Investors’ concerns over the multi-decade high inflation, increasing economic and trade sanctions on Russia, rising energy prices, supply chain disruptions, and the prospect of aggressive interest rate increases by the Federal Reserve to tame inflation are leading to remarkable volatility.
Amid this situation, turning to momentum investing could be rewarding, as stocks that have managed to gain momentum might be able to maintain the same in the near to mid-term irrespective of the movement of the broader market.
Marathon Oil Corporation (MRO), Arch Resources, Inc. (ARCH), and Reliance Steel & Aluminum Co. (RS) have been witnessing solid momentum over the past few months and should keep rallying in the upcoming months dodging the market volatility. In addition, all of them have an A grade for Momentum and an overall Strong Buy or Buy rating in our POWR Ratings system. So, it could be wise to scoop up these stocks now.
Marathon Oil Corporation (MRO)
MRO operates as an independent exploration and production company internationally. The company engages in the exploration, production, and marketing of crude oil and condensate, natural gas liquids, and natural gas; and the production and marketing of products manufactured from natural gas, such as liquefied natural gas and methanol.
On February 16, 2022, MRO’s Chairman, President, and CEO Lee Tillman said, “As we look ahead to 2022, you can expect more of the same from our Company: peer leading capital efficiency and operational execution, significant free cash flow generation, and market leading return of capital to shareholders. Additionally, we will remain just as focused on continuing to deliver comprehensive ESG excellence, driven by our mission to provide the responsible, reliable, and affordable energy that the world needs."
MRO’s total revenues and other income surged 116.9% year-over-year to $1.80 billion in the fiscal fourth quarter ended December 31, 2021. The company’s adjusted net income came in at $592 million, compared to a loss of $98 million in the prior-year quarter. Also, its adjusted EPS came in at $0.77 compared to a loss of $0.12 in the year-ago period.
For the current quarter ending June 30, 2022, analysts expect MRO’s EPS and revenue to increase 377.3% and 61.8% year-over-year to $1.05 and $1.85 billion, respectively. In addition, it surpassed Street EPS estimates in each of the trailing four quarters. The stock has gained 142% over the past year to close Friday’s trading session at $25. Over the past nine months, the stock has surged 113.7%.
MRO’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Momentum and Quality and a B grade for Growth and Sentiment. Within the B-rated Energy - Oil & Gas industry, MRO is ranked #24 out of 97 stocks.
To see the additional POWR Ratings for MRO (Stability and Value), click here.
Arch Resources, Inc. (ARCH)
ARCH produces and sells thermal and metallurgical coal from surface and underground mines. It operates seven active mines. The company sells its products to utility, industrial, and steel producers in the United States, Europe, Asia, Central and South America, and Africa.
On February 15, 2022, Paul A. Lang, Arch's CEO and president, said, "As we progress into 2022, the stage is set for even greater advances on our strategic priorities. With our world-class asset base, top-tier marketing and logistics expertise, and high-performing workforce, Arch is exceptionally well-positioned to capitalize on expanding global steel demand and the buildout of a new, low-carbon economy."
ARCH’s revenues surged 123.4% year-over-year to $805.69 million in the fiscal fourth quarter ended December 31, 2021. The company’s net income came in at $226.61 million, compared to a loss of $78.53 million in the prior-year quarter. Also, its EPS came in at $11.92 compared to a loss of $5.17 in the year-ago period.
Analysts expect ARCH’s EPS to increase 1,126.5% year-over-year to $20.36 for the quarter ending June 30, 2022. Its annual revenue is expected to be $3.32 billion in fiscal 2022, representing a 50.3% year-over-year rise. The stock has surged 177.9% over the past year to close Friday’s trading session at $133.95. It has gained more than 120% over the past nine months.
ARCH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. It has an A grade for Momentum and a B grade for Growth and Quality.
We also have graded ARCH for Stability, Value, and Sentiment. Click here to access all of ARCH’s ratings. ARCH is ranked #7 out of 11 stocks in the A-rated Coal industry.
Reliance Steel & Aluminum Co. (RS)
RS operates internationally as a diversified metal solutions provider and a metals service center. The company distributes approximately 100,000 metal products and provides metal processing services to general manufacturing, non-residential construction, transportation, aerospace, energy, electronics, semiconductor fabrication, and heavy industries.
On February 17, 2022, Jim Hoffman, CEO of RS, said, “We believe our ongoing focus on value-added processing will continue to support our strong gross profit margin levels, and help stabilize our margins in times of declining prices.”
RS’ net sales surged 86.9% year-over-year to $3.99 billion in the fiscal fourth quarter ended December 31, 2021. Its net income grew 225.1% year-over-year to $421.30 million. The company’s non-GAAP EPS came in at $6.83, representing a 239.8% year-over-year increase.
For the current quarter ending June 30, 2022, analysts expect RS’ EPS and revenue to increase 42.5% and 32.4% year-over-year to $7.21 and $4.20 billion, respectively. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 29% over the past six months to close Friday’s trading session at $192.64. Over the past three months, the stock has surged 27.7%.
It’s no surprise that RS has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has an A grade for Momentum and a B grade for Growth, Sentiment, and Quality.
Click here to see RS’ rating for Value and Stability as well. RS is ranked #11 out of 34 stocks in the A-rated Steel industry.
MRO shares were trading at $24.14 per share on Monday afternoon, down $0.86 (-3.44%). Year-to-date, MRO has gained 47.50%, versus a -9.50% 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.
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