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Top 5 Momentum Stocks for February After a Seesawing January
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Wall Street ended January in a zigzag fashion after an astonishing rally in 2023. The first half of last month was marred by volatility as market participants remained uncertain about when the Fed would start interest rate cuts.
However, the situation changed in the second half following the release of several strong economic data and steadily falling inflation data. However, U.S. stock markets tumbled on the last day of January after the Fed denied the possibility of the first rate cut in March.
Meanwhile, Wall Street managed to maintain its northward journey in January. The three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — advanced 1.2%, 1.6% and 1%, respectively.
Momentum Likely to Continue
The Department of Commerce reported that the U.S. economy grew at a clip of 3.3% in fourth-quarter 2023, well above the consensus estimate of 2%. The U.S. GDP rose 2.5% in 2023 compared with 1.9% in 2022. At the beginning of 2023, the consensus estimate for full-year GDP was 2%.
The headline personal consumption expenditure (PCE) price index rose 2.7% year over year in third-quarter 2023 compared with 5.1% a year ago. The core PCE price index (excluding volatile food and energy items) increased 3.2% annually in the same period compared with 5.9% a year ago. The metric is the Fed’s most favored inflation gauge.
In the last quarter, personal consumption expenditures increased 2.8%. The chain-weighted price index rose 1.5% in the third quarter, down from 3.3% in the previous period and below the consensus estimate of 2.5%.
The headline PCE price Index for December rose 0.2% month over month and 2.6% annually. The core PCE inflation in December increased 0.2% month over month and 2.9% annually.
The annual rate of increase in December was the slowest since March 2021. The consensus estimate was 0.2% and 3%, respectively. In November, core PCE inflation increased 3.2% year over year.
Personal spending in December increased 0.7% month over month, beating the consensus estimate of 0.5%. November’s data was revised upward to 0.4% from 0.2% reported earlier. Personal income increased 0.3% in December compared with 0.4% in November.
U.S. consumer confidence in the economy and its future outlook jumped in January. On Jan 30, the Conference Board reported that the index of the U.S. consumer confidence for January came in at 114.8, well above the upwardly revised 108 for December. The index for January was the highest since December 2021, marking the third straight monthly increase.
On Jan 19, the University of Michigan reported that the preliminary index of the U.S. consumer sentiment for January came in at 78.8, well above the consensus estimate of 69.7. The final index for December was also 69.7. The index for January was the highest since July 2021.
Our Top Picks
At this stage, it will be prudent to invest in momentum stocks. We have narrowed our search to five large-cap (market capital > $10 billion) stocks that have strong momentum for February. These companies have strong potential for 2024.
The chart below shows the price-performance of our five picks in the past month.
Image Source: Zacks Investment Research
Netflix Inc. (NFLX - Free Report) added 13.12 million paid subscribers globally in fourth-quarter 2023, with a rise of 1% in average revenue per subscription. NFLX attributed the robust top-line growth to its paid subscription-sharing offering (part of its password-sharing crackdown), recent price changes and the strength of its business in general.
NFLX is expected to continue dominating the streaming space, courtesy of its diversified content portfolio, which is attributable to heavy investments in the production and distribution of localized and foreign-language content.
Netflix has an expected revenue and earnings growth rate of 14.3% and 40.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.3% over the last seven days.
The Progressive Corp. (PGR - Free Report) continues to gain on higher premiums, given its compelling product portfolio, leadership position and strength in both Vehicle and Property businesses. Focus on becoming a one-stop insurance destination, catering to customers opting for a combination of home and auto insurance, augurs well for PGR.
Policies in force and retention ratio should remain healthy for PGR. Competitive pricing to retain current customers and address customer needs with new offerings should continue to drive policy life expectancy.
The Progressive has an expected revenue and earnings growth rate of 12.6% and 19.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.4% over the last seven days.
