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The Zacks Analyst Blog Highlights: Exxon Mobil, Deere & Co, Goldman Sachs, ConocoPhillips and Micron Technology

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Zacks Equity Research
·8 min read
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For Immediate Release

Chicago, IL – April 5, 2021 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Exxon Mobil Corporation XOM, Deere & Company DE, The Goldman Sachs Group, Inc. GS, ConocoPhillips COP and Micron Technology, Inc. MU.

Here are highlights from Thursday’s Analyst Blog:

3 Developments to Guide Your Investing Course, Plus 5 Picks

The new bull market of Wall Street that started after exit from the coronavirus-led shortest bear market in April 2020 is showing no signs of decline. The U.S. stock market ended the first quarter of 2021 on a high note.

The three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — rallied 7.8%, 5.8% and 2.8%, respectively. Moreover, the small-cap specific Russell 2000 jumped 12.4% and the mid-cap centric S&P 400 climbed 13.1%. All these reflect a broad-based rally in first-quarter 2021.

Meanwhile, three important developments took place in the last quarter. These developments may determine the course of stock investing in the rest of this year. Let's discuss them briefly.

Cyclical Stocks Outperform Growth Stocks  

The first major change in investment pattern in the first quarter was that investors' preferences shifted to cyclical sectors like oil and energy (up 29.5% year to date), industrials (11.2%), materials (8.9%), financials (16.4%) and consumer discretionary (4.5%) from growth-oriented technology (2.2%). Notably, the technology sector was the primary driver of the new bull market in pandemic-ridden 2020.

Meanwhile, approval of three COVID-19 vaccines by the FDA and the ramp up of nationwide vaccination process by the Biden administration raised market participants' hopes of a faster-than-expected reopening of the U.S. economy.

Several recently released economic data also indicated strong recovery of the U.S. economy. These developments compelled investors to opt for cheaply-priced cyclical stocks over technology stocks, which were already overvalued.

It remains to be seen how cyclical stocks, supported by reopening of the domestic and global economy, will maintain leads over technology stocks that have an inherent growth path.

Soaring Bond Yields and Inflationary Expectations

The U.S. economy is witnessing strong recovery since the beginning of 2021 buoyed by $900 billion of second-round fiscal stimulus and a fresh round of a massive $1.9 trillion relief package approved by the Biden administration. Furthermore, an estimated $1.5 - $1.8 trillion savings by Americans also supported strong pent-up demand.

Strong economic recovery resulted in a stock market rally, which compelled investors to shift from safe-haven government bonds to risky equities. Consequently, the yield of the benchmark 10-Year U.S. Treasury Note soared to a 14-month high at 1.776% on Mar 30. Notably, this yield was around 0.9% at the end of  2020.

Higher risk-free return means a higher discount rate that will reduce the net present value of stock investing. Some economists and financial experts expect the yield of the 10-year U.S. Treasury Note to hit 2% in the second quarter.

Moreover, market participants are concerned about higher inflation in the near term due to strong pent-up demand that may force the Fed to raise benchmark interest rate. Although Fed Chair Jerome Powell said that such inflation will be transitory in nature, investors are skeptical that a spiraling inflation may force the Fed to change its whole course of policy prescriptions. Higher inflation will also reduce net gain from stock investing.

New Infrastructure Plan and Tax Hike Proposal

On Mar 31, President Joe Biden unveiled his $2.3 trillion infrastructure development plan that includes transport, drinking-water, broadband, manufacturing and construction infrastructure developments. Some economists believe that final expenditure may reach around $4 trillion as additional parts are announced.

However, to finance the massive cost of infrastructure projects, the Biden administration has proposed to raise the corporate tax rate from 21% to 28%. We note that the previous Trump administration reduced the corporate tax rate from 35% to 21%.

According to several published reports, the U.S. economy is likely to grow by 6.5-7% in 2021, its highest rate in 33 years. Total corporate earnings of the S&P 500 companies are expected to jump 24.4% on 8.4% higher revenues in 2021, after plunging 13% on 1.8% lower revenues in 2020. It remains to be seen how Biden's new infrastructure plan and corporate tax hike proposal will impact the U.S. GDP and corporate profits.

Our Top Picks

We have narrowed down our search to five U.S. corporate bigwigs (market capital > 50 billion) as these companies have a well-established business model and powerful brand value. These stocks have strong upside potential for 2021 and witnessed robust earnings estimate revisions in the past 30 to 80 days.

Moreover, all these stocks have strong long-term (3-5) growth prospects and have provided more than 15% returns year to date. Finally, 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.

Exxon Mobil has an expected earnings growth rate of more than 100% for the current year. The company has a long-term growth rate of 9.5%. The Zacks Consensus Estimate for the current year has improved 36.6% over the past 30 days. The stock price of this Zacks Rank #1 company has jumped 35.4% year to date.

Deere & Co. has an expected earnings growth rate of 82.5% for the current year (ending October 2021). The company has a long-term growth rate of 19.2%. The Zacks Consensus Estimate for the current year has improved 20.1% over the past 60 days. The stock price of this Zacks Rank #2 company has soared 39.1% year to date.

Goldman Sachs has an expected earnings growth rate of 22% for the current year. The company has a long-term growth rate of 20%. The Zacks Consensus Estimate for the current year has improved 1.6% over the past 60 days. The stock price of this Zacks Rank #2 company has advanced 24% year to date.

ConocoPhillips has an expected earnings growth rate of more than 100% for the current year. The company has a long-term growth rate of 5%. The Zacks Consensus Estimate for the current year has improved 22.8% over the past 30 days. The stock price of this Zacks Rank #2 company has climbed 32.5% year to date.

Micron Technology has an expected earnings growth rate of 59.7% for the current year (ending August 2021). The company has a long-term growth rate of 9.2%. The Zacks Consensus Estimate for the current year has improved 17.1% over the past 30 days. The stock price of this Zacks Rank #2 company has surged 17.3% year to date.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.

Click here for the 4 trades >>

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
 
Micron Technology, Inc. (MU) : Free Stock Analysis Report
 
Deere & Company (DE) : Free Stock Analysis Report
 
The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report
 
ConocoPhillips (COP) : Free Stock Analysis Report
 
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