Top 5 Growth Picks Amid Disappointing April Jobs Data
The U.S. economic recovery, which a large section of economists and financial experts thought was running at a faster-than-expected speed, suffered a huge blow on May 7. The setback came when the Bureau of Labor Statistics reported that the economy added just 266,000 jobs in April, significantly below the consensus estimate of 1.035 million.
Moreover, March's job additions were revised downward to 770,000 from the 916,000 reported earlier although February's data was revised upward to 536,000 from 468,000. This means, 78,000 less jobs were added in February and March together. The unemployment rate rose to 6.1% in April from 6% in March, well above the consensus estimate of 5.7%.
Meanwhile, Wall Street seems unperturbed by this disappointment and rallied with much vigor. The three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — gained 0.7%, 0.7% and 0.9%, respectively. Moreover, the small-cap centric Russell 2000 Index rallied 1.4%.
Expectations of Monetary Stimulus to Continue
Friday's job data showed that the full recovery of the U.S. economy from the pandemic-led devastation is still a distant dream. The labor market, the worst affected sector, has a long way to walk before reaching the pre-pandemic level.
The disappointing jobs data shows that the Fed and its Chairman Jerome Powell are right in pursuing an ultra-dovish monetary stance. In March 2020, at the onset of the global outbreak of the coronavirus, the Fed reduced the benchmark interest rate to 0-0.25%. Moreover, in August 2020, the central bank adopted a new approach to its monetary policy in which it has given more importance to unemployment over inflation.
The central bank decided to allow inflation to remain above 2% till the time the labor market reaches the pre-pandemic level. However, a massive fiscal stimulus of $1.9 trillion injected by the Biden administration, a $1,400 direct check payment to individuals, a historic high savings by U.S. citizens and strong pent-up demand due to lockdowns raised inflationary expectations in the economy.
The great reopening of the U.S. economy buoyed by the nationwide deployment of COVID-19 vaccines, and a jump in consumer spending and retail sales prompted several economists and financial experts to comment that the Fed may need to stop buying bonds and hike the interest rate much before 2023 to contain inflation.
However, the central bank reiterated its stand that any inflation in 2021, due to pandemic-led, supply-chain disruptions or pent-up demand, will be transitory in nature.
Growth Stocks to Benefit
Growth investors are primarily focused on stocks with aggressive earnings or revenue growth, which should propel their stock price higher in the future. A higher interest rate will be detrimental to growth-oriented stocks that depend on easy access to credit at a cheap rate to maintain the company's growth rate.
Fed's decision to keep benchmark interest rate at a record low level will immensely benefit growth stocks. Moreover, the continuation of the $120 billion of bonds per month will keep bond yields and the market interest rate at low levels.
Our Top Picks
At this stage, it will be prudent to invest in growth stocks to enhance one's portfolio. We have narrowed down our search to five growth stocks that have popped more than 25 % year to date and still have upside left for 2021. These stocks have also witnessed robust earnings estimate revisions in the last 7 to 30 days.
Each of our picks beat earnings estimates in first-quarter 2021 and carries either a Zacks Rank #1 (Strong Buy) or 2 (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 year to date.
Continental Resources Inc. CLR explores, develops, and produces crude oil and natural gas primarily in the north, south, and east regions of the United States. It sells its crude oil and natural gas production to energy marketing companies, crude oil refining companies, and natural gas gathering and processing companies.
The company reported first-quarter 2021 adjusted earnings of 77 cents per share that beat the Zacks Consensus Estimate of 52 cents. Quarterly revenues jumped 88% year over year to $1,216 million, surpassing the Zacks Consensus Estimate of $1,066 million.
This Zacks Rank #1 company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last 30 days. The stock price has soared 86.8% year to date.
United Parcel Service Inc. UPS United Parcel Service Inc. (UPS) provides letter and package delivery, specialized transportation, logistics, and financial services. It operates through three segments: U.S. Domestic Package, International Package, and Supply Chain & Freight. United Parcel is looking to facilitate distribution efforts, once the vaccine is commercially available.
The company reported first-quarter 2021 adjusted earnings of $2.77 per share that beat the Zacks Consensus Estimate of $1.67. Quarterly revenues climbed 27% year over year to $22,908 million, surpassing the Zacks Consensus Estimate of $20,379.7 million.
This Zacks Rank #2 company has expected earnings growth of 25.3% for the current year. The Zacks Consensus Estimate for current-year earnings has moved 17% north over the last 30 days. The stock price has jumped 29.1% year to date.
Bruker Corp. BRKR designs and manufactures proprietary life science and materials research systems and associated products that serve multiple customers in life science research, pharmaceuticals, applied markets, nanotechnology, cell biology, clinical research, microbiology and in-vitro diagnostics.
The company delivered adjusted earnings per share of 44 cents in first-quarter 2021, soaring 214.3% year over year and surpassing the Zacks Consensus Estimate by 37.5%. Total revenues of $554.7 million iincreased 30.8% year over year, surpassing the Zacks Consensus Estimate by 8.9%.
This Zacks Rank #2 company has expected earnings growth of 34.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the last 7 days. The stock price has climbed 28% year to date.
Molina Healthcare Inc. MOH is a multi-state healthcare organization, which provides managed health care services to low-income families and individuals under the Medicaid and Medicare programs and through the state insurance marketplaces.
The company reported first-quarter 2021 adjusted earnings of $4.44 per share, beating the Zacks Consensus Estimate by 17.5%. Total revenues of $6.5 billion surpassed the consensus mark by 5.2%.
This Zacks Rank #2 company has expected earnings growth of 23.4% for the current year. The Zacks Consensus Estimate for current-year earnings has moved 0.5% north over the last 7 days. The stock price has surged 25.9% year to date.
CDW Corp. CDW is a leading provider of integrated information technology solutions to small, medium and large business, government, education and healthcare customers in the United States, United Kingdom and Canada.
The company reported first-quarter 2021 adjusted earnings of $1.74 per share, beating the Zacks Consensus Estimate by 13%. Total revenues of $4.84 billion surpassed the Zacks Consensus Estimate of $4.61 billion.
This Zacks Rank #2 company has expected earnings growth of 10% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 7 days. The stock price has rallied 32.6% year to date.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2021 today >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
United Parcel Service, Inc. (UPS) : Free Stock Analysis Report
Molina Healthcare, Inc (MOH) : Free Stock Analysis Report
Continental Resources, Inc. (CLR) : Free Stock Analysis Report
CDW Corporation (CDW) : Free Stock Analysis Report
Bruker Corporation (BRKR) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
