As market conditions shift and investor sentiment evolves, momentum stocks take center stage. With recent economic data, including a surprising drop in jobless claims fueling optimism and major market indices showing signs of recovery, savvy investors are turning their attention to stocks poised for significant gains.
Amid the current market landscape, momentum stocks Enterprise Products Partners L.P. (EPD), PulteGroup, Inc. (PHM), and Lennar Corporation (LEN) stand out as prime candidates for substantial returns.
The Labor Department reported this Thursday that initial jobless claims were a seasonally adjusted 233,000 for the week, a decline of 17,000 from the prior week’s upwardly revised level and lower than the Dow Jones estimate for 240,000. Less-than-expected weekly jobless claims are a positive sign for the labor market.
After a sharp market sell-off earlier in the week, U.S. stocks surged yesterday following new labor market data that drove investors’ confidence in the economy. The S&P 500 index climbed 2.3% to 5,319.31, marking its best day since November 2022. The Dow Jones soared 1.76% to 39,446.49, while the Nasdaq Composite gained 2.9%, closing at 16,660.02.
Meanwhile, the 10-year Treasury yield hit 4% after the jobless claims data, matching levels seen before last Friday’s disappointing July jobs report Friday that had unsettled the markets.
Moreover, on Thursday, a weaker Japanese yen against the U.S. dollar supported the markets. The yen’s surge, which led to the unwinding of a popular carry trade with hedge funds, was a key factor behind Monday’s sharp stock decline.
Let’s discuss the fundamentals of three momentum stocks, EPD, PHM, and LEN, which are well-poised to capitalize on current market trends.
Enterprise Products Partners L.P. (EPD)
EPD offers midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products. The company operates in four segments: NGL Pipelines & Services; Crude Oil Pipelines & Services; Natural Gas Pipelines & Services; and Petrochemical & Refined Products Services.
On July 30, EPD announced expanding the Houston Ship Channel in response to continued solid customer demand for natural gas liquids export capacity. At the Enterprise Hydrocarbons Terminal (EHT), the company is adding its refrigeration capacity to boost propane and butane export capabilities by roughly 300,000 barrels per day (bpd).
Besides adding extra capacity for liquefied petroleum gas (LPG), the expansion will enhance the instantaneous loading rates for propane and butane and offer more capacity for propylene exports. The upgraded service is anticipated to commence by the end of 2026.
In April, EPD received the deepwater port license for the Sea Port Oil Terminal from the United States Maritime Administration, an agency within the federal Department of Transportation. The license will enable the company to move forward to the next step in developing the offshore terminal capable of loading 2 million barrels per day of crude oil.
For the second quarter that ended June 30, 2024, EPD’s revenues increased 26.6% year-over-year to $13.48 billion. Its operating income grew 11.8% year-over-year to $1.77 billion. Net income attributable to common unitholders rose 12.1% from the prior year’s quarter to $1.41 billion. Its earnings per common unit was $0.64, up 12.3% year-over-year.
In addition, the company’s adjusted EBITDA grew 10% year-over-year to $2.39 billion. Its adjusted CFFO rose 10.7% from the previous year’s quarter to $2.07 billion.
Analysts expect EPD’s revenue and EPS for the third quarter (ending September 2024) to grow 19.1% and 13.4% year-over-year to $14.29 billion and $0.69, respectively. Also, the company topped the consensus revenue estimates in three of the four trailing quarters.
Shares of EPS have surged 11.7% over the past six months and 11.3% year-to-date to close the last trading session at $29.33. The stock is trading above its 100-day and 200-day moving averages of $28.94 and $27.85, respectively, indicating an uptrend.
EPD’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
EPD has an A grade for Momentum and a B for Value and Stability. It is ranked #3 out of 23 stocks in the A-rated MLPs – Oil & Gas industry.
In addition to the POWR Ratings we’ve stated above, we also have EPD ratings for Quality, Sentiment, and Growth. Get all EPD ratings here.
PulteGroup, Inc. (PHM)
PHM, through its subsidiaries, engages in the homebuilding business. It acquires and develops land mainly for residential purposes and constructs housing on such land. Also, the company provides various home designs under the Centex, Pulte Homes, American West, Del Webb, DiVosta Homes, and John Wieland Homes and Neighborhoods brand names.
