The fast-paced economic recovery is helping most industries shrug off their COVID-19-pandemic-era losses and generate record sales and profits. With an annualized GDP growth rate of 6.4% in the fiscal first quarter ended March 2021, the United States is currently one of the fastest recovering economies from the pandemic-driven recession last year, and is way ahead of the eurozone.

The healthcare, housing and oil and gas industries are at the forefront of the economic recovery. These sectors of the economy are contributing significantly to the GDP growth.

Therefore, some Wall Street analysts have recently revised their take on Cummins Inc. (CMI), McKesson Corporation (MCK), and Bluelinx Holdings Inc. (BXC) given their potential to outperform the broader market in the near-term.

Cummins Inc. (CMI)

CMI designs, manufactures, distributes and services diesel and natural gas engines and engine-related component products. The company operates through five segments—Engine, Distribution, Components, Power Systems and New Power. CMI sells its products to original equipment manufacturers, dealers, distributors, and other customers. Analysts at Bank of America have upgraded CMI’s rating from ‘Neutral’ to ‘Buy.’

This month, CMI launched its  next generation of reliable power transfer equipment—its PowerCommand X-Series transfer switches. The company hopes the product’s impressive features will help withstand increased grid instability and increased power outages during inclement weather and natural disasters.

On May 6, CMI and KBR (KBR), an engineering, construction, and services company, signed a memorandum of understanding (MoU) to collaborate on producing integrated green ammonia from renewable sources. With KBR’s expertise in ammonia technologies and system engineering and CMI’s extensive experience with its proprietary PEM electrolysis solution, the  companies hope to offer a complete and integrated ammonia solution to clients worldwide to  help them  achieve their corporate ESG initiatives.

CMI’s net sales have increased 21.6% year-over-year to $6.09 billion for its fiscal year 2021 first quarter, ended April 4. The company’s gross profit was  $1.49 billion, which represented a 14.8% gain from the prior-year period. Its operating income was  reported at $810 million for the quarter, up 27.8% from the prior-year period. While its net income increased 18% year-over-year to $603 million, its EPS increased 19.4% year-over-year to $4.07.

A $4.01 consensus EPS estimate for the current quarter, ending June 30, 2021, represents a 115.8% improvement year-over-year. CMI surpassed the consensus EPS estimates in each of the trailing four quarters. The $5.99 billion consensus revenue estimate  for the current quarter represents a 55.6% gain from the prior-year period. Analysts expect the stock’s EPS to grow at a 17.6% rate per annum over the next five years. The stock has gained 64.3% over the past year and closed yesterday’s trading session at $257.89.

It’s no surprise that CMI has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

The stock has a B grade for Momentum, Quality and Sentiment. Click here to see the additional ratings for CMI (Growth, Value and Stability).

CMI is ranked #8 of 86 stocks in the A-rated Industrial – Machinery industry.

Click here to check out our Industrial Sector Report for 2021

McKesson Corporation (MCK)

MCK provides healthcare supply chain management, retail pharmacy, community oncology and specialty care, and healthcare information solutions internationally. It partners with payers, hospitals, physician offices, pharmacies, pharmaceutical companies and others across the spectrum of care to build healthier organizations that deliver better care to patients in every setting. Goldman Sachs analysts have lifted MCK shares’ target price from $231 to $257, maintaining a ‘Buy’ rating on the stock.

On May 5, 2021, MCK signed a commitment letter with the Science Based Targets initiative (SBTi) to set ambitious targets to reduce greenhouse gas emissions. By developing targets using climate science and the SBTi’s methodologies, MCK will promote best practices in emissions reductions and demonstrate its commitment to bold climate action.

In March, MCK launched ScriptPAS, a pharmacy management solution for oncology practices that is powered by its Biologics by McKesson specialty pharmacy. This solution is designed to help Medically Integrated Dispensing (MID)-equipped practices provide quicker access to care by reducing barriers that delay treatment. The company hopes to generate  good sales from this offering.

For its fiscal year 2021 fourth quarter, ended March 31, MCK’s revenues increased marginally from the prior-year period to $59.14 billion. The company’s income from continuing operations came in at $1.16 billion, which represented a 12.5% rise from the prior-year period. Its adjusted earnings increased 8.7% year-over-year to $810 million. Its adjusted EPS came in at $5.05, which represented an 18.3% improvement from the prior-year period.

Analysts expect MCK’s EPS to be $4.13 for its fiscal year 2022 first quarter, ending June 30, 2021, which represents a 49.2% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Also, the consensus revenue  estimate  is $60.01 billion for the first quarter, representing a 7.8% rise year-over-year. FLWS’ EPS is expected to grow at a 10.1% rate per annum over the next five years.

The stock has gained 37.4% over the past year and 29.6% over the past nine months. It closed yesterday’s trading session at $198.74.

MCK’s POWR Ratings reflect this promising outlook. The stock has a B grade for Value and Stability. Click here to see the additional ratings for MCK (Growth, Quality, Sentiment and Momentum).

MCK is ranked #6 of 80 stocks in the Medical – Services industry.

Click here to checkout our Healthcare Sector Report for 2021

Bluelinx Holdings Inc. (BXC)

BXC distributes residential and commercial building products. The company also provides a range of services and solutions that include intermodal distribution services, inventory stocking, and backhaul services. It serves dealers, specialty distributors, national home centers, and manufactured housing customers through a network of distribution centers. Craig Hallum analysts boosted the price target on BXC shares from $65 to $85, and gave the company a ‘Buy’ rating.

Last month, BXC repaid the outstanding principal balance under its $16 million term loan facility. The payment was funded from the company’s revolving credit facility. The repayment has reduced the company’s cash interest expense significantly.

For its fiscal year 2021 first quarter, ended April 3, BXC’s net sales came in at $1.03 billion, which represented a 54.9% rise year-over-year. The company’s gross profit increased 93.5% year-over-year to $180.39 million. Its operating income is reported at $99.53 million for the quarter, which represents a 1,094.8% rise year-over-year. BXC’s net income was $61.86 million, compared to a $787,000 loss  in the first quarter of 2020. And its EPS is reported at $6.28, compared to a loss per share of $0.08 in the year-ago period.

For the current quarter, ending June 30, 2021, analysts expect BXC’s EPS to be $1.25, up 76.1% from the prior-year period. BXC surpassed  consensus EPS estimates in each of the trailing four quarters. Analysts expect the stock’s revenue to be $1.01 billion, which represents a 44.3% rise from the prior-year period. The stock’s EPS is expected to grow at 25% per annum over the next five years.

BXC ended yesterday’s trading session at $52.65, surging 955.1% over the past year. During the past nine months, the stock has plunged 152.2%.

BXC’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.

BXC has an A grade for Growth, Value and Sentiment, and a B grade for Momentum. In addition to the POWR Ratings grades we’ve just highlighted, one can see BXC’s ratings for Stability and Quality here.

Out of 54 stocks in the A-rated Industrial – Building Materials industry, BXC is ranked #4.

Click here to check out our Industrial Sector Report for 2021

CMI shares were trading at $255.17 per share on Thursday afternoon, down $4.07 (-1.57%). Year-to-date, CMI has gained 12.99%, versus a 11.44% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...

More Resources for the Stocks in this Article