Investors are optimistic about the upcoming Federal Reserve meeting. So we think it might be wise to bet on quality stocks QUALCOMM Incorporated (QCOM), GMS Inc. (GMS), Axcelis Technologies, Inc. (ACLS) and Huttig Building Products, Inc. (HBP). They are each well positioned to experience a Santa Claus rally. Read more.
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Markets closed lower yesterday on the expected Federal Reserve meeting and the rapid spread of the COVID-19 omicron variant. However, as a potential rate hike has already been factored in and the ommicron variant appears milder than expected, investor sentiment is expected to remain favourable.
The market expects nearly three rate hikes in 2022, but stocks are at record highs. According to Jefferies strategist Sherif Hamid, “So there’s a lot of short-term hawkishness in the price already.” According to a Factset report, the S&P 500 will also close above 5,200 in 2022.
Against this background, we think it may be wise to bet on fundamentally healthy stocks of QUALCOMM Incorporated (QCOM), GMS Inc. (GMS), Axcelis Technologies, Inc. (ACLS) and Huttig Building Products, Inc. (HBP). They have been rallying for the past few months and are expected to be part of this year’s Santa Claus rally.
QUALCOMM Incorporated (QCOM)
QCOM, based in San Diego, California, develops and commercializes fundamental technologies for the wireless industry worldwide. It has three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licenses (QTL); & Qualcomm Strategic Initiatives (QSI).
On November 16, 2021, QCOM announced a partnership to bring the latest advancements in driver assistance technologies and products from its Snapdragon Ride Platform to the next generation of advanced driver assistance systems and automated driving platforms from BMW Group. Cristiano Amon, the president and CEO of QCOM, said, “We are very proud of this milestone and can’t wait to take our jointly designed products on the road.”
QCOM’s non-GAAP revenue came in at $9.32 billion, up 43.4% year over year for the fiscal fourth quarter ended September 26, 2021. Non-GAAP net income came in at $2. 92 billion, up 74.7% year over year year. Also, non-GAAP EPS increased 75.9% year-over-year to $2.55, and non-GAAP EBT came in at $3.28 billion, up 76% year-over-year.
Analysts expect QCOM revenue to grow 18.2% to $39.54 billion in fiscal 2022. Earnings per share are expected to rise 25.5% to $10.72 in the current year. The stock has surpassed its EPS estimates in each of the last four quarters. Over the past year, it is up 27.1% in price to close out yesterday’s trading session at $183.32.
QCOM’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a strong buy in our POWR Ratings system. The POWR Ratings rate stocks on 118 different factors, each with its own weighting.
The stock also has an A rating for Momentum and Sentiment and a B rating for Value and Quality. Within the Semiconductor & Wireless Chip industry, it ranks 11th out of 100 stocks. Click here to see the additional POWR Growth and Stability ratings for QCOM.
Click here to view our 2021 Semiconductor Industry Report
GMS Inc. (GMS)
GMS distributes wall plates, suspended ceilings and additional building products in the US and Canada. Based in Tucker, Georgia, the company has approximately 268 locations in 44 states and the District of Columbia and six provinces in Canada.
On December 1, 2021, GMS announced the closing of its acquisition of AMES Taping Tools LLC. John C. Turner, Jr., President and CEO of GMS, said: “We are pleased to announce the successful completion of the AMES transaction as part of our strategy to grow our complementary product offerings, as well as the continued execution of our strategic priority of platform expansion.”
GMS net sales increased 41.5% year over year to $1.15 billion for the fiscal second quarter of 2022 ended October 31, 2021. The company’s gross profit was $371.87 million, an increase of 40.3% on an annual basis. And net income increased 161.2% year-over-year to $74.36 million.
For fiscal 2022, analysts expect GMS revenue to reach $4.51 billion, up 36.8% year over year. The company’s earnings per share are expected to grow 104.5% year-over-year to $7.24 in the current year. It beat EPS estimates in each of the next four quarters. Over the past year, the stock is up 106.4% in price to close out yesterday’s trading session at $57.70.
GMS has an overall A rating, which is equivalent to a Strong Buy in our POWR Ratings system. The stock also has an A rating for growth and a B rating for momentum and sentiment. Within the Industrial – Building Materials sector, it ranks 3rd out of 54 shares. Click here to view additional POWR Value, Stability and Quality ratings for GMS.
Click here to view our industry sector report for 2021
Axcelis Technologies, Inc. (ACLS)
ACLS in Beverly, Mass., designs, manufactures, and services ion implantation and other processing equipment used to manufacture semiconductor chips. In addition, it offers a complete line of high-energy, high-current and medium-current implanters for all application requirements.
On November 3, 2021, President and CEO Mary Puma noted, “Axcelis delivered a very strong financial performance in the third quarter, driven by record implant system sales and solid gross margins. Significant market expansion.”
For the fiscal third quarter ended September 30, 2021, ACLS total revenue increased 60% year over year to $176.69 million. The company’s gross profit was $76.51 million, up 58.9% year over year. Operating income was $36.39 million, up 162.2% year over year.
ACLS revenue is expected to reach $646.78 million in fiscal 2021, representing a 36.3% year-over-year increase. In addition, the company’s earnings per share are expected to grow 98.5% year-over-year to $2.68 in the current year. It also outperformed Street’s EPS estimates in each of the lagging four quarters. Over the past year, the stock is up 123.6% in price to close out yesterday’s trading session at $63.41.
Not surprisingly, ACLS has an overall A rating, which equates to a strong buy in our proprietary rating system. It also has an A rating for Growth and Momentum and a B rating for Sentiment and Quality.
ACLS is ranked 7th out of 100 stocks in the Semiconductor & Wireless Chip industry. Click here to view ACLS ratings for value and stability.
Click here to view our 2021 Semiconductor Industry Report
Huttig Building Products, Inc. (HBP)
HBP, along with its subsidiaries in St. Louis, Miss., distributes milling, building materials, and wood products for new construction, home improvement, remodeling, and repair throughout the United States.
On November 3, 2021, Jon Vrabely, HBP’s President and CEO, said: “Our strong quarterly and year-over-year performance is a direct result of the fortitude and dedication of our employees and the actions we have taken over the past two years to financial model in a meaningful and sustainable way.”
HBP’s net sales increased 15.3% year-over-year to $245.3 million for the fiscal third quarter ended September 30, 2021. Net revenue came in at $18.7 million, an increase 206.6% yoy, and EPS increased 183.3% yoy to $0.68.
Over the past year, the stock is up 157.3% in price to close out yesterday’s trading session at $9.34.
HBP’s strong fundamentals are reflected in its POWR ratings. The stock has an overall A rating, which equates to a strong buy in our proprietary rating system.
It also has an A grade for Growth and Value and a B grade for Momentum and Quality. It ranks No. 1 in the industry – building materials industry. Click here to see additional POWR ratings for HBP (Stability and Sentiment).
Please note that HBP is one of the few stocks carefully selected by our Chief Growth Strategist, Jaimini Desai, and currently in the POWR stock below $10 portfolio. Read more here.
QCOM shares fell $2.82 (-1.54%) in premarket trading Tuesday. Year-to-date, QCOM is up 20.67%, versus a 25.23% rise in the benchmark S&P 500 index over 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 commentary.
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