In the wake of the Fed’s interest rate increase this week, Goldman Sachs now expects the Fed to raise interest rates by 50 basis points each at its May and June meetings, which might dampen investor sentiment considerably in the near term. However, stocks closed higher yesterday, absorbing Federal Reserve Chair Jerome Powell’s warning of more aggressive hikes.
Amid the volatile market, strong momentum stocks could be safer bets for investors since their momentum might continue for some time. Investors’ interest in momentum stocks is evidenced by the Virtus Terranova U.S. Quality Momentum ETF’s (JOET) 5.8% returns in the past month, compared to the SPDR S&P 500 Trust ETF’s (SPY) 4.7% returns.
The shares of ITOCHU Corporation (ITOCY), Reliance Steel & Aluminum Co. (RS), Univar Solutions Inc. (UNVR), and Danaos Corporation (DAC) have been showing impressive price trends, and their momentum might continue because of the companies’ solid revenue and earnings growth prospects. Therefore, we think these stocks could be solid bets now.
ITOCHU Corporation (ITOCY)
Headquartered in Tokyo, Japan, ITOCY trades, imports, and exports various products worldwide. Its segments are: Textile; Machinery; Metals & Minerals; Energy & Chemicals; Food; General Products & Realty; and ICT & Financial Business.
On March 16, 2022, ITOCY and Aquafil S.p.A. announced a non-exclusive business alliance agreement to promote and expand nylon circular business. ITOCY’s representative, Nobuyuki Tabata, Chief Operating Officer of the Chemical Department, said, “The business alliance with Aquafil enables us to commit to the nylon circular business and strengthen our contributions to SDGs in our medium-term management plan “Brand New Deal 2023”.”
ITOCY’s total assets came in at ¥11.18 trillion ($92.30 billion) for the period ended Dec. 31, 2021, compared to ¥10.92 trillion ($90.16 billion) for the period ended Dec. 31, 2020. Its cash flow from operating activities was ¥895.90 billion ($7.40 billion), compared to ¥878.13 billion ($7.25 billion) for the same period in the prior year. Also, its cash dividends were ¥88.00, compared to ¥85.00 in the previous period.
Analysts expect ITOCY’s revenue to increase 2.3% year-over-year to $26.70 billion for the period ended Sept. 30, 2022. Its EPS is estimated to increase 15.3% per annum for the next five years. Over the past three months, the stock has gained 13% in price to close yesterday’s trading session at $69.00. Its 50-day moving average of $65.24 is above its 200-day moving average of $61.18.
ITOCY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
ITOCY has an A grade for Stability and a B grade for Growth, Value, and Momentum. Within the B-rated Industrial - Manufacturing industry, it is ranked #3 of 39 stocks. Click here to see the additional POWR Ratings for Sentiment and Quality for ITOCY.
Click here to check out our Industrial Sector Report for 2022
Reliance Steel & Aluminum Co. (RS)
RS in Los Angeles operates as a diversified metal solutions provider and a metals service center company in the United States, Canada, and internationally. The company distributes approximately 100,000 metal products and operates a network of roughly 315 locations.
On Feb. 17, 2022, Jim Hoffman, RS’ CEO, said, “In addition to investing $237 million into our business in 2021 through capital expenditures, we completed four acquisitions in the fourth quarter with an aggregate purchase consideration of $439 million and returned over $500 million to our stockholders through dividends and repurchases of Reliance common stock.”
For its fiscal 2021 fourth quarter, ended Dec. 31, 2021, RS’ net sales increased 86.9% year-over-year to $3.99 billion. The company’s non-GAAP net income came in at $433.80 million, up 234.5% year-over-year, while its non-GAAP EPS came in at $6.83, up 239.8% year-over-year.
RS’ revenue is expected to be $15.15 billion in its fiscal 2022, representing a 7.5% year-over-year rise. The company’s EPS is expected to increase 17.3% per annum for the next five years. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 33.8% to close yesterday’s session at $195.28. Its 50-day moving average of $171.46 is above its 200-day moving average of $158.07.
It is no surprise that RS has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has an A grade for Momentum and a B grade for Growth, Sentiment, and Quality.
RS is ranked #10 of 33 stocks in the A-rated Steel industry. Click here to see the additional POWR Ratings for RS (Value and Stability).
Click here to checkout our Infrastructure Report for 2022
Univar Solutions Inc. (UNVR)
UNVR distributes commodity and specialty chemical products and provides related services worldwide. It is a leading global commodity and specialty chemical and ingredient distributor, representing a premier portfolio from leading global producers. UNVR is headquartered in Downers Grove, Ill.
On Feb. 24, 2022, David Jukes, President, and CEO, said, "For 2022, we expect continued strong demand as we capture share growth through our robust supplier relationships, Ingredients & Specialties authorizations, installed asset base, owned trucking fleet and digital backbone. We are targeting a strong full year adjusted EBITDA in the range of $860 million to $890 million."
UNVR’s net sales increased 22.7% year-over-year to $2.50 billion for its fiscal year 2021 fourth quarter, ended Dec.31, 2021. The company’s adjusted net income came in at $103.80 million, up 82.1% year-over-year, while its adjusted EPS came in at $0.60, up 76.5% year-over-year.
For its fiscal year 2022, analysts expect UNVR’s revenue to be $10.13 billion, representing a 6.3% year-over-year rise. The company’s EPS is expected to increase 12.7% per annum for the next five years. Over the past year, the stock has gained 59.1% in price to close yesterday’s trading session at $33.78. Its 50-day moving average of $29.07 is above its 200-day moving average of $26.39.
UNVR’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our POWR Rating system. Also, the stock has an A grade for Growth and a B grade for Value, Momentum, and Sentiment.
Click here to see UNVR’s ratings for Stability and Quality as well. Again, UNVR is ranked #6 of 89 stocks in the A-rated Chemicals industry.
Danaos Corporation (DAC)
Based in Piraeus, Greece, DAC, and its subsidiaries own and operate containerships in Australia, Asia, Europe, and the United States. It has a fleet of approximately 71 containerships, aggregating 436,589 twenty-foot equivalent units capacity.
On Feb.7, 2022, DAC’s CEO, Dr. John Coustas, said, “Our outlook directed our growth and chartering strategy, both of which have maximized our returns. On the other hand, our investment in Zim shares has surpassed all reasonable expectations and led to Danaos posting in excess of 1 billion USD in reported net income for 2021.”
DAC’s operating revenues increased 79.7% year-over-year to $215.04 million for the fourth quarter, ended Dec. 31, 2021. Its adjusted net income came in at $125.84 million, up 163.2% year-over-year, while its adjusted EPS came in at $6.10, up 166.4% year-over-year.
DAC’s revenue is expected to increase 27.9% to $881.80 million in 2022. Its EPS is estimated to increase 41.9% to $24.97 in 2022. It surpassed EPS estimates in three of the four trailing quarters. Over the past year, the stock has gained 97% in price to close yesterday’s trading session at $104.66. Its 50-day moving average of $91.21 is above its 200-day moving average of $78.15.
DAC’s strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
In addition, it has a B grade for Momentum, Sentiment, and Quality. It is ranked #21 of 48 stocks in the B-rated Shipping industry. Click here to see the additional POWR Ratings for DAC (Growth and Value).
ITOCY shares were trading at $68.43 per share on Wednesday morning, down $0.57 (-0.83%). Year-to-date, ITOCY has gained 11.18%, versus a -5.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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