The economy appears to be on its recovery path with the New Year, with the job market heading toward full employment. The Labor Department recently reported that the unemployment rate fell from 6.3% in January 2021 to 3.9% in December 2021 as the economy added 199,000 jobs. Regarding the jobs report, President Biden stated, “I think it’s a historic day for our economic recovery.”
The stock market has moved upward because investors bought the dip after the five-day sell-off. The market witnessed a rebound yesterday, with the S&P 500 gaining 0.9% and the Dow Jones Industrial Average gaining 180 points.
Given the continuing economic recovery, we think it could be wise to buy the dip in fundamentally strong growth stocks of Eli Lilly and Company (LLY), Zoetis Inc. (ZTS), and The TJX Companies, Inc. (TJX).
Eli Lilly and Company (LLY)
LLY engages in the discovery, development, and marketing of human pharmaceuticals worldwide. The Indianapolis, Ind.-based company’s offerings include Baqsimi, used for severe hypoglycemia, alongside other pharmaceuticals used for treating ailments such as diabetes and cancer.
On Jan. 6, LLY and Entos Pharmaceuticals announced that LLY acquired exclusive rights to Entos’ Fusogenix nucleic acid delivery technology to commercialize nucleic acid products. The research and collaboration agreement is expected to benefit the company by catering to patients with unmet medical needs.
On Dec.15, LLY provided an update on its research and development (R&D) programs. The company declared that it was on track to meet its goal of launching 20 medicines over a 10-year period. LLY intends to launch five new medicines over the next five years. The new medicines should contribute toward its volume-driven growth.
For its fiscal third quarter, ended Sept. 30, LLY’s revenue increased 18% year-over-year to $6.77 billion. Its operating income rose 47.2% from the prior-year quarter to $1.88 billion. Its non-GAAP net income and non-GAAP EPS improved 36.8% and 37.6%, respectively, from the same period in the prior year to $1.76 billion and $1.94.
Analysts expect LLY’s EPS to increase 3.9% year-over-year to $7.45 for its fiscal year 2022.
The stock has gained 41.1% in price over the past year but declined 5% year-to-date to close yesterday’s trading session at $262.32. It is currently trading above its 50-day, and 200-day Moving Average of $260.90 and $234.44, respectively but is trading 7.6% below its 52-week high of $283.90.
LLY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
LLY has a Growth, Stability, Sentiment, and Quality grade of B. In the 190-stock Medical – Pharmaceuticals industry, it is ranked #14. Click here to see the additional POWR Ratings for LLY (Value and Momentum).
Zoetis Inc. (ZTS)
ZTS discovers, develops, manufactures, and commercializes animal health medicines and diagnostic products globally. The Florham Park, N.J.-based concern offers its products primarily across species, including livestock, such as cattle and companion animals.
On Dec. 7, ZTS announced a $3.5 billion share repurchase program. The shares are expected to be repurchased over a multi-year period as a part of the company’s capital allocation plans. ZTS also declared a $0.325 per share dividend for the first quarter of 2022, payable to shareholders on March 1. The share repurchase and the dividend declaration might reflect upon the company’s strong cash position.
ZTS’ revenue increased 11.4% year-over-year to $1.99 billion in its fiscal third quarter, ended September 30. Its non-GAAP net income and non-GAAP EPS attributable to ZTS came in at $597 million and $1.25, respectively, up 13.9% and 13.6% from the prior-year quarter.
The $0.97 consensus EPS estimate for its fiscal fourth quarter indicates a 6.6% year-over-year increase. And the $1.94 billion consensus revenue estimate for the same period reflects a rise of 7.1% from the prior-year quarter. Furthermore, ZTS has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 25.6% in price to close yesterday’s trading session at $212.80. However, it has declined 8.1% over the past month and is currently trading 14.6% below its 52-week high of $249.27. The stock is trading above its 200-day Moving Average of $198.32.
It is no surprise that ZTS has an overall A rating, which translates to Strong Buy in our POWR Rating system. The stock has an A grade for Quality and a B grade for Growth, Stability, and Sentiment. It is ranked #5 in the Medical – Pharmaceuticals industry. Click here to see the additional POWR Ratings for Value and Momentum for ZTS.
The TJX Companies, Inc. (TJX)
TJX in Framingham, Mass., is an off-price apparel and home fashions retail operator that sells family apparel, home fashions, and other merchandise. The company operates through the four broad segments of Marmaxx; HomeGoods; TJX Canada; and TJX International.
In September, TJX declared a $0.26 per share quarterly dividend on its common stock, which was to be paid to shareholders on December 2. This reflects the company’s ability to pay back shareholders.
In terms of its forward non-GAAP PEG, TJX is currently trading at 0.17x, which is 82.3% lower than the 0.96x industry average.
For its fiscal third quarter, ended October 30, TJX’s net sales increased 23.9% year-over-year to $12.53 billion. Its net income rose 18% from the same period prior year to $1.02 billion. And its EPS stood at $0.84, registering an 18.3% improvement from the prior-year quarter.
The Street’s $0.91 EPS estimate for the fiscal fourth quarter (ending January 2022) reflects an 82% increase from the prior-year quarter. And the Street’s $14.25 billion revenue estimate for the same period indicates a 30.2% rise year-over-year. In addition, TJX has topped consensus EPS estimates in three out the trailing four quarters.
TJX’s shares have gained 17.8% in price over the past three months but have declined 1.2% over the past five days to close yesterday’s trading session at $74.21. It is currently trading above its 50-day and 200-day moving averages of $72.14 and $69.30, respectively. The stock is currently trading 4.1% below its 52-week high of $77.35.
TJX’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. TJX has a Growth, Sentiment, and Quality grade of B. It is ranked #19 of 63 stocks in the A-rated Fashion & Luxury industry.
In addition to the POWR Rating grades we have stated above, one can see TJX’s ratings for Value, Momentum, and Stability here.
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LLY shares were trading at $255.46 per share on Wednesday afternoon, down $6.86 (-2.62%). Year-to-date, LLY has declined -7.52%, versus a -0.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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