Investing in stocks can be a gateway to substantial capital gains, but the real rewards come from finding stocks that go beyond the market’s performance. For investors eager to achieve significant long-term appreciation, zeroing in on stocks that can outperform the broader S&P 500 Index ($SPX) can be especially lucrative.
As the most widely followed benchmark of U.S. stock market performance, the S&P 500 is the yardstick everyone aims to outshine, yet only a select few manage to pull it off. Having said that, it’s definitely possible to drill down on standout stocks - like Boston Scientific Corporation (BSX), Parker-Hannifin Corporation (PH), and Leidos Holdings, Inc. (LDOS) - that have not only matched, but outperformed, the returns of this equity benchmark.
While these “Strong Buy”-rated picks have demonstrated exceptional growth and resilience so far, Wall Street analysts believe there is still more room left to run. Here’s a closer look at these three names.
Stock #1: Boston Scientific Corporation
Commanding a market cap of $120.2 billion, Massachusetts-based Boston Scientific Corporation (BSX) has emerged as a global leader in medical technology and is dedicated to transforming lives through innovative solutions that enhance patient health. The company advances scientific progress by providing a wide range of high-performance technologies that address unmet patient needs and contribute to reducing healthcare costs.
Shares of Boston Scientific have rallied 52.9% over the past 52 weeks and 41% on a YTD basis, easily overshadowing the broader SPX’s gains of 22.8% over the past 52 weeks and 15.7% on a YTD basis.
Boston Scientific reported its Q2 earnings results on July 24, which blew past Wall Street’s expectations on both the top and bottom lines. The company reported net sales of $4.1 billion, marking a solid 14.5% year-over-year jump that topped estimates by 2.5%. This impressive performance was driven by stellar growth in both its MedSurg and Cardiovascular segments.
While net sales from Boston Scientific's MedSurg segment soared 9% annually, its Cardiovascular segment impressed with 18% year-over-year sales growth. During the quarter, the company achieved an adjusted EPS of $0.62, reflecting almost a 17% improvement from the previous year and comfortably exceeding analysts’ forecasts.
As of June 30, the medical device manufacturer boasted a strong cash position of $2.9 billion and a manageable gross debt leverage ratio of 2.4 times. In its Q2 earnings call, company executives highlighted that Boston Scientific’s primary capital allocation strategy centers on strategic tuck-in mergers and acquisitions, followed by annual share repurchases to mitigate dilution from employee stock grants.
For Q3, management anticipates net sales to grow 13% to 15% year over year, both reported and organically, while adjusted EPS is projected to range between $0.57 and $0.59. Looking forward to fiscal 2024, the company anticipates net sales growth of 13.5% to 14.5% year-over-year on a reported basis and 13% to 14% on an organic basis.
Additionally, full-year adjusted EPS is forecasted to land between $2.38 and $2.42. By comparison, analysts tracking Boston Scientific expect the company’s bottom line to hit $2.40 per share in fiscal 2024, representing a solid 17.1% annual jump. This growth is expected to continue into fiscal 2025, with profit projected to increase almost 13% year over year to $2.71 per share.
Overall, Wall Street is bullish, with a consensus “Strong Buy” rating for BSX. Of the 28 analysts covering the stock, 23 advise a “Strong Buy,” three advocate a “Moderate Buy,” and two recommend a “Hold.”
The average analyst price target of $88.28 indicates a potential upside of 9% from the current price levels. The Street-high price target of $100 suggests that the BSX could rally as much as 23.6% from here.
Stock #2: Parker-Hannifin Corporation
Founded in 1917, Cleveland-based Parker-Hannifin Corporation (PH) specializes in designing, manufacturing, and selling motion and control technologies and systems for various global markets, including the mobile, industrial, and aerospace sectors. With a market cap of around $74.1 billion, the company operates through two main segments: Diversified Industrial and Aerospace Systems.
Parker-Hannifin’s shares have soared 38.7% over the past year and 23.9% on a YTD basis, outpacing the broader SPX’s gains during both time frames.
