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3 Red-Hot Stocks Still Worth Buying

Even though the major benchmark indexes are hovering near all-time highs thanks to impressive corporate earnings and forecasts, many analysts expect the stock market to suffer a correction on concerns over the resurgence of COVID-19 cases. However, some stocks could perform well irrespective of how the market moves in the near- to midterm. Indeed, we think McDonald's (MCD), Zoetis (ZTS), and Republic Services (RSG) are still worth buying, considering their fundamental strength and industry tailwinds. Read on to learn more.

Although the latest performances by the major benchmark indexes reflect bullish investor sentiment, analysts expect the stock market to suffer a correction in the near term on concerns over the rapid spread of the COVID-19 Delta variant worldwide. Impressive second-quarter corporate results are the primary factor helping the market stay steady, offsetting the negativity related to the resurgence of the COVID-19 cases.

But even if the robust corporate earnings cannot offset the concerns surrounding the potential that a COVID-19 resurgence will slow economic growth in the near term, there are still some fundamentally sound stocks that should keep performing well.

We believe industry tailwinds and fundamental strength make McDonald's Corporation (MCD), Zoetis Inc. (ZTS), and Republic Services, Inc. (RSG) solid bets now.

McDonald's Corporation (MCD)

Oak Brook, Ill.-based MCD is one of the most popular global foodservice retailers with over 39,000 locations in more than 100 countries. Approximately 93% of MCD's restaurants are owned and operated by independent local business owners.

On May 20, MCD announced new investment plans to accelerate the allocation of advertising dollars to diverse-owned media companies, production houses, and content creators, which should contribute significantly to its overall marketing strategy and goals.

MCD’s revenues increased 57% year-over-year to $5.89 billion in its  fiscal second quarter, ended June 30. Its operating income grew 180% from its  year-ago value to $2.69 billion, while its net income improved 358.7% year-over-year to $2.22 billion. The company’s EPS increased 353.8% year-over-year to $2.95.

Analysts expect MCD’s revenues to increase 16.8% year-over-year to $22.44 billion in the current year. The $8.63 consensus EPS estimate for the current year indicates a 42.6% rise versus the last year.

Shares of MCD have gained 23.2% over the past year. The stock has gained 16.9% over the past six months.

MCD has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

The stock also has a grade of A for Quality and Sentiment, and a grade B for Growth, Stability, and Momentum. Among the 46 stocks in the A-rated Restaurants industry, MCD is ranked #4.

To see more of MCD’s component grades, click here.           

Zoetis Inc. (ZTS)

ZTS discovers, develops, manufactures, and commercializes animal health medicines, vaccines, and diagnostic products in the United States and internationally. The Parsippany, N.J.-based company commercializes products across species, including livestock and companion animals.

ZTS’s revenue increased 22% year-over-year to $1.87 billion in its  fiscal first quarter ended March 31. Its net income stood at $559 million, up 32% from the same period last year. The company’s EPS increased 33% year-over-year to $1.17. Its cash and cash equivalents balance rose 84.6% from the prior-year quarter to $3.60 billion over this period.

A $7.59 billion consensus revenue estimate for the current year indicates a 13.8% increase year-over-year. The Street expects the company’s EPS to rise 17.4% from the prior year to $4.52 in the current year. In addition, ZTS surpassed the consensus EPS estimates in each of the trailing four quarters.

ZTS has gained 29.9% over the past six months to close yesterday’s trading session at $204.12. The stock has gained 39.3% over the past year.

ZTS’ POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy. It also has a B grade for Growth, Stability, Sentiment, and Quality. Of the 221 stocks in the Medical – Pharmaceuticals industry, ZTS is ranked #3.

Click here to view additional ZTS ratings for Value and Momentum.

Click here to checkout our Healthcare Sector Report for 2021

Republic Services, Inc. (RSG)

RSG in Phoenix, Ariz., provides non-hazardous solid waste collection, transfer, disposal, recycling, and environmental services. The company serves mainly small-container, large-container, and municipal and residential customers.

On April 26, RSG opened its first Northern California organics pre-processing facility ahead of a new state law mandating the diversion of food and yard waste from landfills. Given the emerging organics sector, especially in California, this should provide tremendous potential for the company to grow its business and strengthen the circular economy.

RSG’s revenues increased 14.6% year-over-year to $2.81 billion in its fiscal second quarter, ended June 30. Its operating income grew 31% from its  year-ago value to $517.90 million. RSG’s net income came in at $332 million, indicating a 46.7% rise year-over-year. The company’s EPS increased 45.1% year-over-year to $1.03.

The Street expects RSG’s revenues to rise 8.4% year-over-year to $2.79 billion in the current quarter, ending September 2021. The $1.02 consensus EPS estimate for the current  quarter indicates a 2% improvement year-over-year. Furthermore,  RSG surpassed the Street’s EPS estimates in each of the trailing four quarters. Shares of RSG have gained 35.2% over the past year and 25.5% over the past six months.

It’s no surprise that RSG has an overall A rating, which equates to Strong Buy in our POWR Ratings system. It also has an A grade for Sentiment, and a B for Growth, Stability, and Quality. In addition, it is ranked #2 among the 18 stocks in the B-rated Waste Disposal industry.

We also provide Momentum and Value grades for RSG, which you can find here.

MCD shares were trading at $244.07 per share on Friday afternoon, up $0.05 (+0.02%). Year-to-date, MCD has gained 15.08%, versus a 18.02% rise in the benchmark S&P 500 index during the same period.

About the Author: Subhasree Kar

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.


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