Growth stocks have recently witnessed a correction that many agree has been driven by a rotation by investors away from growth stocks and into value names. However, as most pandemic-driven challenges and trends are expected to continue this year, this dip provides an excellent entry opportunity for growth investors. However, the market is anything but certain currently. So, we think investing in large-cap stocks is a safer bet because they have strong balance sheets that insulate them to a degree from negative shocks.
Despite rising concerns related to inflation, the Fed plans to maintain its dovish monetary stance. This should help large-cap growth stocks benefit significantly from lower borrowing costs.
With consistent improvement in revenue and earnings over the past couple of years, Generac Holdings Inc. (GNRC) and CNH Industrial (CNHI) are two quality large-cap growth stocks that we think should generate promising returns in the long-run.
Generac Holdings Inc. (GNRC)
GNRC is a leading global designer and manufacturer of a wide range of energy technology solutions. The company provides power generation equipment, energy storage systems, and other power products for the residential, light commercial and industrial markets. With power generation as its key focus, GNRC operates primarily in three product class segments – Residential products, Commercial & industrial (C&I) products, and Others.
GNRC recently unveiled its plans to open a new manufacturing, assembly, and distribution operation in Trenton, South Carolina. The facility will support increased demand for home standby generators and associated energy technologies and serve as a distribution center for customers in the Southeast part of the United States, creating approximately 450 new jobs over the next two years.
In the fourth quarter and full-year ended December 31, 2020, GNRC reported record quarterly net sales of $761 million, increasing 29% year-over-year. Its core sales growth during the quarter improved approximately 28% on the back of a 55% year-over-year increase in residential product sales. GNRC witnessed incredible demand for home standby generators due to significantly higher power outage events. Consequently, its EPS for the quarter came in at $1.97, rising 76% compared to the year-ago value $1.12.
The stock has gained a whopping 220% in the past year. GNRC has made important progress with its evolution into an energy technology solutions company. Its management expects 2021 to be another strong year given the significant momentum in its residential products and an expected return to growth for its C&I products. Wall Street analysts estimate GNRC’s current year revenue and EPS to improve 28.9% and 32.8%, respectively.
GNRC’s POWR Ratings reflect this promising outlook. GNRC has an overall rating of B, 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.
It has an A grade for both Growth and Momentum. Of the 88 stocks in the A-rated Industrial – Machinery industry, it is ranked #31.
In total, we rate GNRC on eight different levels. Click here to check additional POWR Ratings for GNRC (Value, Stability, Sentiment and Quality).
CNH Industrial (CNHI)
CNHI is a global leader in the capital goods sector that designs, produces, markets, sells, and finances agricultural and construction equipment, including farm machinery, tractors, seeding equipment, crawler dozers, graders, vehicles for distribution of goods, engines, transmission systems, and other specialty vehicles in North America, Europe, and internationally. CHNI operates through the following segments – Agriculture, Construction, Commercial and Specialty Vehicles, Powertrain, and Financial Services segments.
In January, CNHI completed the acquisition of four businesses of Capital Equipment Group (CEG), a business unit of Africa-based Humulani Marketing Pty Ltd., a transport and motoring car parts and accessories distributor major. The transaction has enabled CNHI to expand its direct distribution network in southern Africa and drive continuous development of new and improved services for its customers in the region.
CNHI’s earnings report for the fourth quarter and full year ended December 31, 2020 did not fail to impress the Street. The company reported consolidated revenues of $8.5 billion, increasing 10% year-over-year, along with improvements across all industrial segments. Its net sales of industrial activities increased 12% due to higher volumes and favorable prices, mainly in agriculture and commercial and specialty vehicles. Its adjusted EPS came in at $0.30, rising 50% compared to the year-ago value.
Over the past year, CNHI invested in new technologies and positioned itself for strong and profitable growth. As a result, the stock has gained nearly 60% in the same period. CNHI’s management anticipates strong demand this year in most segments because industrial activities are picking up steadily. Wall Street analysts further expect the company’s current year revenue and EPS to rise 7.8% and 175%, respectively.
It is no surprise that CNHI has an overall rating of B, which translates to Buy in our POWR Ratings system. CNHI has an A grade for both Growth and Sentiment. It is ranked #25 in the 88-stock the Industrial – Machinery industry.
Click here to see the additional POWR Ratings for CNHI (Value, Momentum, Stability and Quality).
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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RPM shares were trading at $81.41 per share on Monday afternoon, up $1.77 (+2.22%). Year-to-date, RPM has declined -9.93%, versus a 4.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...
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