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Multinational stocks come from a variety of industries.
With around 43% of revenues in S&P 500 firms delivered by customers outside the USA, these companies’ earnings performances are worth evaluating, for a global growth proxy.
Let’s compare and contrast three major U.S. multinational stocks:
- Micron (MU - Free Report) , the memory chip supplier, placed safely in Info Tech
- JP Morgan (JPM - Free Report) , the NYC-based money center bank, a Financial, and
- Exxon Mobil (XOM - Free Report) , the major oil conglomerate, hailing from Energy
First off, the S&P 500 returned +39% over the last year, and the Nasdaq returned +43%.
The 3 stocks are very similar in terms of stock market beta. Their share price returns doubled or tripled those indexes over the last year (+128%, +85% and +109%).
In other words, it did pay to own major large-cap stocks — versus passively riding up the major large cap U.S. indices — over the past year’s bull market.
Image Source: Zacks Investment Research
Added to that, Micron returns outperformed the other two stocks over the last year. This speaks to the Nasdaq outperformance, and to the semiconductor shortage. Micron only missed on a quarterly EPS call 1 time out of the last 20 attempts, in early 2019 (below).
Image Source: Zacks Investment Research
Micron shows the best long-term Zacks investing scores (A, A, A). Meanwhile, the 3 stocks’ forward 12M P/E ratios look similar. No clear chip stock overvaluation apparent.
Image Source: Zacks Investment Research
Surprisingly, JPMorgan stock has terrible long-term Zacks investing scores (F, F, F). This speaks to that banking share’s momentum price run as riskier to a pullback.
The JPMorgan Zacks Price and Momentum chart does not appear to be any different than the Micron chart. Both companies missed on earnings in early 2019, when there was the first sign of a broad S&P 500 earning slowdown (below).
Image Source: Zacks Investment Research
Finally, the forward look on 2022 earnings is similar for Micron and JPMorgan. In contrast, Exxon Mobil shares should earn well under half the same amount next year (below).
Image Source: Zacks Investment Research
However, stock traders were much more surprised by the quarterly earnings Exxon Mobil delivered over the last year (+58.7% versus +7.7% or +28.5%).
No one expected a swift run to $75 a barrel WTI oil a year ago. The OPEC+ agreement to restrict production globally has been very successful. Yet the oil market is only one emergency meeting away from a sudden increase in oil supply.
I would say the share price technicals are much worse for Exxon Mobil. Added to that, I count 8 quarterly earnings misses for Exxon Mobil over the last 20 attempts (below).
Image Source: Zacks Investment Research
Multinational oil company earnings remain under pressure. On June 21st, Exxon Mobil announced it will target 8% of U.S. employees as ‘low performers’ — up from 3% historically.
According to Reuters, that company’s historic $22.4 billion loss in 2020 led the company to slash project spending by a third and delay major expansion programs. At the same time, it added $21 billion to debt to help preserve its shareholder dividend.
Zacks July Sector/Industry/Company Telescope
The Zacks Rank system showed 6 strong sectors. Many industries are resolutely bullish.
Info Tech was the clear top sector again; strong across all industries.
Two deep cyclical sectors came out on top – Materials and Industrials. Think Steel, Paper, Metals Non-ferrous, Chemicals, Building Products-Construction Materials, Construction Building Services and Metal Fabricating.
Two more cyclicals: Energy and Financials stayed Attractive, with Coal, Drillers, and big Integrated groups remaining strong, given $74 a barrel WTI oil prices.
Consumer Discretionary rose to Attractive this month. Apparel and Home Furnishing- Appliances are strong. Consumer Staples remains at Market Weight, with Agri-business booming with commodity prices.
Health Care stayed Market Weight. Medical Care led again.
At the back, defensives. Telcos and Utilities were Very Unattractive, respectively.
(1) Info Tech stayed Very Attractive. Computer-Office Equipment, Misc. Tech, Computer-Software Services, and Electronics-Semiconductors (with a global supply shortage), all of those look excellent.
(4) Financials stayed Attractive. Investment Banking, Major Banks & Banks & Thrifts look good. Higher rate spreads and savings help all of these.
(5) Energy stayed Attractive. Coal, Drilling, and Integrated looked great.
(6) Consumer Discretionary rose a notch to Attractive. Apparel, Home Furnishings-Appliance, and Publishing were strong and also show the stimulus check buyer and saver remains in play.
(7) Consumer Staples stayed at Market Weight. Agri-business (commodity price boom) and Food/Drug Retail looked best.
(8) Health Care stayed at Market Weight. Medical Care looked the best.
(9) Communications Services fell to Very Unattractive. Utility-Telephone the best.
(10) Utilities sunk to Very Unattractive. Utilities-Gas Distribution was the best, at Market.
Conclusion
My title this month says it all: “Heed the Takeaways from 3 Big Stocks.”
Does any of this fundamental or technical material I presented foretell how to play the second half of 2021 — or 2022, for that matter?
At a point, earnings delivery has to become softer, based on tougher year-over-year comps alone.
Stock traders are notoriously forward-looking. In sum, keep your eyes wide open, and focus on the road ahead too.
The 1-year share price trend on all three stocks is not broken.
Yet.
Enjoy the Zacks July 2021 Market Strategy report.
Warm Regards,
John Blank
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Bigstock
Heed the Takeaways from 3 Big Stocks: Zacks July Market Strategy
The following is an excerpt from Zacks Chief Strategist John Blank’s full Jul Market Strategy report To access the full PDF, click here.
