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Wall Street Set to See a Broad-Based Rally in Q2: 5 Picks
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U.S. stock markets have been witnessing an astonishing rally in the past 15 months. However, the major driver of this rally was globally booming artificial intelligence (AI), especially generative AI. Companies that have extensive applications of AI in their final products have become multi-baggers in the past 15 months. Stock prices of some of these companies have skyrocketed 200-300% during this period.
These highly overvalued stocks make a large section of financial researchers and analysts skeptical of investing, although the near-term business outlook of these entities remains solid. Their current overstretched valuation makes them less attractive to investors.
Market participants are shifting more toward cyclical sectors like industrials, financials, energy, materials and transportation, to name a few. Consequently, the Wall Street bull run has become more broad-based. This trend is likely to gather pace in the second quarter of 2024.
A Cross-Section Study of Q1 2024
In 2023, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — jumped 13.7%, 23.9% and 43.4%, respectively. However, in first-quarter 2024, the S&P 500 rallied 10.2%, marking its best first-quarter performance since 2019. The Dow surged 5.6%, reflecting its strongest first-quarter performance since 2021. The tech-heavy Nasdaq Composite appreciated 9.1% in the same quarter.
Within the S&P 500, technology and its close resemblance — communication services — advanced 8.2% and 12.4%, respectively. On the other hand, the energy, financials, industrials, materials and healthcare sectors surged 12.6%, 12%, 10.5%, 8.6% and 8.3%, respectively.
Looking more microscopically, in March 2024, the Dow, the S&P 500 and the Nasdaq Composite advanced 2.1%, 3.1% and 1.8%, respectively. Within the S&P 500, technology and communication services were up 1.7% and 3.8%, respectively. On the other hand, energy, financials, industrials, materials and healthcare sectors rose 10.1%, 4.4%, 4.4%, 6.9% and 1.2%, respectively.
Finally, for the truncated week ended Mar 28 — the last trading week of the first quarter — the Dow and the S&P 500 increased 0.8% and 0.4%, respectively. However, the Nasdaq Composite slipped 0.3%.
Our Top Picks
At this stage, it will be prudent to invest in non-technology stocks with a favorable Zacks Rank to gain in the near future. We have selected five non-tech bigwigs (market capital > $30 billion) that have strong growth potential for 2024.
These stocks have seen positive earnings estimate revisions in the last 30 days. 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
Royal Caribbean Cruises Ltd. (RCL - Free Report) has been benefiting from strong cruising demand from new and loyal guests and robust booking trends. Also, strength in consumer spending onboard and pre-cruise purchases bodes well. RCL emphasized investing in a modern digital travel platform to streamline the vacation booking process for customers and expand wallet share. Also, RCL emphasized new innovative ships and onboard experiences to boost its offering and deliver superior yields and margins.
Zacks Rank #1 Royal Caribbean Cruises has an expected revenue and earnings growth rate of 14.7% and 47.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.3% over the last 30 days.
Ryanair Holdings plc (RYAAY - Free Report) continues to benefit from improved traffic growth. Traffic grew 10% during the first nine months of fiscal 2024. RYAAY expects fiscal 2024 traffic to be 183.5 million.
On the back of a buoyant traffic scenario, RYAAY’s profit after tax also showed year-over-year improvement during the first nine months of fiscal 2024. The load factor was a healthy 94% in the first nine months of fiscal 2024. RYAAY’s measures to expand its fleet, in order to cater to rising travel demand, look encouraging.
Zacks Rank #2 Ryanair Holdings has an expected revenue and earnings growth rate of 9.4% and 24.5%, respectively, for the current year (ending March 2025). The Zacks Consensus Estimate for current-year earnings has improved 2.1% over the last 30 days.
Welltower Inc. (WELL - Free Report) owns a well-diversified portfolio of healthcare real estate assets in the key markets of the United States, Canada and the U.K. Given an aging population and an expected rise in senior citizens’ healthcare expenditure, WELL’s seniors housing operating portfolio is well-positioned to capitalize on this positive trend.
The outpatient medical segment is expected to benefit from the favorable outpatient visit trends in the near term. WELL’s strategic restructuring initiatives have enabled it to attract operators and improve its cashflows. WELL enjoys solid balance sheet strength and its capital-recycling efforts are encouraging.
Zacks Rank #2 Welltower has an expected revenue and earnings growth rate of 10.6% and 10.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last seven days.
General Mills Inc. (GIS - Free Report) manufactures and markets branded consumer foods worldwide. GIS operates through four segments: North America Retail, International, Pet, and North America Foodservice.
GIS has been gaining from the Accelerate strategy, which is highlighted by its key priorities. These include competing efficiently, investing in Holistic Margin Management and Strategic Revenue Management initiatives, and reshaping the brand’s portfolio. Notably, we forecast GIS’ price/mix to be up 3.6% during fiscal 2024.
Zacks Rank #2 General Mills has an expected revenue and earnings growth rate of 1% and 3.2%, respectively, for next year (ending May 2025). The Zacks Consensus Estimate for next-year earnings has improved 0.2% over the last seven days.
Elevance Health Inc. (ELV - Free Report) has benefited from premium rate increases and expanding memberships. Strategic acquisitions and partnerships have fortified ELV’s business portfolio. Notably, a robust Medicare Advantage segment, combined with successful contract acquisitions, is poised to drive future membership growth.
The Carelon business is a key contributor to ELV’s success. It utilizes excess capital to boost shareholder value. We expect ELV’s product revenues to rise more than 5.4% year over year in 2024.
Zacks Rank #2 Elevance Health has an expected revenue and earnings growth rate of 1.3% and 12.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 60 days.
