The major stock indexes closed at record highs on Friday despite weak third-quarter earnings reports from big technology companies. However, the Wells Fargo Securities head of equity strategy expects Wall Street to experience a losing 2022 after a solid year-end rally. The Fed’s plans to tighten its monetary policy, a slow economic growth rate in the third quarter due to a deceleration in consumer spending and residential investment, and continued supply chain bottlenecks could lead to significant market volatility in the near term.
Moreover, the Commerce Department reported Friday that annual inflation rose at its fastest pace in more than 30 years during September despite a decline in personal income. With this inflation threat, investors are maneuvering to respond to the risk. Therefore, we believe it could be wise to invest in stocks that have managed to gain momentum and can maintain that momentum irrespective of market volatility.
We think China Shenhua Energy Company Limited (CSUAY), Canadian Natural Resources Limited (CNQ), and Mueller Industries, Inc. (MLI) could be ideal bets now because they have exhibited solid momentum over the past few months, which they are expected to maintain in the near term. Each of these stocks has an overall Strong Buy rating and an A grade for Momentum in our proprietary POWR Ratings system.
China Shenhua Energy Company Limited (CSUAY)
Based in Beijing, China, CSUAY is a global coal-based diversified energy company. It operates through six business sectors—Coal; electricity; railways; port handling; shipping; and coal-based chemicals. Its segments offer transportation, storage services, and produce and sell methanol, polyethylene, polypropylene, and other by-products.
In September, CSUAY used its intelligent air window control system, which allows intelligent unmanned operation to reduce manpower requirements. The smart air window control system should accelerate the company’s pace toward an intelligent coal mine by reducing the number of operators and cutting annual material costs.
CSUAY’s revenue for the first quarter, ended March 31, 2021, increased 32.4% year-over-year to RMB67.61 billion ($10.56 billion). The company’s gross profit grew 15.7% from its year-ago value to RMB19.17 billion ($2.99 billion). Its profit for the period rose 19.6% from the prior-year quarter to RMB14.46 billion ($2.26 billion). Also, the company’s comprehensive income increased 21% year-over-year to RMB14.6 billion ($2.28 billion).
CSUAY’s $46.91 billion consensus revenue for its fiscal period ending 2021 represents a 31.1% increase year-over-year. The company has surpassed the consensus EPS in each of the trailing four quarters. Furthermore, the stock has gained 16% in price over the past nine months to close its last trading session at $8.57. Over the past year, the stock has returned 22.6%. CSUAY is currently trading above its 50-day and 200-day moving averages of $8.99 and $8.31, respectively.
CSUAY’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.
Also, the stock has an A grade for Momentum, and a B grade for Value and Quality. We’ve also graded CSUAY for Stability, Sentiment, and Growth. Click here to access all of CSUAY’s ratings. CSUAY is ranked #2 of 11 stocks in the A-rated Coal industry.
Canadian Natural Resources Limited (CNQ)
Headquartered in Calgary, Canada, CNQ is an independent oil and natural gas exploration, development, and production company. CNQ operates through natural gas; North American crude oil and NGLs; oil sands mining and upgrading, and international crude oil. It also offers synthetic crude oil (SCO), bitumen (thermal oil), and Pelican Lake heavy crude oil.
During the second quarter, ended June 30, 2021, CNQ’s net earnings came in at $1.56 billion, compared to a $310 million net loss in the prior-year quarter. The company’s EPS amounted to $1.31, compared to a $0.26 loss per share in the year-ago quarter. Also, its quarterly free cash flow was $1.54 billion.
CNQ’s revenue is expected to increase 0.6% year-over-year to $22.93 billion in its fiscal year 2022. In addition, the company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Moreover, its EPS is expected to increase by 10.4% next year. Over the past nine months, the stock has soared 88.3% in price to close its last trading session at $42.51. Also, the stock has returned 171.3% over the past year and is currently trading above its $36.89 and $32.88 respective 50-day and 200-day moving averages.
CNQ’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. Also, the stock has an A grade for Momentum and Sentiment, and a B grade for Quality.
Mueller Industries, Inc. (MLI)
MLI is a manufacturer of copper, brass, aluminum, and plastic products. The Memphis, Tenn.-based company’s principal business segments include: Piping Systems; Climate Products; and Industrial Metals. Its segments offer PEX plumbing, radiant systems, tubular assemblies, and fabrications for various OEMs in the commercial HVAC and refrigeration markets, fluid control solutions, and gas train assemblies to OEMs and other products.
MLI’s net sales increased 58.7% year-over-year to $982.25 million for the third quarter, ended September 25, 2021. The company’s operating income grew 237.1% from its year-ago value to $233.35 million. Its net income rose 300.4% from the prior-year quarter to $170.98 million. Also, the company’s EPS increased 296.1% year-over-year to $3.01.
For its fiscal year 2021, analysts expect MLI’s revenue to increase 55.6% year-over-year to $3.73 billion. The company’s EPS is estimated to increase 120.1% in the current year. The stock has gained 54.1% in price over the past nine months in price to close its last trading session at $52.64. In addition, MLI is currently trading above its $44.23 and $43.04 respective 50-day and 200-day moving averages.
It’s no surprise that MLI has an overall A rating, which equates to a Strong Buy in our POWR Rating system. Also, the stock has an A grade for Momentum, and a B grade for Sentiment.
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CSUAY shares were trading at $8.71 per share on Monday morning, up $0.14 (+1.63%). Year-to-date, CSUAY has gained 30.69%, versus a 24.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...
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