The U.S. GDP witnessed another decline of 0.9% in the second quarter amid soaring prices, consecutive rate hikes, and looming recession fears. However, according to Treasury Secretary Janet Yellen, “This is not an economy that’s in a recession. A recession is broad-based weakness in the economy. We’re not seeing that now.”
Moreover, the benchmark indices seem to be pacing to post their best month since November 2020, as investors anticipate moderating inflation and rate hikes in the coming months. Nonetheless, market volatility is expected to persist for the time being.
Despite the market downturns, mid-cap stocks have recorded stable gains, as is evident from the Vanguard Mid Cap ETF’s (VO) 6.9% returns over the past month.
Therefore, we think investors could consider buying fundamentally sound mid-cap stocks Acuity Brands, Inc. (AYI), Boyd Gaming Corporation (BYD), and Casey’s General Stores, Inc. (CASY) for the rest of 2022.
Acuity Brands, Inc. (AYI)
AYI provides lighting and building management solutions in North America and internationally. The company operates through two segments, Acuity Brands Lighting and Lighting Controls (ABL); and the Intelligent Spaces Group (ISG). Its market capitalization is $6.05 billion.
On June 30, 2022, Neil Ashe, AYI’s Chairman, President, and CEO, said, “We are executing consistently as a result of significant and ongoing improvements in our business, and we continue to generate value for shareholders through share repurchases.”
Moreover, on January 12, 2022, AYI announced its extended collaboration with Microsoft Corp. (MSFT) to introduce new capabilities like smart lighting, lighting controls, and building automation solutions, which are expected to benefit the company.
AYI’s net sales increased 17.9% year-over-year to $1.06 billion for the third quarter ended May 31, 2022. Its adjusted non-GAAP net income came in at $121.30 million, up 20.8% year-over-year, while its adjusted non-GAAP EPS came in at $3.52, up 27.1% year-over-year.
For 2022, analysts expect AYI’s revenue to be $3.99 billion, representing a 15.2% year-over-year rise. In addition, the company’s EPS is expected to increase 24% year-over-year to $12.61 in 2022. It surpassed EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 15.4% to close the last trading session at $178.07.
AYI’s POWR Ratings reflect this promising outlook. 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.
Also, the stock has an A grade for Quality and a B for Growth, Value, and Sentiment. Within the Home Improvement & Goods industry, it is ranked first among 63 stocks. Click here to see the additional POWR Ratings for Momentum and Stability for AYI.
Boyd Gaming Corporation (BYD)
BYD and its subsidiaries operate as a multi-jurisdictional gaming company. It operates through three segments: Las Vegas Locals; Downtown Las Vegas; and Midwest & South. Currently, the company operates around 28 gaming entertainment properties. Its market capitalization is $6.11 billion.
On June 1, 2022, BYD authorized a $500 million boost to its existing share repurchase program. This investment fortifies the company’s existing robust capital return program.
BYD’s total revenues increased marginally year-over-year to $894.45 million in the second quarter ended June 30, 2022. Its net income came in at $146.76 million, up 29% year-over-year. Moreover, its EPS came in at $1.33, up 33% year-over-year.
Analysts expect BYD’s revenue to increase 2.9% year-over-year to $3.47 billion in 2022. Its EPS is estimated to increase 8% year-over-year to $5.53 in 2022. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 7.5% to close the last trading session at $55.71.
BYD has an overall B rating, which translates to a Buy in our proprietary rating system. The stock has an A grade for Quality and a B grade for Value.
Casey’s General Stores, Inc. (CASY)
CASY and its subsidiaries operate convenience stores under the Casey’s and Casey’s General Store names. Its stores offer a selection of food, tobacco and nicotine products, health and beauty aids, automotive products, and other non-food items. It operates around 2,452 convenience stores. Its market capitalization is $7.56 billion.
On June 14, 2022, CASY and MTN DEW® launched MTN DEW OVERDRIVE™, the newest addition to the MTN DEW flavor line-up. The product will be available in more than 2,400 CASY stores and is expected to garner significant returns.
CASY’s total revenue came in at $3.46 billion for the fourth quarter ended April 30, 2022, up 45.4% year-over-year. Its net income came in at $59.78 million, up 43.4% year-over-year, while its EPS came in at $1.60, up 42.9% year-over-year.
CASY’s revenue is expected to increase 31.4% year-over-year to $17.01 billion in 2023. Its EPS is estimated to grow 8.2% per annum for the next five years. Moreover, it surpassed EPS estimates in three of the four trailing quarters. Over the past month, the stock has gained 6.6% to close the last trading session at $202.52.
CASY’s overall A rating translates to a Strong Buy in our POWR Ratings system. It has a B grade for Value, Sentiment, and Quality.
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AYI shares were trading at $181.47 per share on Friday afternoon, up $3.40 (+1.91%). Year-to-date, AYI has declined -14.10%, versus a -12.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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