Concerns over the potential for an increase in inflation and the resurgence of COVID-19 cases globally this year have spurred volatility in the stock markets. Also, given rising Treasury yields and the collapse of investment firm Archegos Capital Management, heightened volatility is probably here to stay for a while. Amid this environment, investors should target steady momentum stocks that have the capacity to dodge volatility.
As the global economy gradually recovers from the damage caused by the pandemic, businesses that experienced the recessionary headwinds are expected to recapture their pre-pandemic performance this quarter. In fact, shares of many companies could witness solid momentum despite heightened market volatility. Investors’ confidence in momentum stocks is evident in the Invesco DWA Momentum ETF’s (PDP) 7.8% returns over the past six months.
Linde plc (LIN), Lowe’s Companies, Inc. (LOW), ABB Ltd. (ABB), and Eaton Corporation plc (ETN) are stocks that have been witnessing strong momentum, which we believe they have the potential to maintain. So, we think it could be wise to invest in these stocks now.
Linde plc (LIN)
LIN is an industrial gas company based in Guildford in the U.K. The company constructs turnkey process plants, such as natural gas, air separation, hydrogen and synthesis gas. It provides hydrogen, helium, electronic and specialty gases, acetylene, and carbon monoxide to the healthcare, petroleum refining, manufacturing, food, beverage carbonation and other industries.
Last month, the company was selected by Norwegian ferry operator Norled to provide liquid hydrogen and related infrastructure to the world’s first hydrogen-powered ferry, MF Hydra. LIN is also expected to construct and install hydrogen storage, distribution and safety equipment. This should position the company to take the lead in reducing carbon emission in the marine sector.
In February, LIN opened two new air separation units (ASUs) to supply China’s Wanhua Chemical Group with gaseous oxygen and nitrogen. The company’s advanced technology should allow the ASUs to operate at a higher scale and with much greater flexibility.
LIN’s sales increased 3% year-over-year to $7.3 billion in the fourth quarter ended December 31, 2020. The company’s adjusted operating profit increased 20% versus its year-ago value to $1.61 billion, while its adjusted operating profit margin rose 320 basis points year-over-year to 22.2%. It reported an operating cash flow of $2.43 billion, representing an increase of 12% from the prior-year quarter.
A consensus EPS estimate of $9.31 for fiscal 2021 represents a 13.1% improvement year-over-year. Meanwhile, the $28.64 consensus revenue estimate for the current year indicates a 5.1% increase year-over-year.
The stock has gained 8.2% year-to-date to close its last trading session at $287.97. Over the past six months, the stock has gained 21.4%. In fact, LIN is currently trading quite close to its 52-week high mark of $288.80.
LIN’s strong fundamentals are reflected in its POWR Ratings. The stock has a B overall rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock also has an A grade for Momentum, and a B grade for Quality and Growth. We have also graded LIN for Value, Stability, and Sentiment. Click here to access all of LIN’s ratings.
LIN is ranked #34 of 98 stocks in the A-rated Chemicals industry.
Click here to check out our Industrial Sector Report for 2021
Lowe’s Companies, Inc. (LOW)
Founded in 1921, and based in Mooresville, N.C. , LOW is a home improvement retailer operating in the United States and internationally. It sells products for construction, maintenance, repair, remodeling, and decorating through websites that include Lowes.com and Lowesforpros.com, and through mobile applications.
This month, the company introduced a tailored store shopping experience created specifically for its Pro customers. Under its Pro shopping experience, LOW will offer features that include a convenience rack, free phone charging stations, pro trailer parking, and many other upgrades. This should help the company strengthen its relationship with its customers and grow its business.
In the fourth quarter, ended January 29, 2021, LOW’s total sales increased 26.7% year-over-year to $20.3 billion. Its gross margin was $6.46 billion, compared to $4.98 billion in the prior-year quarter. The company’s operating income rose 59.1% year-over-year to $1.52 billion, while its net earnings grew 92.1% from the year-ago value to $978 million.
Analysts expect LOW’s revenue for the current quarter, ending April 30, 2021, to be $22.97 billion, representing 25.4% year-over-year growth. The company’s EPS is likely to increase 40.1% for the current quarter.
LOW has been exhibiting strong momentum. The stock has surged 25.6% year-to-date to close yesterday’s trading session at $204.57, which was close to its 52-week high of $205.07. Over the past year, the stock has gained 103.4%.