On July 9, PHM announced the pre-sale launch of Deep Creek at Jordanelle Ridge, its first Utah community in nearly two decades. It is located in the breathtaking Uinta mountainside in Heber City and offers the perfect blend of outdoor living and city conveniences. The Canyon Series at Deep Creek features eight home designs, with prices starting in the mid-$700Ks.
During the second quarter that ended on June 30, 2024, PHM’s revenues increased 9.8% year-over-year to $4.60 billion. Its income before taxes was $1.05 billion, up 10% from the prior year’s quarter. Its net income and earnings per share came in at $809.13 million and $3.83, increases of 12.3% and 19.3% from the previous year’s period.
Street expects PHM’s revenue for the third quarter (ending September 2024) to increase 7.1% year-over-year to $4.29 billion. Its EPS for the same period is expected to grow 9.8% year-over-year to $3.18. Moreover, the company surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past six months, the stock has gained 18.3% and 42% over the past year to close the last trading session at $122.13. PHM’s stock is trading above its 100-day and 200-day moving averages of $116.75 and $106.59, respectively, indicating an uptrend.
PHM’s bright outlook is reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
PHM is ranked #4 out of 22 stocks in the Homebuilders industry. It has an A grade for Momentum and a B for Quality. To access PHM’s ratings for Growth, Value, Stability, and Sentiment, click here.
Lennar Corporation (LEN)
Lennar Corporation operates as a homebuilder primarily under the Lennar brand. The company operates through Homebuilding East; Homebuilding Central; Homebuilding Texas; Homebuilding West; Financial Services; Multifamily; and Lennar Other segments.
On July 30, Quarterra Multifamily, LEN’s subsidiary, announced the start of leasing at Harwood, a luxury community in North Phoenix. Harwood includes 268 upscale apartment homes with spacious, stylish designs, and top-tier finishes for the ultimate comfort and convenience.
Also, on July 7, LEN’s Quarterra Multifamily started leasing at Dryden, a luxury community that blends urban activity and walkability with the elegance and culture of Denver’s ideal Golden Triangle Neighborhood.
Nick Russell, Vice President of Development at the Quarterra Group, said, “Location is another strategic aspect of Dryden's development. Nestled between CBD, Wash Park, Cherry Creek and Capitol Hill, in the city's renowned Golden Triangle creative district, the community locale puts everything Denver has to offer right at residents' fingertips. But the hustle and bustle of the city is checked at the door, because Dryden offers a sense of ease and tranquility within its walls.”
For the second quarter that ended May 31, 2024, LEN’s revenues increased 9% year-over-year to $8.77 billion. Its homebuilding operating earnings rose 10.4% year-over-year to $1.34 billion. Net earnings attributable to Lennar was $954.31 million, up 9.4% from the previous year’s quarter. Its EPS grew 14.6% from the year-ago value to $3.45.
In addition, the company’s EBIT came in at $1.30 billion, an increase of 6.9% year-over-year. As of May 31, 2024, its cash and cash equivalents amounted to $3.60 billion.
Analysts expect LEN’s revenue and EPS for the fiscal year (ending November 2024) to increase 2.9% and 1.1% year-over-year to $35.21 billion and $14.40, respectively. Further, the company topped consensus EPS estimates in all four trailing quarters, which is impressive.
LEN’s shares have gained 10.5% over the past six months and 33.3% over the past year to close the last trading session at $169.37. Moreover, the stock is currently trading above its 50-day and 200-day moving averages of $159.42 and $150.80, respectively, indicating an uptrend.
LEN’s POWR Ratings reflect its promising prospects. The stock has an A grade for Momentum and a B for Sentiment. It is ranked #9 out of 22 stocks in the Homebuilders industry.
Click here to access LEN’s ratings for Momentum and Sentiment.
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EPD shares were unchanged in premarket trading Friday. Year-to-date, EPD has gained 17.57%, versus a 12.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
3 Momentum Stocks to Capitalize on Current Trends StockNews.com
