After the Labor Department's hiring report stated that U.S. employers added only 235,000 jobs in August, barely one-third of the consensus forecast of 730,000 jobs added, global stock markets and Wall Street futures climbed on Monday, supported by expectations that the Federal Reserve may postpone the withdrawal of economic stimulus. Although the Dow Jones Industrial Average (DJIA) declined yesterday on concerns surrounding the Delta Variant’s impact on the economic recovery, some investors and analysts remain optimistic.
Officials indicated that the Fed might decide this month on when to initiate tapering of its bond purchases. Because employment is a crucial factor, the Fed wants to ensure that an economic recovery is enroute for sure. This position has fostered positive investor sentiment. The Fed’s postponement in reducing bond purchases will ensure capital continues to flow in the financial system to aid economic recovery.
Given this backdrop, we think it could be wise to bet on fundamentally sound Dow Jones stocks UnitedHealth Group Incorporated (UNH), McDonald’s Corporation (MCD), Honeywell International Inc. (HON), and Walgreens Boots Alliance Inc. (WBA).
UnitedHealth Group Incorporated (UNH)
UNH is a diversified health care company based in the United States. UnitedHealthcare; OptumHealth; OptumInsight; and OptumRx are the company’s four operational segments. Last month, the state of Nevada selected Health Plan of Nevada, a UnitedHealthcare company, as one of four managed care companies to run its Medicaid program in Clark and Washoe counties, effective Jan. 1, 2022. The four-year contract will include the state’s Temporary Assistance for Needy Families, Children’s Health Insurance Program, and Medicaid expansion programs.
UNH’s revenue increased 14.8% year-over-year to $71.32 billion in the second quarter, ended June 30, 2021. Its operating income came in at $5.98 billion. The company reported $4.27 billion in net income, while its EPS came in at $4.46 over this period.
The company’s EPS is expected to grow 11.1% year-over-year to $18.75 in its fiscal year 2021. Analysts expect UNH’s revenue to increase 10.4% year-over-year to $283.86 billion in the current year. The stock has gained 33.7% in price over the past year and 20.6% year-to-date.
UNH's POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
UNH is also rated an A for Stability, and a B for Quality. In addition, it is ranked #2 of 11 stocks within the B-rated Medical – Health Insurance industry.
To see additional POWR Ratings for Growth, Momentum, Value, and Sentiment for UNH, click here.
Click here to checkout our Healthcare Sector Report for 2021
McDonald’s Corporation (MCD)
MCD, a prominent global foodservice retailer, operates and franchises more than 39,000 McDonald’s restaurants worldwide. U.S. International Lead Markets; High Growth Markets; Foundational Markets; and Corporate are among the company's target markets.
During the second quarter, ended June 30, 2021, MCD’s total revenue increased 57% year-over-year to $5.89 billion. Its operating income climbed 180% from its year-ago value to $2.69 billion, while its net income surged 358.7% year-over-year to $2.22 billion over this period. The company’s EPS increased 353.9% from the year-ago value to $2.95.
A $9.05 consensus EPS estimate for the current year represents a 49.6% improvement year-over-year. Analysts expect MCD's revenue to increase 19.4% year-over-year to $22.94 billion in its fiscal year 2021. The stock has gained 11.6% in price over the past year and 12.9% over the past nine months.
MCD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy. The stock also has an A grade for Quality, and a B for Sentiment and Stability. In the A-rated Restaurants industry, it is ranked #20 of 46 stocks.
In total, we rate MCD on eight different levels. Beyond what we've stated above, we have also given MCD grades for Growth, Momentum, and Value. Get all the MCD ratings here.
Honeywell International Inc. (HON)
HON is a diversified technology and manufacturing company worldwide. Aerospace; Honey Building Technology; Performance Materials and Technologies; and Safety and Productivity Solutions are the company's four operational segments. In addition, it has strategic partnerships with DENSO Corporation, Signify, and IDEMIA Group, S.A.S.
Last month, HON announced that it was experimenting with a new technology suite for light drones that will allow them to fly for three times longer and require less human intervention. According to the company, drones equipped with Honeywell's Beyond Visual Line of Sight (BVLOS) technology can fly further, carry more weight, avoid dangers up to three kilometers away, and transmit video of their journey anywhere globally, outperforming typical drones that use batteries and line-of-sight radio connections.
For the second quarter, ended June 30, 2021, HON’s net sales increased 17.8% year-over-year to $8.81 billion. The company’s operating margin increased 450 basis points year-over-year to $18.1%. Its net income increased 32.3% year-over-year to $143 billion, while its EPS grew 33.4% from the prior-year quarter to $2.04.
Analysts expect HON’s revenue to increase 7.9% year-over-year to $35.2 billion in its fiscal year 2021. In addition, the company's EPS is expected to grow 14.1% in the current year. Over the past year, the stock has gained 37.3% in price. Also, it has returned 7.4% year-to-date.
HON's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. HON has also rated B for Growth, Quality, and Stability. Within the A-rated Industrial – Manufacturing industry, it is ranked #20 of 45 stocks.
Click here to see additional POWR Ratings for Momentum, Value, and Sentiment for HON.
Click here to check out our Industrial Sector Report for 2021
Walgreens Boots Alliance Inc. (WBA)
WBA operates as a pharmacy-led health and beauty retail company. Retail Pharmacy USA; Retail Pharmacy International; and Pharmaceutical Wholesale are the company's three business segments. It offers its products under various brands, including Walgreens, Duane Reade, Boots, and global health and beauty product brands, including No7, NICE!, Soap & Glory, Liz Earle, Finest Nutrition, Botanics, Well Beginnings, Sleek MakeUP, and YourGoodSkin.
This month, WBA and InComm Payments, a leading global payments technology company, launched Scarlet1, a bank account and debit card powered by Mastercard and issued by MetaBank, which will be available exclusively at Walgreens. Through this collaboration, the company aims to expand its financial services offerings and expand the broad spectrum of financial solutions accessible to customers, patients, and communities.
WBA’s sales increased 12.1% year-over-year to $34.03 billion in the third quarter, ended May 31, 2021. Its operating income was $1.13 billion, compared to a $1.68 billion operating loss in the prior-year quarter. The company reported $1.20 billion in net income, versus a $1.71 billion net loss in the third quarter of 2020. Its EPS amounted to $1.38, compared to a $1.95 loss per share during the same period last year.
A $136.28 billion consensus revenue estimate for next year represents a 3.6% increase year-over-year. WBA’s EPS is expected to increase 11% year-over-year to $4.75 in its fiscal year 2021. Also, the stock has returned 38.3% in price gains over the past year and 28.6% so far this year.
It is no surprise that WBA has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Growth, Stability, and Value. In the Medical – Drug Stores industry, it is ranked #2 of 6 stocks.
In addition to the POWR Ratings grades we have just highlighted, one can see the WBA ratings for Momentum, Sentiment, and Quality.
UNH shares were trading at $417.36 per share on Wednesday morning, down $3.88 (-0.92%). Year-to-date, UNH has gained 19.87%, versus a 21.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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