LOW’s POWR Ratings reflect this promising outlook. The stock has a B overall rating, which equates to Buy in our POWR Ratings system.
The stock has an A grade for Momentum, and a B for Quality and Sentiment. In addition to the POWR Ratings grades we’ve just highlighted, one can see LOW’s ratings for Stability, Value, and Growth here.
Of the 64 stocks in the A-rated Home Improvements & Goods industry, LOW is ranked #14.
Click here to checkout our Retail Industry Report for 2021
ABB Ltd. (ABB)
Headquartered in Zurich, Switzerland, ABB is a manufacturer and seller of electrification, industrial automation, and robotics and motion products for users in utilities and transport, and infrastructure worldwide. The company also offers digital solutions, lifecycle services, and artificial intelligence applications for the hybrid industries.
This month, the company launched HoverGuard, which detects, quantifies and maps leaks up to 100 meters from natural gas distribution and transmission pipelines. This groundbreaking solution is expected to increase safety across the pipeline network in remote and urban environments.
In February, ABB expanded its portfolio by launching the next generation GoFa and SWIFTI cobot families that will offer higher payloads and speeds. This should accelerate the company’s reach in growth segments, such as electronics, healthcare, consumer goods, amongst others, to meet the demand for automation across multiple industries.
ABB’s revenue increased 2% year-over-year to $7.18 billion in the fourth quarter ended December 31, 2020. Its operational EBITA grew 16% from the year-ago value to $825 million, while its operational EBITA margin of 11.5% expanded 140 basis points year-over-year. ABB reported $1.23 billion in cash flow from operating activities for this period.
The Street expects ABB’s EPS to increase 26.5% in 2021 and 21.8% in 2022. A consensus revenue estimate of $6.84 billion for the quarter ending June 30, 2021 represents an improvement of 11.1% from the same period last year.
ABB’s stock has gained 17.8% year-to-date to close yesterday’s trading session at $32.93. The stock has returned 33.9% over the past nine months. Over the past three months, ABB climbed 12.2%.
It’s no surprise that ABB has an overall A rating, which equates to Strong Buy in our POWR Ratings system.
The stock has an A grade for Momentum, and a B grade for Growth and Sentiment. Click here to see the additional POWR Ratings for ABB’s Stability, Value, and Quality.
ABB is ranked #6 of 87 stocks in the A-rated Industrial – Machinery industry.
Eaton Corporation plc (ETN)
Founded in 1916, ETN is a Dublin-based power management company. The company operates through the following segments: Electrical Americas and Electrical Global, Hydraulics, Aerospace, Vehicle, and eMobility. It provides utility power distribution products, electro-hydraulic pumps, hybrid power systems, fuel vapor components, amongst other power systems.
Last month, the company completed the acquisition of a 50% stake in HuanYu High Tech, a subsidiary of HuanYu Group in China. The combination of ETN’s access to the Southeast Asian market and HuanYu High Tech’s diverse product portfolio should boost the ETN’s growth in the Asia.
Also, ETN’s Vehicle Group recently signed a joint development agreement with Tenneco’s Clean Air business group to develop an integrated exhaust thermal management system, which will help truck and light vehicle manufacturers to meet emissions regulations.
ETN reported net sales of $4.69 billion for the fourth quarter ended December 31, 2020. Its net income increased 5.1% year-over-year to $475 million, while its EPS rose 9.2% from the year-ago value to $1.19. The company’s operating margin for the quarter was 10.5%, up 420 basis points over the fourth quarter of 2019.
The company’s EPS is expected to grow 84.3% for the quarter ending June 30, 2021. Analysts expect ETN’s revenue to increase 6.5% in fiscal 2022.
ETN closed yesterday’s trading session at $140.80, gaining 85.9% over the past year. The stock has gained 14.3% over the past three months and 17.2% so far this year.
ETN’s strong fundamentals are reflected in its POWR Ratings. The stock has a B overall rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
The stock also has an A grade for Momentum, and a B for Quality and Sentiment. To see additional grades for Stability, Growth, and Value for ETN, click here.
Of the 87 stocks in the A-rated Industrial – Machinery industry, ETN is ranked #8.
Click here to checkout our Retail Industry Report for 2021
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LIN shares were trading at $289.83 per share on Friday morning, up $1.86 (+0.65%). Year-to-date, LIN has gained 10.46%, versus a 11.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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