Growth stocks, especially those from the technology sector, dominated the market in 2020. However, this year investors have been rotating away from expensive growth stocks and betting on the potential of cyclical stocks to capitalize on an accelerating economic recovery. However, this doesn’t denote the complete absence of growth investing opportunities in the market now. In truth, some growth stocks have the potential to continue thriving with the economy’s recovery and investors have already started rewarding them.
Investors’ renewed interest in the growth stocks is evident in the SPDR Portfolio S&P 500 Growth ETF’s (SPYG) and Vanguard Growth Index Fund ETF Shares’ (VUG) 9.4% and 9% returns, respectively, over the past six months.
Abbott Laboratories (ABT), Thermo Fisher Scientific Inc. (TMO), Starbucks Corporation (SBUX), and FedEx Corporation (FDX) are four companies that we think have immense growth potential. So, it could be wise to bet on them now.
Abbott Laboratories (ABT)
ABT is known for creating breakthrough products in diagnostics, medical devices, nutrition and branded generic pharmaceuticals. The company operates through four segments: Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Medical Devices.
The company’s net revenues came in at $10.50 billion for fiscal first quarter ended March 31, which represents a 35.3% year-over-year rise. ABT’s net income increased 217.9% from the prior-year quarter to $1.80 billion. Also, its EPS increased 222.6% year-over-year to $1.00.
Its revenue has grown at a CAGR of 9.5% over the past three years. Also, the company’s EPS and EBITDA has grown at CAGRs of 148% and 19.3%, respectively, over the same period. This reflects ABT’s steady growth over the past few years.
For the current quarter, ending June 30, analysts expect ABT’s EPS and revenue to increase 115.8% and 53.5%, respectively, year-over-year to $1.23 and $10.45 billion Moreover, it surpassed consensus EPS estimates in each l of the trailing four quarters.
On April 20, WalGreens Boots Alliance, Inc. (WBA) signed a deal with ABT to sell its BinaxNOW Rapid Antigen Self-Test over-the-counter nationwide at WBA’s stores. The move is expected to increase the market reach of ABT’s kits and could lead to increased sales for the company. The stock has gained 27.4% over the past year to close yesterday’s trading session at $117.45.
It’s no surprise that ABT has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Growth, and a B grade for Quality and Stability. Click here to see ABT’s ratings for Momentum, Sentiment and Value as well.
ABT is ranked #7 of 227 stocks in the Medical-Pharmaceuticals industry.
Thermo Fisher Scientific Inc. (TMO)
Operating under various brand names, including Thermo Scientific, Applied Biosystems, Invitrogen, Fisher Scientific and Unity Lab Services, TMO develops, manufactures and sells a range of products. It operates through four segments: Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics, and Laboratory Products and Services.
The company’s net sales for the first quarter, ended April 3, came in at $9.91 billion, up 59% year-over-year. Its gross profit increased 22.3% year-over-year to $902.60 million, while its net income increased 196.6% from the same period last year to $2.34 billion. Also, its adjusted EPS increased 198% year-over-year to $5.93.
TMO’s revenue has grown at a 17.7% CAGR over the past three years. Its EBITDA and EPS have increased at CAGRs of 31% and 52.3%, respectively, over the same period. This reflects the company’s consistent growth over the past few years.
Analysts expect TMO’s EPS to be $5.50 for the current quarter ending June 30, which represents a 41.4% year-over-year rise. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Its revenue is expected to increase 27% year-over-year to $8.79 billion in the current quarter.
The company announced in April that it has entered an agreement to acquire PPD, Inc. (PPD), which is a leading global provider of clinical research services to the pharma and biotech industry. This acquisition is expected to help it deliver innovative products and solutions to the market in a faster and more efficient manner. The stock has gained 36.8% over the past year to close yesterday’s trading session at $456.92.
TMO’s POWR Ratings reflects this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. It has an A grade for Growth, and a B grade for Value and Sentiment. Click here to see TMO’s ratings for Momentum, Quality and Stability as well.
