3 S&P 500 Companies Generating Substantial Cash

A common metric focused on when selecting stocks is free cash flow. In its simplest form, free cash flow is the total amount of cash a company has left over after paying for operating costs and any capital expenditures.

It’s a great indicator of a company’s financial health. A high free cash flow provides more growth opportunities, a higher potential for share buybacks, stable dividend payouts, and the ability to wipe out any debt with ease.

A few titans within the S&P 500 have unbelievably strong free cash flow, such as Apple AAPL, Exxon Mobil XOM, and Microsoft MSFT. The chart below illustrates the year-to-date performance of all three companies.

Image Source: Zacks Investment Research

Let’s take a closer glance at each company’s free cash flow metrics and projected growth.

Exxon Mobil

Exxon Mobil XOM has massively benefitted from soaring energy costs in 2022, causing analysts to significantly up their earnings outlook and push the stock into the highly-coveted Zacks Rank #1 (Strong Buy).

Image Source: Zacks Investment Research

As mentioned above, soaring energy prices have significantly benefitted the company, and especially its free cash flow – XOM reported quarterly free cash flow of a mighty $16.1 billion in its latest earnings report, good enough for a sizable 48% uptick from the prior quarter and a massive 133% year-over-year increase.

Image Source: Zacks Investment Research

Top and bottom-line estimates reflect substantial growth. For the current fiscal year (FY22), the Zacks Consensus EPS Estimate resides at $12.24, reflecting a 130% triple-digit uptick in earnings year-over-year.

Image Source: Zacks Investment Research

Of course, the growth doesn’t stop there – Exxon Mobil is forecasted to generate a sizable $418 billion in revenue in FY22, reflecting a steep 46% increase year-over-year. Below is a chart illustrating the company’s income on a quarterly basis. 

Image Source: Zacks Investment Research

Apple

Apple AAPL has revolutionized the mobile phone landscape and has been one, if not the most, popular stock of the last decade. Analysts have primarily been bearish over the past 60 days, reflecting the harsh macroeconomic backdrop we’ve landed in. The company is a Zacks Rank #3 (Hold).

Image Source: Zacks Investment Research

Apple is the king of free cash flow - the company is on track to achieve the highest free cash flow of any S&P 500 company in 2022. Just in its latest quarter, free cash flow was reported at a spectacular $20.8 billion, good enough for a solid 9.4% uptick from year-ago quarterly free cash flow of $19 billion.

Image Source: Zacks Investment Research

Even in the face of a harsh macroeconomic backdrop, Apple is still projected to grow at a rock-solid pace. For the company’s current fiscal year, earnings are projected to climb a notable 8.7%, reflecting annual EPS of $6.10.

Image Source: Zacks Investment Research

In addition, Apple’s top-line looks to remain supercharged, with the FY22 sales estimate of $392 billion penciling in a strong 5.4% year-over-year uptick. Below is a chart illustrating the company’s income on a quarterly basis. 

Image Source: Zacks Investment Research

Microsoft

Microsoft MSFT has been a cornerstone in many portfolios over the last decade, with shares rewarding investors handsomely. Analysts have dialed back their earnings outlook over the last 60 days, similar to what we’ve seen with Apple. The company is a Zacks Rank #3 (Hold).

Image Source: Zacks Investment Research

Microsoft has repeatedly impressed with its free cash flow and is one of the biggest cash generators within the S&P 500. In its latest quarter, free cash flow was reported at a mighty $17.8 billion, good enough for a solid 9.2% uptick from the year-ago quarter.

Image Source: Zacks Investment Research

Consistent growth is the name of the game for Microsoft. The Zacks Consensus EPS Estimate for the company’s current fiscal year (FY23) resides at $10.14, notching an impressive 10% double-digit year-over-year uptick.

Image Source: Zacks Investment Research

Of course, MSFT’s top-line is also in excellent shape – annual revenue is forecasted to climb 9.7% in FY23, reflecting annual sales of $220 billion. Below is a chart illustrating the company’s income on a quarterly basis.

Image Source: Zacks Investment Research

Bottom Line

Many investors seek high free cash flow when selecting stocks. Simply put, it proves that a company is making money with extra to spare for future endeavors.

In addition, it gives them flexibility amid downturns – a vital aspect that instills confidence within investors. After all, if a company can’t adapt, the consequences can be severe.

All three companies above are cash cows and members of the S&P 500 – undoubtedly a pairing that reflects serious success.

For investors looking for companies with substantial cash-generating abilities, Apple AAPL, Exxon Mobil XOM, and Microsoft MSFT all precisely fit the parameters.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.