Casey's General Stores Inc. (CASY - Free Report) reported impressive results for second-quarter fiscal 2024. CASY’s stellar performance in prepared food and grocery categories helped post a 6.2% jump in inside sales and 2.9% growth in inside same-store sales in the quarter. Its business operating model, omnichannel capabilities, enhanced customer reach and private-label offerings reinforce its position in the industry.
Casey's price and product optimization strategies, increased penetration of private brands and digital engagements are also commendable. CASY’s inventory management, technology advancements and data analytics position it well for future growth.
Casey's General Stores has an expected revenue and earnings growth rate of 0.3% and 7.4%, respectively, for the current year (ending April 2024). The Zacks Consensus Estimate for current-year earnings has improved 6.3% over the past 30 days.
Cincinnati Financial Corp. (CINF - Free Report) continues to grow premiums through a disciplined expansion of Cincinnati Re while the division makes a good contribution to its overall earnings. Price increases and a higher level of insured exposures are positives. CINF is focused on earning new business by appointing new agencies and believes that an agent-focused business model will drive long-term premium growth.
CINF expects 2023 property-casualty premium to grow 8% while its agent-focused business model will drive long-term premium growth. CINF boasts a solid capital position supporting effective capital deployment. Consistent cash flow and sufficient cash balances continue to boost liquidity.
Cincinnati Financial has an expected revenue and earnings growth rate of 8% and 8.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 30 days.
Textron Inc. (TXT - Free Report) is a global multi-industry company that manufactures aircraft, automotive engine components and industrial tools. TT is known globally for its most recognizable and valuable brand names, such as Bell Helicopter, Cessna Aircraft Company, Jacobsen, Kautex, E-Z-GO and Greenlee.
TXT also offers solutions and services for aircraft, fastening systems, and industrial products and components. Its products include commercial and military helicopters, light- and mid-size business jets, plastic fuel tanks, automotive trim products, golf carts and utility vehicles, turf-car equipment, industrial pumps and gears.
Textron has an expected revenue and earnings growth rate of 6.8% and 7.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.8% over the last seven days.
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Top 5 Momentum Stocks for February After a Seesawing January
Wall Street ended January in a zigzag fashion after an astonishing rally in 2023. The first half of last month was marred by volatility as market participants remained uncertain about when the Fed would start interest rate cuts.
However, the situation changed in the second half following the release of several strong economic data and steadily falling inflation data. However, U.S. stock markets tumbled on the last day of January after the Fed denied the possibility of the first rate cut in March.
Meanwhile, Wall Street managed to maintain its northward journey in January. The three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — advanced 1.2%, 1.6% and 1%, respectively.
Momentum Likely to Continue
The Department of Commerce reported that the U.S. economy grew at a clip of 3.3% in fourth-quarter 2023, well above the consensus estimate of 2%. The U.S. GDP rose 2.5% in 2023 compared with 1.9% in 2022. At the beginning of 2023, the consensus estimate for full-year GDP was 2%.
The headline personal consumption expenditure (PCE) price index rose 2.7% year over year in third-quarter 2023 compared with 5.1% a year ago. The core PCE price index (excluding volatile food and energy items) increased 3.2% annually in the same period compared with 5.9% a year ago. The metric is the Fed’s most favored inflation gauge.
In the last quarter, personal consumption expenditures increased 2.8%. The chain-weighted price index rose 1.5% in the third quarter, down from 3.3% in the previous period and below the consensus estimate of 2.5%.
The headline PCE price Index for December rose 0.2% month over month and 2.6% annually. The core PCE inflation in December increased 0.2% month over month and 2.9% annually.
The annual rate of increase in December was the slowest since March 2021. The consensus estimate was 0.2% and 3%, respectively. In November, core PCE inflation increased 3.2% year over year.
Personal spending in December increased 0.7% month over month, beating the consensus estimate of 0.5%. November’s data was revised upward to 0.4% from 0.2% reported earlier. Personal income increased 0.3% in December compared with 0.4% in November.
U.S. consumer confidence in the economy and its future outlook jumped in January. On Jan 30, the Conference Board reported that the index of the U.S. consumer confidence for January came in at 114.8, well above the upwardly revised 108 for December. The index for January was the highest since December 2021, marking the third straight monthly increase.
