of CAR to cater to a wide range of mobility demands helps it expand and strengthen its global foothold through organic growth.

Avis Budget Group operates through distinct global brands that focus on different market segments and complement other brands in their respective regional markets. Fleet expansion and technology enhancement efforts by CAR are likely to enhance its offerings.  

Avis Budget Group has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 30 days.  

United Rentals Inc. (URI Quick QuoteURI - Free Report) is benefiting from the U.S. administration’s increased focus on infrastructural improvement. URI has been gaining from better fleet productivity on broad-based rental demand in construction and industrial verticals.

Better fleet productivity on broad-based rental demand in non-residential construction and industrial verticals, higher total and rental revenues and stronger pricing aided United Rentals’ second-quarter 2022 results. During the period, rental revenues grew 26.2% from a year ago. Adjusted gross margin expanded 360 basis points.

United Rentals has expected earnings growth of 43.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 30 days.  

Civitas Resources Inc. (CIVI Quick QuoteCIVI - Free Report) is a carbon-neutral oil & gas producer focused on developing and producing crude oil, natural gas and natural gas liquids principally in Colorado's Denver-Julesburg Basin.

CIVI has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the last 30 days.