Wall Street has witnessed its worst first half in 50 years this year. Thereafter, a two month-long impressive summer rally raised hope among market participants that the market might have bottomed out. However, the Fed’s tougher-than-expected hawkish monetary stance in the Jackson Hole Symposium last month and its September FOMC meeting destroyed all hopes.
Inflation, Rate Hike and Recession Concerns
The Fed, so far, has been unable to cool down inflation from a 40-year high despite adopting ultra-hawkish monetary stances. The central bank has hiked the interest rate by 3% year to date, unseen since 1990.
Moreover, the Fed has raised the median of the Fed Fund rate to 4.4% in September from 3.4% in June. This means that the range of the benchmark lending rate at the end of 2022 will be 4.25-4.5%, indicating a 75 basis-point and 50 basis-point interest rate hike in November and December, respectively. Market participants are now adjusting the cost of an imminent recession in the U.S. economy into stock markets’ valuation
As of Sep 23, our projection has shown that the overall earnings of the S&P 500 Index are expected to grow 1.1% year over year. This indicates a stiff fall from 8.1% earnings growth year over year estimated in Jun 15. The Dow, the S&P 500 and the Nasdaq Composite – have tumbled 10.3%, 10.8% and 12.2%, respectively, in the past month.
Our Top Picks
Despite this grim scenario, a handful of stocks have seen positive earnings estimate revisions within the last 30 days. This means that investors are expecting these companies to do solid business for the rest of 2022, defying macro-economic headwinds. Investment in such stocks with a favorable Zacks Rank should be fruitful going forward.
We have narrowed our search to five such stocks with strong growth potential for the rest of 2022. Each of our picks currently sports a Zacks Rank #1 (Strong 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 in the past three months.
Image Source: Zacks Investment Research Marathon Petroleum Corp. ( MPC Quick Quote MPC - 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 2.9% over the last 7 days.
Albemarle Corp. ( ALB Quick Quote ALB - Free Report) should gain from long-term growth in the battery-grade lithium market. It is expected to benefit from its actions to boost its global lithium derivative capacity. ALB will also benefit from the synergies of the Rockwood acquisition. The buyout has enhanced diversity across end markets.
Albemarle also remains focused on executing its cost-reduction program. Its cost-saving actions are expected to support margins in 2022. ALB also remains committed to boosting shareholder returns by leveraging strong cash flows. It remains focused on maintaining its dividend payout. Albemarle has ample liquidity to meet its short-term debt obligations.
Albemarle has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.7% over the last 30 days.
HF Sinclair Corp. ( DINO Quick Quote DINO - Free Report) operates as an independent energy company. DINO produces and markets gasoline, diesel fuel, jet fuel, renewable diesel, specialty lubricant products, specialty chemicals, specialty and modified asphalt, and others.
HF Sinclair also owns and operates refineries located in Kansas, Oklahoma, New Mexico, Utah, Washington, and Wyoming, and markets its refined products principally in the Southwest United States and Rocky Mountains, Pacific Northwest, and in other neighboring Plains states.
HF Sinclair has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.1% over the last 7 days.
Ulta Beauty Inc. ( ULTA Quick Quote ULTA - Free Report) has been benefiting from its omnichannel strength. Also, the skincare category has been gaining from consumers’ rising interest in self-care. ULTA’s solid performance was backed by the strong execution of its strategies and solid guest demand, with the latter gaining from exciting brand launches.
Also, increased in-person activities and travel have been leading to the revival of the beauty category demand. All major categories delivered double-digit comp sales growth. Encouragingly, Ulta Beauty raised its fiscal 2022 view.
Ulta Beauty has an expected earnings growth rate of 2% for the current year (ending January 2023). The Zacks Consensus Estimate for current-year earnings has improved 5.6% over the last 30 days.
Carlisle Companies Inc. ( CSL Quick Quote CSL - Free Report) is set to gain from strength in the U.S. reroofing end markets besides its acquired assets. Strength in the medical technologies business and the commercial aerospace business is likely to drive CSL’s performance.
Strength in the reroofing market in the United States and growth in the architectural metals platform will likely benefit its CCM segment. Carlisle expects the segment's 2022 revenues to jump about 40% on a year-over-year basis. CSL’s focus on product launches and the growing backlog will likely benefit it.
Carlisle Companies has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 30 days.