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Fitch Downgrades U.S. Rating: 5 Stocks to Buy on the Dip
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On Aug 1, Fitch Ratings downgraded the U.S long-term foreign currency issuer default rating to AA+ from AAA. The agency cited “expected fiscal deterioration over the next three years.” In May, Fitch placed the AAA rating of the nation in the negative watchlist.
Fitch expects the general government deficit to rise to 6.3% of U.S. GDP in 2023 from 3.7% in 2022. The agency remained concerned about a steady deterioration in standards of governance over the last 20 years. Notably, in 2011, S&P had downgraded the U.S. credit rating to AA+ from AAA.
Consequently, U.S. stock futures are trading in negative territory. In early morning trading, several key markets of the Asia-Pacific region also traded in the red. However, we believe that any dip in U.S. stock prices following Fitch’s sovereign rating downgrade will provide a good opportunity to accumulate stocks.
U.S. Economy Remains Strong
The Bureau of Economic Analysis reported that U.S. GDP grew 2.4% in second-quarter 2023 after rising 2% in the first quarter. The U.S. GDP increased 2.6% in fourth-quarter 2022. The second-quarter GDP growth rate eliminates the concerns of a large section of economists and financial researchers that the economy may fall into a recession in the near future.
The U.S. labor market remains resilient. Month over month, personal expenditure — the largest driver of GDP — rose 0.5% in June compared with 0.2% in May. The personal savings rate stayed healthy at 4.3%.
The inflation rate is dwindling steadily since June 2022. Consequently, the Fed is approaching the end of its ongoing interest rate hike cycle. The central bank is now more confident about the soft landing of the economy.
Our Top Picks
At this stage, we have narrowed our search to five large-cap (market capital > $10 billion) growth stocks that have strong potential for the rest of 2023. Any dip in these stock prices will be a good opportunity to enter.
The chart below shows the price performance of our five picks in the past three months.
Image Source: Zacks Investment Research
Manhattan Associates Inc. (MANH - Free Report) develops, sells, deploys, services, and maintains software solutions to manage supply chains, inventory, and omni-channel operations. MANH offers Manhattan SCALE, a portfolio of logistics execution solutions that provide trading partner management, yard management, optimization, warehouse management, and transportation execution services, and Manhattan Active, a set of enterprise and omnichannel solution.
Manhattan Associates has an expected revenue and earnings growth rate of 16.1% and 12%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 7.7% over the last seven days.
Uber Technologies Inc.’s (UBER - Free Report) Delivery business benefits from rising online order volumes. UBER’s efforts to expand its delivery operations through successive acquisitions are encouraging. Continued recovery in Mobility operations is aiding the company. UBER’s efforts to expand its presence across the globe are impressive.
Uber Technologies has an expected revenue and earnings growth rate of 17.8% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 11.1% over the last seven days.
Live Nation Entertainment Inc. (LYV - Free Report) is benefiting from pent-up demand for live events, robust ticket sales and the sponsorship and advertising business. LYV remains optimistic about its growth prospects in 2023.
For concerts, LYV stated that it has already sold more than 90 million tickets (as of May 2023), up 20% from 2022 levels. In terms of tickets, LYV is likely to benefit from the market pricing trend. Also, emphasis on new client and venue additions bode well.
Live Nation Entertainment has an expected revenue and earnings growth rate of 18.4% and 35.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last seven days.
United Airlines Holdings Inc. (UAL - Free Report) is seeing steady recovery in domestic and international air-travel demand. Owing to robust air-travel demand, UAL expects revenues for the September quarter to grow 10-13% year over year. For third-quarter 2023, UAL expects capacity to improve 16% from the year-ago reported figure.
Driven by the rosy air-travel demand scenario, UAL expects third-quarter earnings per share in the $3.85-$4.35 band. Management has lifted its EPS forecast for 2023. UAL's fleet-upgrade efforts are commendable as well.
United Airlines has an expected revenue and earnings growth rate of 19.2% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.6% over the last seven days.
The Trade Desk Inc. (TTD - Free Report) is a provider of technology platform for advertising. TTD through self-service, cloud-based platform, ad buyers create, manage and optimize data-driven digital advertising campaigns which includes display, video, audio, native and social, on a multitude of devices, such as computers, mobile devices and connected TV. TTD operates primarily in the United States, Europe and Asia.
The Trade Desk has an expected revenue and earnings growth rate of 22.2% and 20.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 7.8% over the last 60 days.