Parker-Hannifin boasts an extraordinary 68-year streak of consecutive dividend increases, placing it among the top five S&P 500 companies with the longest-running dividend growth records. On Aug. 15, the Dividend King announced a quarterly payout of $1.63 per share, set to be distributed on Sept. 13.
PH’s annualized dividend of $6.52 per share results in a yield of 1.13% at current levels. With a conservative payout ratio of 23.54%, the company should have room to keep growing dividends.
Shares of Parker-Hannifin gained more than 10% on Aug. 8 after the company announced stronger-than-expected fiscal 2024 Q4 earnings results. The company delivered record-breaking Q4 results, with net sales up 2% year over year to $5.2 billion, surpassing Wall Street’s forecast of $5.1 billion.
Net sales from the Diversified Industrial segment dipped slightly, while the Aerospace Systems division reported a 19.2% year-over-year increase in net sales. The company’s adjusted EBITDA margin rose to 26.3% from the prior-year quarter’s 24.4%. On an adjusted basis, PH’s EPS of $6.77 surpassed consensus expectations by a solid 8.7% margin, and reflected an 11.4% annual improvement.
Looking ahead to fiscal 2025, management anticipates total sales growth of 1.5% to 4.5%, with organic growth between 2% and 5%. Adjusted full-year EPS is expected to range between $26.30 and $27.00, with non-GAAP total segment operating margin projected to arrive between 25.2% to 25.6%.
Analysts tracking Parker-Hannifin expect the company’s profit to reach $26.61 per share in fiscal 2025, up 4.6% year over year, and grow another 10% to $29.26 per share in fiscal 2026.
PH stock has a consensus “Strong Buy” rating overall. Of the 17 analysts in coverage, 14 suggest a “Strong Buy,” one recommends a “Moderate Buy,” and two have a “Hold” rating.
The average analyst price target of $643.43 indicates expected upside potential of 12.3% from the current price levels, while the Street-high price target of $717 suggests that PH could rise about 25.2%.
Stock #3: Leidos Holdings
Reston, Virginia-based Leidos Holdings, Inc. (LDOS) is a global leader in cybersecurity, providing advanced solutions across the defense, intelligence, civil, and health sectors, operating from over 400 locations in 30 countries.
Valued at $21.1 billion by market cap, shares of Leidos have easily outperformed the broader market with gains of roughly 58.7% over the past 52 weeks and 42.9% on a YTD basis.
On July 26, Leidos announced a quarterly dividend of $0.38 per share, payable on Sept. 27. This raises its annualized dividend to $1.52 per share, translating to a 0.97% yield. With a conservative payout ratio of just 16.65%, Leidos is investing the majority of its earnings into growth while maintaining significant potential for future dividend increases.
Beyond dividends, Leidos also returns value to shareholders through share repurchases. In Q2, the company allocated $114 million to buy back shares and distributed $51 million in quarterly dividends.
Leidos exceeded Wall Street’s expectations with its Q2 earnings results, reported on July 30. Revenue reached $4.1 billion, up 8% year over year on robust demand in managed health services. The company’s adjusted earnings of $2.63 per share surged 46.1% year over year, surpassing consensus projections by a 15.9% margin.
Adjusted EBITDA reached a record $559 million, marking a 33% year-over-year increase and boosting the margin to 13.5%. Increased volumes, better incentives, and tighter cost management drove the improved profitability. Additionally, the company generated free cash flow of $351 million during the quarter.
For fiscal 2024, management expects revenue to range between $16.1 billion and $16.4 billion, with adjusted EPS projected to arrive between $8.60 and $9.00. Analysts forecast a 22.6% year-over-year increase in profit to $8.95 per share for fiscal 2024, with a further 4.6% annual rise to $9.36 per share expected in fiscal 2025.
Overall, LDOS has a consensus “Strong Buy” rating. Out of the 14 analysts covering the stock, 12 recommend a “Strong Buy,” and two have a “Hold” rating.
The average analyst price target of $168.92 indicates a potential upside of 9.2% from the current price levels. The Street-high price target of $190 suggests that LDOS could rally as much as 22.8%.
On the date of publication, Anushka Mukherji did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
