S&P Capital IQ made confident appraisals of the global economic situation and pointed out favorable stocks heading into the second half of the year during a conference call last week. The financial information provider expects more signs of growing economic activity and better performance from stocks.
S&P’s top eight stocks for the third quarter are: Trinity Industries (TRN), Quanta Services (PWR), H&E Equipment Services (HEES), Spirit Airlines (SAVE), Delta Air Lines (DAL), Jet Blue (JBLU), Triumph Group (TGI), and Boeing (BA).
Jim Corridor, head of S&P Capital IQ’s Industrials and Consumer Staples division, attributed the upbeat forecast to rising consumer confidence, improving employment numbers, higher home sales, and better industrial production.
Top subsectors poised for best performance in the third quarter are: Commercial machinery and heavy trucks, air freight and logistics, and companies that extract, ship, and store petroleum products as oil production from the United States and Canada increases and economic growth gains momentum.
1H&E Equipment Services (HEES)
H&E Equipment Services (HEES) is a national construction equipment rental company that posted a 11.7% rise in revenue and a 14.4% rental revenue hike year-over-year, according to its first-quarter earnings report. The company’s stock could enjoy “a period of accelerating growth” as it boasts “record rates of equipment utilization,” retains its market competitiveness, and adds to its already strategically advantageous location to oil and gas production sites in the southern U.S., according to Corridor. S&P anticipates 38% EPS growth next year.
2Trinity Industries (TRN)
Trinity Industries (TRN) was “one of the best performing stocks in the S&P 500 over the past year,” Corridor noted. The company specializes in manufacturing, leasing, and management of railcars, barges, and energy-related construction materials. With a reasonable stock valuation, 61% earnings per share growth predicted for 2014, high levels of backlog, and excellent revenue visibility, S&P Capital IQ pinned Trinity Industries as a top stock.
3Delta Air Lines (DAL)
Delta Air Lines (DAL) According to S&P, the company “leads the industry in creative thinking” for its investors. Delta pays dividends to stockholders, actively paid down debt, bought back stock, and even recently invested in its own oil refinery, providing it insulation from crude oil price fluctuations.
4Quanta Services (PWR)
Quanta Services (PWR) provided engineering, procurement, and construction services to gas pipeline and electrical infrastructure industries last year. According to Corridor, Quanta is a good stock because it “plays into several trends that will be strong drivers” over the next several years as America’s internet network will require updating and Canadian and American oil and gas production balloons.
5Jet Blue (JBLU)
Jet Blue (JBLU) represents a good opportunity for investors looking for a buy-and-hold stock, according to S&P Capital IQ. The stock is little changed since Dave Barger took over as CEO seven years ago. However, with a 30% discount to peers, Jet Blue is one of the “easiest [stocks] to argue for up-side potential,” for investors, noted Corridor.
6Triumph Group (TGI)
Triumph Group (TGI) produced aero-structures for planes and the firm has been “punished for being an erratic financial performer,” Corridor said. The company faced numerous challenges in production, but is “easiest to argue for up-side potential” as it continues to estimate 38% growth in stock price if it can reduce production errors and inefficiencies.
7Spirit Airlines (SAVE)
Spirit Airlines (SAVE) advertised as a low-cost alternative to major airlines showed positive business indicators with a healthy balance sheet and fast growth. However, a recent review published by the U.S. Public Interest Research Group, reported Spirit was three times more likely to receive customer complaints than other airlines. Spirit CEO Ben Baldanza quickly responded to the report and noted Spirit’s robust safety record, efficient terminal times, and growing use by consumers as evidence of the frugal company’s reasonable business decisions.
Corridor summed it up: “The company is universally despised by customers, but that does not stop them from booking flights.”
Boeing (BA) logged a $440 billion backlog in the first quarter. While the main risk for the stock remains its prevalent military exposure, S&P Capital IQ maintained that the company should a have strong performance next quarter. The stock rose 24% over the last twelve months.
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