The increasing number of coronavirus cases in several U.S. states has compelled state governments to reinstate restrictions to maintain social distancing and flatten the curve. Markedly, the United States reported 60K cases on Jul 7, the highest since John Hopkins University started tracking the numbers.
The rising incidences of coronavirus infections are now threatening the reopening of the economy and steady economic revival despite improving consumer confidence and lower unemployment rate.
These growing concerns dealt a blow to Wall Street on Jul 7, as major U.S. indices, namely, the Dow Jones Industrial, the S&P 500 and the Nasdaq declined 1.5%, 1.1% and 0.9%, respectively.
Beleaguered Stocks Make Lucrative Buys
Investors are particularly having a tough time sailing through the market turbulence, with the volatility expected to stay till the availability of an effective vaccine.
However, widespread stock sell-offs are creating buying opportunities, particularly in sectors that have been hit hard by the virus.
Investors can take advantage of the beaten-down prices to buy stocks that have strong fundamentals, solid balance sheets with low debt levels and robust cash flow generating abilities. These factors are expected to help them rebound much faster from the downturn.
Here we pick five large-cap stocks that have lost more than 25% year to date but have all the afore-said features. Large caps have strong fundamentals that help them stay afloat in a turbulent economic and business environment. Each of the five stocks has a market cap of more than $10 billion. They have also seen positive earnings estimate revisions in the past 60 days.
Further, these stocks have a favorable combination of a Growth Score of A or B and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks proprietary methodology suggests that stocks with such a perfect mix of elements offer solid investment opportunities.
Concho Resources CXO is known for its strategic acreage position in the low-cost Permian Basin. The upstream player’s midstream investments to transport output from wells to delivery points are much appreciated.
Moreover, this $10.19-billion company’s current ratio of 2.16 is very healthy. It also has an undrawn credit facility of $2 billion that provides it with enough financial flexibility to survive the current energy market turmoil.
Concho has a Growth Score of A. The Zacks Consensus Estimate for its 2020 has jumped 38.7% to $2.51 per share over the past 60 days. The stock has dropped 42.1% year to date.
The Charles Schwab Corporation SCHW is expected to benefit from accretive acquisitions. Markedly, the buyout of USAA’s Investment Management Company and planned acquisition of TD Ameritrade will help diversify revenues. Moreover, the acquisitions of Motif’s technology and intellectual property and Wasmer, Schroeder & Company, LLC strengthen this $44.04-billion company’s position in the brokerage industry.
Schwab is also focused on maintaining a low-cost capital structure and targets to maintain a long-term debt to total financial capital of less than 30%.
Schwab has a Growth Score of B. The consensus mark for its 2020 earnings is pegged at $2.09 per share, having been raised 1% in the past 60 days. Shares have declined 28.7% year to date.
Chevron’s CVX well economics in the Permian Basin, where it has substantial holdings of 2.2 million net acres, continues to show improvement. Thanks to its successful cost-control initiatives, this $165.36-billion company has lowered its break-even price for oil to an industry-leading $51 per barrel.
Moreover, Chevron has a strong balance sheet with a debt-to-total capitalization of a modest 18.4%. The company has kept its capital expenditure target through 2024 stable, thereby creating opportunities to generate considerable cash flow.
Chevron has a Growth Score of B. The Zacks Consensus Estimate for 2020 earnings is currently pegged at 27 cents per share, which improved from loss of 45 cents per share, over the past 60 days. The stock has lost 28.4% year to date.
Pioneer Natural Resources PXD is a leading upstream energy firm, with footprint in Permian. In the Midland basin, the company has the largest acreage position with operations across 680,000 net acres of land. Moreover, it revised its 2020 capital budget to the band of $1.4-$1.6 billion, representing a decline of roughly 55% from the initial projection. Nevertheless, this $16.28-billion company is expected to see increased production volumes in 2020 on strong operational efficiencies.
Further, debt-to-capitalization (currently 17.8%) has been persistently lower than the industry over the past few years, reflecting considerably lower debt exposure. Low leverage positions Pioneer Natural well ahead of peers to emerge from the downturn.
Pioneer Natural has a Growth Score of B. The consensus mark for its 2020 earnings is pegged at $1.47 per share, having been revised 137% upward in the past 60 days. The stock has plunged 36.5% year to date.
Celanese CE is well-poised to gain from expansion in emerging regions. Operational cost savings through productivity actions are likely to lend support to the company’s earnings in 2020. Acquisitions are also expected to drive results in the Engineered Materials unit.
Moreover, Celanese continues to generate strong cash flows and is focused on returning value to shareholders. The company, in April 2019, raised its quarterly cash dividend by 15% to 62 cents a share. Its board also approved a new $1.5-billion share repurchase program.
Celanese has a Growth Score of B. The consensus mark for its 2020 earnings is pegged at $6.70 per share, having been revised 0.7% upward in the past 60 days. The stock has plunged 28.5% year to date.
5 Stocks to Soar Past the Pandemic: In addition to the companies you learned about above, we invite you to learn about 5 cutting-edge stocks that could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of the decade.
See the 5 high-tech stocks now>>
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Chevron Corporation (CVX) : Free Stock Analysis Report
The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report
Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report
Concho Resources Inc. (CXO) : Free Stock Analysis Report
Celanese Corporation (CE) : Free Stock Analysis Report
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