The stock market has been relentlessly advancing the last couple of weeks despite inflation concerns and the Fed’s hawkish pivot. Overriding these concerns is expectations of another strong earnings season and the lack of alternatives for investors beyond stocks.
The S&P 500 hit another record high on July 2 rising for a 7th straight day, and the tech-heavy Nasdaq and the Dow Jones Industrial Average also closed higher. The economic recovery led by rapid vaccination drives and supportive fiscal and monetary policies is expected to help fundamentally strong stocks soar in the near term.
ArcelorMittal (MT), Darden Restaurants, Inc. (DRI), and Ternium S.A. (TX) are expected to generate significant returns in the second half of this year because of their solid financials, and consistent product and service innovation. These three stocks possess a solid combination of growth, value, and momentum attributes. So, it could be wise to bet on them now.
ArcelorMittal (MT)
Headquartered in Luxembourg City, Luxembourg, MT owns and operates steel manufacturing and mining facilities. The company's principal steel products include semi-finished flat products, and its mining products comprise iron ore lumps, fines, concentrates, pellets, and sinter feeds.
On June 18, 2021, MT completed the second share buyback program announced on March 4, 2021. It also commenced a third share buyback program on the same day under the authorization given by the 2021 AGM Authorization for an aggregate amount of $750 million.
The company’s sales surged 9.1% year-over-year to $16.19 billion for the fiscal first quarter ended March 31, 2021. MT’s EBITDA grew 235.3% year-over-year to $3.24 billion. Its adjusted net income came in at $2.28 billion, which represents a 920.1% sequential increase. MT’s EPS came in at $1.94, up 92.1% sequentially.
Analysts expect MT’s EPS and revenue to increase 1,915.8% and 40.3% year-over-year to $3.45 and $18.61 billion, respectively for the quarter ending September 30, 2021. It surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 187.9% over the past year to close Friday’s trading session at $31.50.
MT’s POWR Ratings reflect solid prospects. The company has an overall rating of A, which translates to Strong Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its weighting. It has an A grade for Growth, and a B grade for Value, Momentum, Sentiment, and Quality.
Click here to see more of MT’s component grades. MT is ranked #9 of 35 stocks in the A-rated Steel industry.
Darden Restaurants, Inc. (DRI)
DRI owns and operates roughly 1,804 full-service restaurants in the United States and Canada. The company’s portfolio of differentiated brands includes Olive Garden, LongHorn Steakhouse, Cheddar's Scratch Kitchen, Yard House, The Capital Grille, Seasons 52, Bahama Breeze, and Eddie V's.
On June 24, 2021, the company’s Chairman & CEO Gene Lee said, “Over the last 15 months, we have made numerous strategic investments in our business, while streamlining our operations and improving productivity. Given the business transformation work we have done, and the demand we are seeing from the consumer, we are well-positioned to thrive in this operating environment."
DRI’s sales increased 79.4% year-over-year to $41.70 billion for the fiscal fourth quarter ended May 30, 2021. Its operating income came in at $323.4 million compared to an operating loss of $592.10 million in the prior year period. Its net earnings came in at $368.5 million compared to a net loss of $480 million in the year-ago period. Its EPS came in at $2.78 for the quarter compared to a loss per share of $3.86 in the prior-year quarter.
For the current quarter ending August 31, 2021, analysts expect DRI’s EPS to come in at $1.64, which represents a 192.9% year-over-year increase. It surpassed Street EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 30.7% year-over-year to $9.41 billion in fiscal 2022. The stock has gained 98.1% over the past year to close Friday’s trading session at $148.13.
It’s no surprise that DRI has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has an A grade for Growth, and a B grade for Value, Momentum, Sentiment, and Quality.
Click here to see DRI’s ratings for Stability as well. DRI is ranked #2 of 45 stocks in the A-rated Restaurants industry.
Ternium S.A. (TX)
TX manufactures and processes various steel products. It operates through two segments: Steel and Mining. The Steel segment offers slabs, insulated panels, merchant bars, and roof tiles. The Mining segment sells iron ore and pellets. The company also provides medical, social, financial, scrap, and engineering services.
TX’s net sales increased 5% year-over-year to $1.18 billion for the first quarter ended March 31, 2021. Its operating income grew 598% year-over-year to $52 million. Its net income came in at $101 million compared to a net loss of $666 million in the prior-year period. Its EPS came in at $0.09 compared to a loss per share of $0.56 in the year-ago period.
The company’s EPS and revenue are expected to increase 297.3% and 90% year-over-year to $2.94 and $3.85 billion, respectively, for the quarter ending September 30, 2021. It surpassed Street EPS estimates in three of the trailing four quarters. The stock has gained 157.3% over the past year to close Friday’s trading session at $39.26.
TX’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary ratings system. The stock has an A grade for Growth, Sentiment, and Quality, and a B grade for Value and Momentum.
Within the Steel industry, TX is ranked #1. To see the additional POWR Rating for TX (Stability), click here.
MT shares were trading at $30.38 per share on Tuesday morning, down $1.12 (-3.56%). Year-to-date, MT has gained 33.72%, versus a 16.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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