All three major U.S. indexes fell over 1% Thursday, with the Nasdaq down 2.3%. The downturn came after the U.S. experienced its first weekly increase in new unemployment claims since March. This highlighted growing concerns about spikes in coronavirus cases that have hampered the economic reopening.
We are also now in the heart of second quarter earnings season that could see investors take home profits on stocks that have soared since March. And it’s not just the tech giants like Apple AAPL and Amazon AMZN that have climbed.
Aside from a possible sell the news stretch, there is still major uncertainty on the pandemic front and the economic strain could get worse even with more government stimulus. Nonetheless, Wall Street is likely poised to remain in don’t fight the Fed mode.
With this in mind, let’s dive into three stocks that are projected to grow during the pandemic that also provide solid income.
Fastenal is a wholesale distributor of industrial and construction supplies that range from machinery to lighting and nearly everything else its consumers might need. FAST topped our Q2 fiscal 2020 estimates on July 14, with sales up over 10% and its adjusted earnings up roughly 17%. The company’s sales were boosted by a spike in demand for personal protective equipment, which did start to taper off in June. Plus, FAST said that its “business activity appears to have bottomed in April,” highlight by its sales rate trend for its “most cyclical product category" fasteners.
FAST shares are up 6% since its report and it hit new highs on Thursday of roughly $46 per share. This is part of a surge that’s seen Fastenal soar over 60% during the market’s climb off its March 23 lows, to outpace Home Depot HD and Microsoft MSFT. Over the last three years, FAST stock is up 110%, to top its industry’s 70% climb. Fastenal also still trades at a discount against its industry’s average, as it has for much of the past several years. And its 2.2% dividend yield tops the S&P 500’s 1.8% average.
Moving on, our Zacks estimates call for FAST’s Q3 sales to pop 2.3%, while its full-year revenue is projected to jump 5.4% in 2020 and another 4.5% in FY21. Meanwhile, its bottom-line is expected to climb 3.6% this year and come in 7% higher next. Fastenal’s positive earnings revisions help it grab a Zacks Ranks #1 (Strong Buy) right now. FAST is also part of a highly-ranked Zacks industry and it sports an “A” grade for Growth in our Style Scores system.
Broadcom is a semiconductor firm that’s expanded its reach into infrastructure software solutions through acquisitions in recent years. AVGO posted better-than-expected second earnings and sales in early June, with revenue up 4% for the period ended in early May. “Looking ahead, our third quarter guidance for semiconductors reflects a surge in demand from cloud, telecom and enterprise customers, offset by supply chain constraints and an expected substantial reset in wireless,” CEO Hock Tan said in prepared remarks.
Broadcom generated record quarterly free cash flow of over $3 billion in Q2. This boosted its balance sheet and helps support its solid dividend during these uncertain times. Broadcom last December raised its dividend by 23% to $3.25 per share. AVGO’s current dividend yield rests at a strong to 4.2% to help it crush Intel’s INTC 2.2% and other large-cap tech players. And AVGO is set to sell its wireless IoT unit to Synaptics SYNA for $250 million in cash. The move is part of Broadcom’s efforts to focus on its infrastructure semiconductor markets and other core areas.
Our estimates call for Broadcom’s adjusted fiscal 2020 EPS figure to pop 1% on 4.4% stronger revenue, which compares favorably to the broader market outlook. AVGO is then projected to follow up this growth with 12% earnings expansion in FY21 on 6% higher sales. AVGO stock is currently a Zacks Rank #3 (Hold) that rocks “B” grades for Value and Growth and an “A” for Momentum in our Style Scores system. Broadcom shares have surged 40% in the past two years to top its industry’s average 30%. AVGO is also up 60% from the market’s lows, but its yet to break through to new highs, which means it could have room to run.
AbbVie’s portfolio features one of the world’s top-selling drugs, Humira. The company’s patent protections for Humira are ending outside of the U.S., even though biosimilars won’t hit the U.S. for at least a few years. The pharmaceutical giant has seen this coming and prepared for the future and it officially completed in early May its $63 billion acquisition of Allergan plc. Wall Street has seemed pleased with the Allergan deal that adds Botox and other popular beauty-focused drugs to its expanding roster.
AbbVie’s therapeutics span a wide variety of illnesses and its R&D pipeline is strong. ABBV shares have jumped 52% from the market’s March 23 lows to easily outpace the Large Cap Pharma industry’s 34%. The stock is now up 45% in the past 12 months, against its industry’s 13%. Plus, AbbVie stock sits around 15% off its early 2018 highs, which could give it more room to run. AbbVie’s strong earnings revisions help it hold a Zacks Rank #2 (Buy) heading into its Q2 earnings release on July 31, alongside an overall “A” VGM score.
AbbVie’s 4.8% dividend yield blows away its industry’s 2.5% average, as well as Pfizer’s PFE 3.9%, Merck’s MRK 3.1%, and Eli Lilly’s LLY 1.8%. Meanwhile, our Zacks estimates call for AbbVie’s revenue to surge 36% in FY20 and another 18% in FY21, driven in part by its Allergan deal. Plus, ABBV’s adjusted FY20 earnings are projected to jump 17% and another 16.2% higher next year.
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