Today’s episode of Full Court Finance at Zacks dives into the volatile week on the stock market that has more investors worried that Jay Powell and the Fed will raise rates at a higher clip in March. Both the S&P 500 and the Nasdaq are now trading below their 50-day and 200-day moving averages, and stocks had tumbled through late-afternoon trading Friday as investors grow spooked by the Silicon Valley Bank failure.
Despite the worries, there are always stocks poised to thrive amid economic and market uncertainty. Today we dive into why investors looking for long-term growth, dividends, and value might want to turn to Analog Devices (ADI) and Halliburton (HAL).
The February jobs report out Friday morning showcased another strong month of hiring, with U.S. employers adding 311K jobs last month to top the 225K estimates. It wasn’t much of a surprise the number came in hot, but at least it was lower than the 517K added in January. The jobs market remains tight and looks poised to keep putting pressure on Powell and the Fed to keep raising rates.
In fact, Powell startled Wall Street earlier this week after he signaled the Fed was willing to raise rates by 50 basis points at its upcoming FOMC meeting that ends on March 22. On top of fears about a continually hawkish Fed, Wall Street dumped shares of many financial stocks and rushed to the safety of U.S. Treasuries after Silicon Valley Bank collapsed Friday.
The 2-year U.S. Treasury, which hit 5.07% on Wednesday, up from 4.89% on Monday, has tumbled back to 4.59% on Friday afternoon. Meanwhile, the Nasdaq and the S&P 500 both fell further beneath their 50-day and 200-day moving averages on Friday.
Needless to say, it has been a wild ride in 2023 and over the last month. With this in mind, investors likely want to buy stocks that offer solid value, dividends, and have strong upward earnings revisions momentum.
Halliburton (HAL) is an oil field services standout. HAL’s products and offerings help oil and gas companies with everything from exploration and well construction to abandonment activities. The ongoing Russian invasion and sanctions have forced a reevaluation of the status quo and fight for greater energy independence, which is music to Haliburton's ears.
Haliburton topped our EPS estimates in late January and raised its outlook to help it land a Zacks Rank #2 (Buy). Zacks estimates call for Haliburton’s FY23 sales to climb 16% and another 11% in FY24 to $26 billion. Plus, its adjusted earnings are projected to soar by 43% this year and 22% in FY24. These estimates come on top of a huge year of growth in 2022.
Halliburton is part of a highly-ranked industry and raised its dividend by 33%. Wall Street is also high on the stock, with it trading at a nice discount to its industry and its own five-year median at 11.8X forward earnings. At around $35 per share, HAL trades roughly 20% below its highs and 42% under its average Zacks price target.
Analog Devices, Inc. (ADI) is a leader in the analog semiconductor. ADI beat our Q1 FY23 estimates in mid-February and provided upbeat guidance. Analog Devices is poised to benefit over the long haul from the constant expansion of automation, electrification, EVs, data centers, advanced connectivity, and beyond.
Analog Devices lands a Zacks Rank #2 (Buy) right now, and ADI stock has climbed 92% in the last five years to outpace the broader Zacks Tech sector’s 45% and its Zacks Semi market’s 80%. ADI has also crushed its tech peers over the last 12 months. Still, at roughly $182 per share, ADI trades 17% under its average Zacks price target
Analog Devices trades at a 20% solid discount to the Tech sector and nearly 40% vs. its own 10-year highs at 17.2X forward earnings. ADI also recently raised its quarterly dividend by 13% for its fifth consecutive double-digit increase.
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