Even though the market remains volatile as supply chain disruptions and rising oil prices further exacerbate the inflationary environment, growth stocks have been witnessing continued investor attention. This is evidenced by the SPDR Portfolio S&P 500 Growth ETF’s (SPYG) 11.3% returns over the past three months compared to the SPDR Portfolio S&P 500 Value ETF (SPYV) and the SPDR S&P 500 Trust ETF’s (SPY) 3.7% and 7.6% gains, respectively.
While the Federal Reserve recently indicated its willingness to reduce asset purchases before year’s end, benchmark interest rates have been kept near zero for now. And a low-interest-rate environment should keep supporting the business growth of several companies.
Moreover, analysts expect third-quarter corporate earnings to be strong. According to FactSet, 41 S&P 500 companies have reported third-quarter results so far, with 80% of them topping EPS expectations. And shares of companies reporting earnings growth should soar in the near term.
So, we think it could be wise to bet on fundamentally sound stocks LyondellBasell Industries N.V. (LYB), Texas Roadhouse, Inc. (TXRH), and Herc Holdings Inc. (HRI), which possess solid earnings growth prospects. These stocks have an overall B (Buy) grade in our POWR Ratings system and a B grade for Growth.
LyondellBasell Industries N.V. (LYB)
Chemical company LYB operates in six segments: Olefins and Polyolefins Americas; Olefins and Polyolefins Europe, Asia, International; Intermediates and Derivatives; Advanced Polymer Solutions; Refining; and Technology. The Rotterdam, Netherlands, company produces and markets olefins and co-products, polyolefins; polyethylene products; and polypropylene products.
On September 9, 2021, LYB obtained the International Sustainability and Carbon Certification (ISCC) PLUS certification for specific polyethylene and polypropylene produced at four of its U.S. manufacturing sites. Ken Lane, LYB Executive Vice President of Global Olefins and Polyolefins, said, “The ISCC PLUS certification helps us to accelerate our progress as an industry leader in the production and marketing of recycled and renewable-based polymers.”
LYB’s sales and other operating revenues surged 108.4% year-over-year to $1.97 billion for its fiscal second quarter, ended June 30, 2021. The company’s EBITDA grew 297.1% year-over-year to $3.02 million, while its net income came in at $2.06 billion, representing a 555.7% year-over-year increase. Also, its EPS was $6.13, up 552.1% year-over-year.
LYB’s EPS is expected to be $4.48 for the quarter ending December 30, 2021, representing a 104.6% year-over-year increase. Its EPS is expected to grow at a 51.4% rate per annum over the next five years. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Also, the company’s revenue is expected to increase 51.7% year-over-year to $42.11 billion in its fiscal year 2021. The stock has gained 27.8% in price over the past year to close yesterday’s trading session at $98.42.
LYB’s POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
In addition, it has an A grade for Value, and a B grade for Growth. Click here to see the additional POWR Ratings for LYB (Momentum, Stability, Sentiment, and Quality). LYB is ranked #21 of 93 stocks in the A-rated Chemicals industry.
Texas Roadhouse, Inc. (TXRH)
Restaurant company TXH in Louisville, Ky., operates and franchises Texas Roadhouse and Bubba’s 33 restaurants. It also operates 537 domestic restaurants and 97 franchise restaurants. In addition, it offers its guests a selection of chicken, beef, fish, seafood, and other items.
On July 29, 2021, Jerry Morgan, the CEO of TXRH, said, “Our strong cash flows have further strengthened our financial position, which allowed us to reinstate our dividend and repay our short-term debt this quarter. In addition, our development pipeline looks great and continues to move forward as expected.”
The company’s total revenue surged 88.7% year-over-year to $898.79 million for the second quarter, ended June 29, 2021. TXRH’s income from operations came in at $89.73 million, compared to a $47.32 million operating loss in the prior-year quarter. Its net income came in at $75.48 million, compared to a $33.55 million loss in the year-ago period. Its EPS for the quarter was $1.08 compared to a $0.48 loss per share in the previous year.
For the quarter ending December 30, 2021, analysts expect TXRH’s EPS to increase 207.1% year-over-year to $0.86. In addition, its EPS is expected to grow at a 94.1% rate per annum over the next five years. Also, it surpassed the consensus EPS estimates in three of the trailing four quarters. The company’s revenue is expected to increase 44% year-over-year to $3.45 billion in its fiscal year 2021. Over the past year, the stock has gained 23.4% in price to close yesterday’s trading session at $91.15.
TXRH’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Growth, Value, Momentum, and Quality. Within the A-rated Restaurants industry, TXRH is ranked #22 of 48 stocks. Click here to see the additional POWR Ratings for TXRH (Stability and Sentiment).
Herc Holdings Inc. (HRI)
HRI is an equipment rental supplier, renting aerial, earthmoving, material handling, trucks and trailers, air compressors, compaction, and lighting equipment. The Estero, Fla., company also provides ProSolutions, industry-specific solution-based services, and ProContractor professional-grade tools.
On October 7, 2021, HRI entered a purchase agreement to acquire Rapid Equipment Rental Limited. Larry Silber, the company’s President and CEO, said, “The addition of Rapid Equipment supports our long-term strategy to achieve greater density and scale in select urban markets across North America to better serve both our local and multi-geography customers.”
HRI’s total revenues surged 33.4% year-over-year to $490.90 million for its fiscal second quarter, ended June 30, 2021. The company’s adjusted EBITDA grew 39% year-over-year to $207.70 million, while its adjusted net income came in at $2.06 billion, representing a 552% year-over-year increase. Also, its adjusted EPS came in at $6.13, up 528% year-over-year.
Analysts expect HRI’s EPS to increase 76.3% year-over-year to $2.38 for the quarter ending December 30, 2021. In addition, its EPS is expected to grow at a 71% rate per annum over the next five years. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The company’s revenue is expected to be $2.08 billion in fiscal 2021, up 16.6% year-over-year. The stock has gained 302.9% in price over the past year to close yesterday’s trading session at $186.
HRI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Growth, Quality, and Sentiment.
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LYB shares were trading at $98.74 per share on Tuesday morning, up $0.32 (+0.33%). Year-to-date, LYB has gained 11.09%, versus a 21.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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