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Wall Street Set to See a Broad-Based Rally in Q2: 5 Picks
U.S. stock markets have been witnessing an astonishing rally in the past 15 months. However, the major driver of this rally was globally booming artificial intelligence (AI), especially generative AI. Companies that have extensive applications of AI in their final products have become multi-baggers in the past 15 months. Stock prices of some of these companies have skyrocketed 200-300% during this period.
These highly overvalued stocks make a large section of financial researchers and analysts skeptical of investing, although the near-term business outlook of these entities remains solid. Their current overstretched valuation makes them less attractive to investors.
Market participants are shifting more toward cyclical sectors like industrials, financials, energy, materials and transportation, to name a few. Consequently, the Wall Street bull run has become more broad-based. This trend is likely to gather pace in the second quarter of 2024.
A Cross-Section Study of Q1 2024
In 2023, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — jumped 13.7%, 23.9% and 43.4%, respectively. However, in first-quarter 2024, the S&P 500 rallied 10.2%, marking its best first-quarter performance since 2019. The Dow surged 5.6%, reflecting its strongest first-quarter performance since 2021. The tech-heavy Nasdaq Composite appreciated 9.1% in the same quarter.
Within the S&P 500, technology and its close resemblance — communication services — advanced 8.2% and 12.4%, respectively. On the other hand, the energy, financials, industrials, materials and healthcare sectors surged 12.6%, 12%, 10.5%, 8.6% and 8.3%, respectively.
Looking more microscopically, in March 2024, the Dow, the S&P 500 and the Nasdaq Composite advanced 2.1%, 3.1% and 1.8%, respectively. Within the S&P 500, technology and communication services were up 1.7% and 3.8%, respectively. On the other hand, energy, financials, industrials, materials and healthcare sectors rose 10.1%, 4.4%, 4.4%, 6.9% and 1.2%, respectively.
Finally, for the truncated week ended Mar 28 — the last trading week of the first quarter — the Dow and the S&P 500 increased 0.8% and 0.4%, respectively. However, the Nasdaq Composite slipped 0.3%.
Our Top Picks
At this stage, it will be prudent to invest in non-technology stocks with a favorable Zacks Rank to gain in the near future. We have selected five non-tech bigwigs (market capital > $30 billion) that have strong growth potential for 2024.
These stocks have seen positive earnings estimate revisions in the last 30 days. 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
Royal Caribbean Cruises Ltd. (RCL - Free Report) has been benefiting from strong cruising demand from new and loyal guests and robust booking trends. Also, strength in consumer spending onboard and pre-cruise purchases bodes well.
RCL emphasized investing in a modern digital travel platform to streamline the vacation booking process for customers and expand wallet share. Also, RCL emphasized new innovative ships and onboard experiences to boost its offering and deliver superior yields and margins.
Zacks Rank #1 Royal Caribbean Cruises has an expected revenue and earnings growth rate of 14.7% and 47.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.3% over the last 30 days.
Ryanair Holdings plc (RYAAY - Free Report) continues to benefit from improved traffic growth. Traffic grew 10% during the first nine months of fiscal 2024. RYAAY expects fiscal 2024 traffic to be 183.5 million.
On the back of a buoyant traffic scenario, RYAAY’s profit after tax also showed year-over-year improvement during the first nine months of fiscal 2024. The load factor was a healthy 94% in the first nine months of fiscal 2024. RYAAY’s measures to expand its fleet, in order to cater to rising travel demand, look encouraging.
Zacks Rank #2 Ryanair Holdings has an expected revenue and earnings growth rate of 9.4% and 24.5%, respectively, for the current year (ending March 2025). The Zacks Consensus Estimate for current-year earnings has improved 2.1% over the last 30 days.
Welltower Inc. (WELL - Free Report) owns a well-diversified portfolio of healthcare real estate assets in the key markets of the United States, Canada and the U.K. Given an aging population and an expected rise in senior citizens’ healthcare expenditure, WELL’s seniors housing operating portfolio is well-positioned to capitalize on this positive trend.
The outpatient medical segment is expected to benefit from the favorable outpatient visit trends in the near term. WELL’s strategic restructuring initiatives have enabled it to attract operators and improve its cashflows. WELL enjoys solid balance sheet strength and its capital-recycling efforts are encouraging.
Zacks Rank #2 Welltower has an expected revenue and earnings growth rate of 10.6% and 10.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last seven days.
General Mills Inc. (GIS - Free Report) manufactures and markets branded consumer foods worldwide. GIS operates through four segments: North America Retail, International, Pet, and North America Foodservice.
GIS has been gaining from the Accelerate strategy, which is highlighted by its key priorities. These include competing efficiently, investing in Holistic Margin Management and Strategic Revenue Management initiatives, and reshaping the brand’s portfolio. Notably, we forecast GIS’ price/mix to be up 3.6% during fiscal 2024.
Zacks Rank #2 General Mills has an expected revenue and earnings growth rate of 1% and 3.2%, respectively, for next year (ending May 2025). The Zacks Consensus Estimate for next-year earnings has improved 0.2% over the last seven days.
Elevance Health Inc. (ELV - Free Report) has benefited from premium rate increases and expanding memberships. Strategic acquisitions and partnerships have fortified ELV’s business portfolio. Notably, a robust Medicare Advantage segment, combined with successful contract acquisitions, is poised to drive future membership growth.
The Carelon business is a key contributor to ELV’s success. It utilizes excess capital to boost shareholder value. We expect ELV’s product revenues to rise more than 5.4% year over year in 2024.
Zacks Rank #2 Elevance Health has an expected revenue and earnings growth rate of 1.3% and 12.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 60 days.