Multinational stocks come from a variety of industries.
With around 43% of revenues in S&P 500 firms delivered by customers outside the USA, these companies’ earnings performances are worth evaluating, for a global growth proxy.
Let’s compare and contrast three major U.S. multinational stocks:
First off, the S&P 500 returned +39% over the last year, and the Nasdaq returned +43%.
The 3 stocks are very similar in terms of stock market beta. Their share price returns doubled or tripled those indexes over the last year (+128%, +85% and +109%).
In other words, it did pay to own major large-cap stocks — versus passively riding up the major large cap U.S. indices — over the past year’s bull market.
Added to that, Micron returns outperformed the other two stocks over the last year. This speaks to the Nasdaq outperformance, and to the semiconductor shortage. Micron only missed on a quarterly EPS call 1 time out of the last 20 attempts, in early 2019 (below).
Micron shows the best long-term Zacks investing scores (A, A, A). Meanwhile, the 3 stocks’ forward 12M P/E ratios look similar. No clear chip stock overvaluation apparent.
Surprisingly, JPMorgan stock has terrible long-term Zacks investing scores (F, F, F). This speaks to that banking share’s momentum price run as riskier to a pullback.
The JPMorgan Zacks Price and Momentum chart does not appear to be any different than the Micron chart. Both companies missed on earnings in early 2019, when there was the first sign of a broad S&P 500 earning slowdown (below).
Finally, the forward look on 2022 earnings is similar for Micron and JPMorgan. In contrast, Exxon Mobil shares should earn well under half the same amount next year (below).
However, stock traders were much more surprised by the quarterly earnings Exxon Mobil delivered over the last year (+58.7% versus +7.7% or +28.5%).
No one expected a swift run to $75 a barrel WTI oil a year ago. The OPEC+ agreement to restrict production globally has been very successful. Yet the oil market is only one emergency meeting away from a sudden increase in oil supply.
I would say the share price technicals are much worse for Exxon Mobil. Added to that, I count 8 quarterly earnings misses for Exxon Mobil over the last 20 attempts (below).
Multinational oil company earnings remain under pressure. On June 21st, Exxon Mobil announced it will target 8% of U.S. employees as ‘low performers’ — up from 3% historically.
According to Reuters, that company’s historic $22.4 billion loss in 2020 led the company to slash project spending by a third and delay major expansion programs. At the same time, it added $21 billion to debt to help preserve its shareholder dividend.
Zacks July Sector/Industry/Company Telescope
The Zacks Rank system showed 6 strong sectors. Many industries are resolutely bullish.
Info Tech was the clear top sector again; strong across all industries.
Two deep cyclical sectors came out on top – Materials and Industrials. Think Steel, Paper, Metals Non-ferrous, Chemicals, Building Products-Construction Materials, Construction Building Services and Metal Fabricating.
Two more cyclicals: Energy and Financials stayed Attractive, with Coal, Drillers, and big Integrated groups remaining strong, given $74 a barrel WTI oil prices.
Consumer Discretionary rose to Attractive this month. Apparel and Home Furnishing- Appliances are strong. Consumer Staples remains at Market Weight, with Agri-business booming with commodity prices.
Health Care stayed Market Weight. Medical Care led again.
At the back, defensives. Telcos and Utilities were Very Unattractive, respectively.
(1) Info Tech stayed Very Attractive. Computer-Office Equipment, Misc. Tech, Computer-Software Services, and Electronics-Semiconductors (with a global supply shortage), all of those look excellent.
Zacks #1 Rank (STRONG BUY): NVIDIA Corp. (NVDA - Free Report)
(2) Materials stayed Very Attractive. Steel, Paper, Metals Non-Ferrous, Chemicals and Building Products-Construction Materials were very strong.
Zacks #1 Rank (STRONG BUY): Nutrien (NTR - Free Report)
(3) Industrials shifted up to Very Attractive. Metal Fabricating, Construction-Building Services and Machinery were the top industries.
Zacks #1 Rank (STRONG BUY): Cummins (CMI - Free Report)
(4) Financials stayed Attractive. Investment Banking, Major Banks & Banks & Thrifts look good. Higher rate spreads and savings help all of these.
(5) Energy stayed Attractive. Coal, Drilling, and Integrated looked great.
(6) Consumer Discretionary rose a notch to Attractive. Apparel, Home Furnishings-Appliance, and Publishing were strong and also show the stimulus check buyer and saver remains in play.
(7) Consumer Staples stayed at Market Weight. Agri-business (commodity price boom) and Food/Drug Retail looked best.
(8) Health Care stayed at Market Weight. Medical Care looked the best.
(9) Communications Services fell to Very Unattractive. Utility-Telephone the best.
(10) Utilities sunk to Very Unattractive. Utilities-Gas Distribution was the best, at Market.
Conclusion
My title this month says it all: “Heed the Takeaways from 3 Big Stocks.”
Does any of this fundamental or technical material I presented foretell how to play the second half of 2021 — or 2022, for that matter?
At a point, earnings delivery has to become softer, based on tougher year-over-year comps alone.
Stock traders are notoriously forward-looking. In sum, keep your eyes wide open, and focus on the road ahead too.
The 1-year share price trend on all three stocks is not broken.
Yet.
Enjoy the Zacks July 2021 Market Strategy report.
Warm Regards,
John Blank
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>