Even though solid second-quarter corporate earnings reports have been helping the major stock market indexes hover near their all-time highs, investors’ concerns over the pace of economic recovery due to the resurgence of COVID-19 cases have fostered market volatility. In addition, the Federal Reserve recently indicated its willingness to reduce its asset purchases before the end of the year.
Several stocks are currently trading at sky-high valuations, and a high inflation environment could cause them to decline in price. However, turning to momentum investing could be rewarding now because stocks that have managed to gain momentum over the past few months might be able to maintain it in the near term, irrespective of short-term fluctuations by the broader market. Investors’ increasing interest in momentum stocks is evident in the iShares MSCI USA Momentum Factor ETF’s (MTUM) 2.8% returns over the past month.
ABB Ltd (ABB), Eaton Corporation plc (ETN), and Allied Motion Technologies Inc. (AMOT) have achieved decent momentum over the past few months, and their fundamental strength should allow them to keep rallying. So, we think it could be wise to scoop up these three stocks now.
ABB Ltd (ABB)
Headquartered in Zurich, Switzerland, ABB manufactures and sells electrification, industrial automation, and robotics and motion products for utilities, industry, transport, and infrastructure sectors worldwide. It operates through four segments—Electrification, Robotics & Discrete Automation; Industrial Automation; and Motion. In addition, it has a strategic collaboration with International Business Machines Corporation (IBM).
The company launched ABB Ability Condition Monitoring for belts on June 8, 2021. It is an advanced digital service to enable mine operators to track speed, misalignment, damage, thickness and wear, slippage, and temperature of conveyor belts in real-time. So, ABB is expected to witness increasing demand for its solution in the coming months, given its numerous advantages.
ABB’s revenues increased 21% year-over-year to $7.40 billion for the second quarter, ended June 30, 2021. Its operational EBITA grew 59% year-over-year to $1.11 billion, while its net income increased 136% year-over-year to $752 million. Also, its EPS increased 150% year-over-year to $0.37.
For the current quarter, ending September 30, 2021, analysts expect ABB’s EPS and revenue to increase 90.5% and 13.5%, respectively, year-over-year to $0.40 and $7.47 billion. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has surged 40.4% over the past nine months to close yesterday’s trading session at $36.99. ABB has gained 45.1% in price so far this year. Also, it is currently trading above its 50-day and 200-day moving averages of $36.86 and $33.64, respectively, indicating an uptrend.
ABB’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Momentum, and a B grade for Stability, Sentiment, and Quality. Click here to access the additional POWR Ratings for ABB (Value and Growth). ABB is ranked #18 of 81 stocks in the A-rated Industrial – Machinery industry.
Eaton Corporation plc (ETN)
Based in Dublin, Ireland, ETN is a power management company. With a presence in more than 175 countries, the company’s operating segments include Electrical Americas and Electrical Global; Hydraulics; and eMobility.
ETN announced the global launch of the 9PX lithium-ion uninterruptible power supply on July 15, 2021. Sami Hussaini, the company’s product manager, UPS 9 series, said, “The need for reliable backup power has never been more critical. Our 9PX lithium-ion UPS continues our commitment to building lithium-ion capabilities into UPS solutions, enabling greater business continuity and always-on power in environments with limited on-site IT support.”
ETN’s net sales surged 35% year-over-year to $5.20 billion for the fiscal first quarter ended June 30, 2021. Its total assets grew 15.6% year-over-year to $36.80 billion. Its adjusted earnings came in at $690 million, representing a 99.4% year-over-year increase. Its adjusted EPS was $1.72, up 97.7% year-over-year.
Analysts expect ETN’s EPS and revenue to increase 59% and 12.4%. Respectively, year-over-year to $6.74 and $20.07 in its fiscal year 2021. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters.
The stock gained 40.1% in price year-to-date and 64.9% over the past year to close yesterday’s trading session at $168.36. ETN is currently trading above its 50-day and 200-day moving averages of $161.76 and $146.79, respectively.
It’s no surprise that ETN has an overall B rating, which equates to a Buy in our POWR Rating system. In addition, the stock has an A grade for Momentum, and a B grade for Stability, Quality, and Sentiment. Click here to see ETN’s ratings for Value and Growth as well. In addition, ETN is ranked #27 in the Industrial – Machinery industry.
Allied Motion Technologies Inc. (AMOT)
AMOT designs, manufactures, and sells precision and specialty-controlled motion components and systems used in various industries worldwide. The Amherst, N.Y.-based company offers brush and brushless DC motors, brushless servo and torque motors, coreless DC motors, integrated brushless motor drives, modular digital servo drives, and motion controllers.
On August 04, 2021, Dick Warzala, AMOT’s Chairman and CEO, said, “As we look forward, we believe we have a platform to drive strong growth and, given the emergence and the realization of a more stable environment, we are optimistic that we can continue to generate growth in the future.”
AMOT’s revenue surged 17% year-over-year to $101.50 million in its fiscal second quarter, ended June 30, 2021. Its adjusted EBITDA grew 30.1% year-over-year to $12.40 million. While its adjusted net income came in at $4.78 million, representing a 54.2% year-over-year increase, its EPS came in at $0.33, up 50% year-over-year.
AMOT’s EPS is expected to increase 28.5% year-over-year to $1.58 in its fiscal year 2022. It surpassed the consensus EPS estimates in each of the trailing four quarters. The company’s revenue is expected to be $404.40 million in fiscal 2021, representing a 10.3% year-over-year rise.
The stock has surged 27.8% in price over the past nine months to close yesterday’s trading session at $34.56. In addition, AMOT has gained 21.7% so far this year. It is currently trading above its 50-day and 200-day moving averages of $32.82 and $34.08, respectively.
AMOT’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Momentum and Sentiment, and a B grade for Value, Stability, and Quality. Within the B-rated Industrial – Equipment industry, AMOT is ranked #13 of 91 stocks. To see the additional POWR Rating for AMOT (Growth), click here.
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ABB shares were trading at $37.15 per share on Wednesday morning, up $0.16 (+0.43%). Year-to-date, ABB has gained 35.07%, versus a 21.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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