TMO is ranked #6 of 57 stocks in the Medical-Diagnostics/Research industry.
Starbucks Corporation (SBUX)
Coffee roaster and specialty coffee retailer SBUX not only sells a variety of coffee and tea products but also licenses its trademarks through other channels, that include licensed stores, grocery and foodservice. It has more than 32,000 company-operated and licensed stores and sells its goods and services under various brands, including Teavana, Seattle’s Best Coffee, Starbucks Reserve and Princi.
For its fiscal second quarter, ended March 28, SBUX’s net sales came in at $6.70 billion, which represents a 11.2% year-over-year rise. The company’s net income for the quarter came in at $659.40 million, up 100.8% from the prior-year quarter. Its EPS came in at $0.56, which represents a 100% year-over-year increase.
SBUX’s revenue increased at a 3.4% CAGR over the past five years, and its total assets increased at a 17.4% CAGR over the past three years. This reflects the company’s steady growth in recent years.
Analysts expect SBUX’s EPS to come in at $0.77 for the current quarter, ending June 30, which represents a 267.4% year-over-year increase. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 31.4% year-over-year to $8.15 billion for the quarter ending September 30, 2021.
This week, Generate, a leading provider of sustainable infrastructure, announced that it has put the first six of up to 23 New York State community solar projects into service under an innovative multi-year facility with SBUX. The company is also receiving renewable energy credits from the projects, which are expected to offset more than 70% of its electricity usage within the state. This is expected to bring down SBUX’s operating costs. The stock has soared 39.8% over the past nine months to close yesterday’s trading session at $110.49.
SBUX’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has an A grade for Growth, and a B grade for Quality and Sentiment. Click here to see the additional POWR Ratings for SBUX (Stability, Momentum and Value).
SBUX is ranked #3 of 47 stocks in the B-rated Restaurants industry.
FedEx Corporation (FDX)
Transportation company FDX provides a variety of delivery services, ranging from express transportation, small-package ground delivery, and freight transportation services to time-critical transportation services, cross-border e-commerce technology and e-commerce transportation solutions. Its segments include FedEx Express, TNT Express, and FedEx Ground.
The company’s net sales came in at $21.50 billion for its fiscal third quarter, ended March 18, indicating a 22.9% year-over-year rise. Its operating income increased 119.5% from prior-year quarter to $1.06 billion. The company’s net income increased 153.1% year-over-year to $939 million. Its EPS came in at $3.47, which represents a 146.1% year-over-year increase.
FDX’s revenue increased at a 9.7% CAGR over the past three years. Its total assets and EBITDA increased at CAGRs of 16.9% and 2.2%, respectively, over the past three years. This reflects the company’s stable growth over the past few years.
The company’s EPS and revenue are expected to increase 88.5% and 22.5%, respectively, year-over-year to $4.77 and $21.27 billion for the current quarter, ending May 31, 2021. FDX also surpassed consensus EPS estimates in all the trailing four quarters.
FDX announced a new, multi-year collaboration with Adobe Inc. (ADBE) in April 2021, beginning with the integration of ShopRunner, which is a leading e-commerce platform provider. FDX’s President and Chief Operating Officer Raj Subramaniam said, “The opportunity to partner with Adobe is another step forward in the FedEx journey to create an open, collaborative e-commerce ecosystem that will help brands and merchants deliver seamless experiences for their customers.” The stock has rallied 177.5% over the past year to close yesterday’s trading session at $303.40.
FDX has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Growth, and a B Grade for Sentiment and Quality. Click here to see the additional POWR Ratings for FDX (Momentum, Stability and Value).
FDX is ranked #5 of 15 stocks in the A-rated Air freight & Shipping Services industry.
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ABT shares were trading at $118.64 per share on Friday afternoon, up $1.19 (+1.01%). Year-to-date, ABT has gained 9.19%, versus a 11.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...
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