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Fitch Downgrades U.S. Rating: 5 Stocks to Buy on the Dip
On Aug 1, Fitch Ratings downgraded the U.S long-term foreign currency issuer default rating to AA+ from AAA. The agency cited “expected fiscal deterioration over the next three years.” In May, Fitch placed the AAA rating of the nation in the negative watchlist.
Fitch expects the general government deficit to rise to 6.3% of U.S. GDP in 2023 from 3.7% in 2022. The agency remained concerned about a steady deterioration in standards of governance over the last 20 years. Notably, in 2011, S&P had downgraded the U.S. credit rating to AA+ from AAA.
Consequently, U.S. stock futures are trading in negative territory. In early morning trading, several key markets of the Asia-Pacific region also traded in the red. However, we believe that any dip in U.S. stock prices following Fitch’s sovereign rating downgrade will provide a good opportunity to accumulate stocks.
U.S. Economy Remains Strong
The Bureau of Economic Analysis reported that U.S. GDP grew 2.4% in second-quarter 2023 after rising 2% in the first quarter. The U.S. GDP increased 2.6% in fourth-quarter 2022. The second-quarter GDP growth rate eliminates the concerns of a large section of economists and financial researchers that the economy may fall into a recession in the near future.
The U.S. labor market remains resilient. Month over month, personal expenditure — the largest driver of GDP — rose 0.5% in June compared with 0.2% in May. The personal savings rate stayed healthy at 4.3%.
The inflation rate is dwindling steadily since June 2022. Consequently, the Fed is approaching the end of its ongoing interest rate hike cycle. The central bank is now more confident about the soft landing of the economy.
Our Top Picks
At this stage, we have narrowed our search to five large-cap (market capital > $10 billion) growth stocks that have strong potential for the rest of 2023. Any dip in these stock prices will be a good opportunity to enter.
These stocks have also witnessed positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #1 (Strong Buy) and has a Growth Score 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
Manhattan Associates Inc. (MANH - Free Report) develops, sells, deploys, services, and maintains software solutions to manage supply chains, inventory, and omni-channel operations. MANH offers Manhattan SCALE, a portfolio of logistics execution solutions that provide trading partner management, yard management, optimization, warehouse management, and transportation execution services, and Manhattan Active, a set of enterprise and omnichannel solution.
Manhattan Associates has an expected revenue and earnings growth rate of 16.1% and 12%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 7.7% over the last seven days.
Uber Technologies Inc.’s (UBER - Free Report) Delivery business benefits from rising online order volumes. UBER’s efforts to expand its delivery operations through successive acquisitions are encouraging. Continued recovery in Mobility operations is aiding the company. UBER’s efforts to expand its presence across the globe are impressive.
Uber Technologies has an expected revenue and earnings growth rate of 17.8% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 11.1% over the last seven days.
Live Nation Entertainment Inc. (LYV - Free Report) is benefiting from pent-up demand for live events, robust ticket sales and the sponsorship and advertising business. LYV remains optimistic about its growth prospects in 2023.
For concerts, LYV stated that it has already sold more than 90 million tickets (as of May 2023), up 20% from 2022 levels. In terms of tickets, LYV is likely to benefit from the market pricing trend. Also, emphasis on new client and venue additions bode well.
Live Nation Entertainment has an expected revenue and earnings growth rate of 18.4% and 35.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last seven days.
United Airlines Holdings Inc. (UAL - Free Report) is seeing steady recovery in domestic and international air-travel demand. Owing to robust air-travel demand, UAL expects revenues for the September quarter to grow 10-13% year over year. For third-quarter 2023, UAL expects capacity to improve 16% from the year-ago reported figure.
Driven by the rosy air-travel demand scenario, UAL expects third-quarter earnings per share in the $3.85-$4.35 band. Management has lifted its EPS forecast for 2023. UAL's fleet-upgrade efforts are commendable as well.
United Airlines has an expected revenue and earnings growth rate of 19.2% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.6% over the last seven days.
The Trade Desk Inc. (TTD - Free Report) is a provider of technology platform for advertising. TTD through self-service, cloud-based platform, ad buyers create, manage and optimize data-driven digital advertising campaigns which includes display, video, audio, native and social, on a multitude of devices, such as computers, mobile devices and connected TV. TTD operates primarily in the United States, Europe and Asia.
The Trade Desk has an expected revenue and earnings growth rate of 22.2% and 20.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 7.8% over the last 60 days.