The market’s strong start to December hit a slippery patch during the week of Dec. 7 for some familiar reasons. Friday’s decline came after U.S. stimulus talks reportedly hit yet another potential roadblock. But the downturn seemed due after stocks surged for roughly five-straight weeks from the start of November, and more fiscal support is likely inevitable as many of the hardest-hit businesses face another round of restrictions.
The market is only days removed from climbing to new records, after the U.K. began administering doses of Pfizer and BioNTech’s Covid-19 vaccine. This is likely to kick off what many in the market hope will be months of continuous vaccine rollouts that are projected to help get the economy closer to normal during 2021.
The vaccine news dramatically expanded that market’s rally outside of pandemic winners like Zoom Video
ZM
, Target
TGT
, and others. In fact, November’s wide-spread rally saw over 450 stocks in the S&P 500 climb. This represented the largest share for any month since April, according to the Wall Street Journal, and blew away October’s 212 and September’s 153.
Meanwhile, Q3 earnings results came in better than expected and the outlook for the fourth quarter and 2021 was improving long before the vaccine news. And last, but certainly not least, the monetary policy in the U.S. and elsewhere is set to boost stocks as investors hunt for returns amid low interest rates (also read:
First Look Ahead to the Q4 Earnings Season
).
All of this sets up a bullish outlook for next year. That said, investors might not want to jump into stocks that are banking on a highly successful vaccine rollout. Therefore, today we focused on three large-cap giants from completely different industries that pay a dividend and look poised to grow no matter what happens in 2021…
AbbVie
ABBV
AbbVie is a pharmaceutical powerhouse that completed its $63 billion acquisition of Allergan in May 2020. The deal added Botox and other popular drugs to its expanding roster of therapeutics that span a wide variety of illnesses and diseases. ABBV’s R&D pipeline is also strong. This should all help ABBV deal with the fact that its patent protections for Humira, one of the world’s top-selling drugs, are running out. Biosimilars are already available outside of the U.S., with competition set to begin stateside in 2023.
With this in mind, global Humira revenue popped 4% in Q3, driven by 8% growth in the U.S., while international sales fell 9%. Overall, ABBV’s third quarter sales surged by 52%, driven by Allergan’s inclusion. “Results from key growth products–including Skyrizi, Rinvoq and Ubrelvy–continue to track ahead of our expectations, our aesthetics portfolio is demonstrating a strong V-shaped recovery, our hematologic-oncology franchise is delivering double-digit growth and we’re advancing numerous attractive late-stage pipeline programs,” CEO Richard Gonzalez said in prepared remarks.
ABBV shares have climbed 20% in the last year to crush the Large-Cap Pharma industry’s 7% average. The stock also trades at a solid discount to its industry at 8.9X forward earnings vs. 14.9X. Furthermore, it has consistently raised its dividend. Last quarter, it lifted its payout by 10% to $1.30 a share, with its next dividend payable on February 16 to shareholders of record as of January 15. This pushes its yield up to 4.9% to destroy its industry’s 2.3% average, Eli Lilly’s
LLY
1.8%, and the S&P 500’s 1.6% average.
All of this helped AbbVie catch the attention of Warren Buffett and Berkshire Hathaway in the third quarter, as the firm bought up pharmaceutical stocks. ABBV is a Zacks Rank #3 (Hold) right now that rocks an “A” grade for Value and a “B” for Growth in our Style Scores system. And the stock still trades 8% below its 2018 highs.
Looking ahead, Zacks estimates call for its sales to jump 37% in FY20 and another 18% in FY21. Meanwhile, its adjusted EPS is projected to climb 17% this year and 16% in FY21. Investors should also know that 12 of the 18 brokerage recommendations Zacks has for AbbVie come in at a “Strong Buy.”
Microsoft
MSFT
Microsoft hasn’t needed an introduction to investors or the general public for decades. And it’s arguably more influential and diversified than at any point in its history. The company is a cloud computing titan alongside Amazon
AMZN
and its cloud efforts play a role in nearly every facet of its business. This includes MSFT’s Office business that remains invaluable to countless businesses, organizations, and schools.
Microsoft is also set to grow within the ever-expanding global gaming market, with its Xbox content and services revenue up 30% last quarter. Meanwhile, its portfolio of remote work and business communication offerings have become more important than ever during the coronavirus economy. Plus, it last held $137 billion in cash and equivalents that will help it continue to make strategic acquisitions, both big and small, and weather nearly any possible economic storm.
Peeking ahead, estimates call for Microsoft’s revenue to jump by 10% in both fiscal 2021 (current year) and FY22. The firm’s projected top-line growth would follow three straight years of between 13% to 15% revenue expansion, which is highly impressive for a firm of its size and age. Meanwhile, its adjusted earnings are expected to climb 17% and 10%, respectively over this stretch.
MSFT’s positive earnings revisions help it grab a Zacks Rank #2 (Buy) at the moment. Microsoft stock is up 35% in the past year and 150% in the last three. This run has helped push its market cap up to around $1.6 trillion and the stock currently sits about 8% below its early September highs. Plus, its 1.1% dividend yield beats the 10-year U.S. Treasury and Apple’s
AAPL
0.70%. And for investors who needed any more confirmation of Microsoft’s standing on Wall Street, 20 of the 23 brokerage recommendations Zacks has for MSFT are at a “Strong Buy” with two more at a “Buy.”
Home Depot
HD
Home Depot has thrived during the coronavirus economy alongside Lowe’s
LOW
, RH
RH
, and countless other stocks that focus on the home market. HD has benefitted from home improvement and DIY projects and it counties to grow within the booming housing market that’s been spurred by low interest rates and a desire for more space.
For instance, U.S. home sales jumped to a 14-year high in October, which marked the fifth straight monthly increase. Perhaps more importantly, millennials continue to reach their prime homebuying years. This could help propel the broader housing market and adjacent industries. And some of this strength is reflected in its recent results, with HD’ Q1 revenue up 7.1% and both its second and third quarter sales up 23% to mark its strongest top-line expansion in years.
Zacks estimates call for HD’s adjusted Q4 earnings to pop 13% on 16% higher revenue, with Q1 FY21 EPS set to climb 30% on over 9% higher sales. Home Depot’s bottom-line outlook has improved since its last report and it earns a Zacks Rank #3 (Hold) at the moment, alongside its “A” grades for Growth and Momentum in our Style Scores system. HD is also part of our Building Products – Retail industry that sits in the top 14% of our more than 250 Zacks industries.
The firm has now paid a dividend for 135 straight quarters and its 2.3% yield easily tops LOW’s 1.5% and the 30-year U.S. Treasury’s 1.7%. On top of that, HD shares have outpaced the market in the last 12 months up 25% vs. 16% and over the past five years, up 100% vs. 88%. And investors might be pleased to note that Home Depot currently trades about 10% below its 52-week highs, which could give it plenty of room to climb,
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