Wall Street has already moved on from the market’s impressive November run that saw the S&P 500 climb 11% and the Dow post its best month since 1987. Looking ahead, investors appear to have plenty of reasons to be bullish.
The positive vaccine news stole the show last month and the optimism finally helped extend the market’s rally outside of the usual suspects of tech firms and big retailers like Apple AAPL and Target TGT that have soared during the coronavirus. Investors are now hoping that the hard-hit areas such as energy and travel will be able to bounce back in 2021.
Meanwhile, the earnings outlook continues to improve for Q4 and beyond, and the U.S. economy continues to grow. Plus, the Fed is set to keep its interest rate near zero through at least 2023, which should provide a boost to stocks, as Wall Street lives in a constant state of there is no alternative.
That said, investors likely want to be on the hunt for stocks to add to their portfolios as we head into 2021. Yet, it might be prudent to find firms that were already growing and won’t need a vaccine for help. Today, we explore three highly-ranked Zacks stocks that fit the bill…
Winnebago Industries, Inc. WGO
Winnebago is an iconic American company that builds motorhomes, travel trailers, fifth wheel products, and boats under multiple brands, including its namesake, as well as Chris-Craft and others. The company is coming off a strong year and it might continue to benefit from people looking to travel in different ways during the coronavirus.
More importantly, Winnebago was growing well before the pandemic, having posted 60% growth in FY17 and 30% sales expansion in FY18. WGO did see its sales slip around 1% in FY19, but it bounced back in a big way, with its fiscal 2020 revenue up 19% to $2.4 billion.
The firm topped our Q4 estimates in October, ending FY20 on a high note. Zacks estimates call for its adjusted Q1 earnings to climb 37% on 26% stronger sales. Peeking further ahead, its FY21 revenue is set to surge 28% to hit $3.0 billion and help lift its adjusted EPS by 77%. Winnebago’s revenue and earnings are then projected to continue to grow in FY22. And WGO’s bottom-line revisions help it land a Zacks Rank #1 (Strong Buy) at the moment.
Winnebago holds an “A” grade for Growth in our Style Scores system and its Building Products-Mobile Homes and RV Builders industry rests in the top 2% of our over 250 Zacks industries. Plus, five out of the eight brokerage recommendations Zacks has for WGO come in at “Strong Buy” with one more at a “Buy.” And the company’s 0.85% dividend tops its industry’s 0.45% average.
WGO stock is up 20% during the last 12 months, against its industry’s 12% climb. Investors might be pleased to note that at $56 a share, WGO rests 20% off its 52-week highs, which could give it room to climb. And Winnebago shares have been heading in the right direction recently, up 15% in the last month to more than double its industry.
PulteGroup, Inc. PHM
PulteGroup is one of the largest homebuilders in the U.S., with operations in over 40 major markets, operating under multiple brands. The company has posted three-straight quarters of solid revenue growth. Most recently, its sales jumped by 9% in Q3, while its adjusted earnings surged 33%. Plus, its unit backlog increased by 29%, with its backlog revenue up 32%.
Investors should know that U.S. home sales jumped to a 14-year high in October, which marked the fifth straight monthly increase. The recent growth has been spurred by the coronavirus and the social distancing push that has millions of Americans searching for more space. On top of that, millennials continue to reach their prime homebuying years and a shortage of homes could help PulteGroup and other homebuilders continue to grow.
Our current estimates call for PHM’s fiscal 2020 revenue to climb over 6%, with FY21 projected to come in 18% higher to reach $12.8 billion. At the bottom-end, its adjusted earnings are expected to climb by 42% and 18%, respectively over this same stretch. PulteGroup’s positive bottom-line revisions help it land a Zacks Rank #1 (Strong Buy) right now. The stock also boasts “B” grades for Value, Growth, and Momentum in our Style Scores system
PHM’s Building Products-Home Builders space rests in the top 2% of our over 250 Zacks industries, which highlights the strength of the industry that includes Lennar LEN, TRI Pointe TPH, and many other highly-ranked stocks. On top of that, seven of the 12 brokerage recommendations we have for Plute come in at a “Strong Buy,” and its 1.16% dividend yield crushes its industry’s average and the 10-year U.S. Treasury. Over the last two years, PHM shares have climbed 55% vs. its industry’s 40%. And the stock hovers 15% off its October highs.
Yeti YETI
Yeti has come a long way from its 2006-founding as a niche, high-end cooler company. The Austin, Texas-based firm still sells heavy-duty coolers that can cost up to $1,300. But it has expanded its offerings and its consumer base through multiple coolers, more colors, as well as tumblers, mugs, dog bowls, and much more. Yeti’s Q3 sales jumped 29%, which represented its best top-line growth as a public firm. And Wall Street was once again pleased to see that its drinkwear space accounted for nearly 60% of total sales.
Yeti is part of a group of higher-end retail brands that have succeeded in crowded markets and inspired knockoffs, through branding and a loyal and growing customer base. This group includes the likes of Lululemon LULU, Peloton PTON, Canada Goose GOOS, and others. Yeti has also grown its e-commerce business and slowly expanded its brick-and-mortar footprint.
Wall Street has rewarded Yeti stock by helping it climb up 270% during the past two years. This run includes a 30% jump in the past month. Yeti currently trades right near its recent highs at roughly $63 per share and it trades at a big discount against Lululemon in terms of forward sales and earnings. Plus, the stock sports an “A” grade for Growth and its Leisure and Recreation Products space sits in the top 12% of our over 250 Zacks industries.
Zacks estimates call for Yeti’s Q4 sales to jump over 16% to help lift its adjusted earnings by 27%. Meanwhile, its FY20 sales are expected to surge 16% to $1.1 billion, with FY21 set to climb 13% higher. Yeti’s adjusted FY20 earnings are projected to soar 45% to $1.74 per share, with FY21 expected to come in another 18% stronger. And Yeti’s earnings revisions help it grab a Zacks Rank #1 (Strong Buy) right now.
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