On Jan 19, the University of Michigan reported that the preliminary index of the U.S. consumer sentiment for January came in at 78.8, well above the consensus estimate of 69.7. The final index for December was also 69.7. The index for January was the highest since July 2021.
Our Top Picks
At this stage, it will be prudent to invest in momentum stocks. We have narrowed our search to five large-cap (market capital > $10 billion) stocks that have strong momentum for February. These companies have strong potential for 2024.
These stocks have seen positive earnings estimate revisions in the past 60 days. Each of our picks carries a Zacks Rank #1 (Strong Buy) and has a Momentum Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price-performance of our five picks in the past month.
Image Source: Zacks Investment Research
Netflix Inc. (NFLX - Free Report) added 13.12 million paid subscribers globally in fourth-quarter 2023, with a rise of 1% in average revenue per subscription. NFLX attributed the robust top-line growth to its paid subscription-sharing offering (part of its password-sharing crackdown), recent price changes and the strength of its business in general.
NFLX is expected to continue dominating the streaming space, courtesy of its diversified content portfolio, which is attributable to heavy investments in the production and distribution of localized and foreign-language content.
Netflix has an expected revenue and earnings growth rate of 14.3% and 40.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.3% over the last seven days.
The Progressive Corp. (PGR - Free Report) continues to gain on higher premiums, given its compelling product portfolio, leadership position and strength in both Vehicle and Property businesses. Focus on becoming a one-stop insurance destination, catering to customers opting for a combination of home and auto insurance, augurs well for PGR.
Policies in force and retention ratio should remain healthy for PGR. Competitive pricing to retain current customers and address customer needs with new offerings should continue to drive policy life expectancy.
The Progressive has an expected revenue and earnings growth rate of 12.6% and 19.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.4% over the last seven days.
Casey's General Stores Inc. (CASY - Free Report) reported impressive results for second-quarter fiscal 2024. CASY’s stellar performance in prepared food and grocery categories helped post a 6.2% jump in inside sales and 2.9% growth in inside same-store sales in the quarter. Its business operating model, omnichannel capabilities, enhanced customer reach and private-label offerings reinforce its position in the industry.
Casey's price and product optimization strategies, increased penetration of private brands and digital engagements are also commendable. CASY’s inventory management, technology advancements and data analytics position it well for future growth.
Casey's General Stores has an expected revenue and earnings growth rate of 0.3% and 7.4%, respectively, for the current year (ending April 2024). The Zacks Consensus Estimate for current-year earnings has improved 6.3% over the past 30 days.
Cincinnati Financial Corp. (CINF - Free Report) continues to grow premiums through a disciplined expansion of Cincinnati Re while the division makes a good contribution to its overall earnings. Price increases and a higher level of insured exposures are positives. CINF is focused on earning new business by appointing new agencies and believes that an agent-focused business model will drive long-term premium growth.
CINF expects 2023 property-casualty premium to grow 8% while its agent-focused business model will drive long-term premium growth. CINF boasts a solid capital position supporting effective capital deployment. Consistent cash flow and sufficient cash balances continue to boost liquidity.
Cincinnati Financial has an expected revenue and earnings growth rate of 8% and 8.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 30 days.
Textron Inc. (TXT - Free Report) is a global multi-industry company that manufactures aircraft, automotive engine components and industrial tools. TT is known globally for its most recognizable and valuable brand names, such as Bell Helicopter, Cessna Aircraft Company, Jacobsen, Kautex, E-Z-GO and Greenlee.
TXT also offers solutions and services for aircraft, fastening systems, and industrial products and components. Its products include commercial and military helicopters, light- and mid-size business jets, plastic fuel tanks, automotive trim products, golf carts and utility vehicles, turf-car equipment, industrial pumps and gears.
Textron has an expected revenue and earnings growth rate of 6.8% and 7.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.8% over the last seven days.