While the COVID-19 pandemic affected the U.S. economy severely last year, it experienced a V-shaped recovery this year. Thanks to several rounds of fiscal stimulus, an ultra-low interest rate environment and easing public health anxiety with the roll out of COVID-19 vaccines, the economy now appears to be on solid footing.
This, along with a decent global economic recovery, has helped the stock market bounce back from its bottom in 2020 to hit all-time highs. This is evident in the Dow Jones Industrial Average (DJI), S&P 500, and Nasdaq Composite’s gains of 79.8%, 84.6% and 106.3%, respectively, from their lows in March 2020.
As the global economy has been recovering from the damage caused by the pandemic, companies with strong balance sheets have been returning to their pre-pandemic performance levels this quarter. In fact, shares of Covestro AG (COVTY), Foot Locker, Inc. (FL), and Gates Industrial Corporation plc (GTES) have been witnessing strong growth and momentum, which they have the potential to maintain. These stocks can be fairly described as no-brainer stocks now given their solid fundamentals. So, we think it could be wise to bet on these stocks now.
Covestro AG (COVTY)
Based in Leverkusen, Germany, COVTY produces polymer materials for industries, including automotive manufacturing, electronics, construction and home products. The company operates through the polyurethanes; polycarbonates; and coatings, adhesives, specialties (CAS) segments. It sells its products through trading houses and distributors.
This month, COVTY formed a partnership with the Color & Imaging Institute, Art & Science Research Center at the Tsinghua University in Beijing to work on a research project to develop an aesthetic, design-based identity for recycled polycarbonate materials. This study on sustainable materials should enable COVTY to serve industries in a better way and contribute to greater business success.
Also this month, COVTY received the JEC Innovation Award 2021 in the “Sustainability” category for its polyurethane infusion resins and offshore wind turbines. The recognition should help the company stand out in the market and drive its business growth.
COVTY’s sales increased 18.8% year-over-year to €3.31 billion ($4.01 billion) in the first quarter, ended March 31, 2021. The company’s APAC segment sales rose 56.4% from their year-ago value to €1.16 billion ($1.41 billion), while its EBITDA rose 192.5% year-over-year to €743 million ($900.89 million). It reported net income of €393 million ($476.51 million), compared to €20 million ($24.25 million) in the prior-year period.
COVTY’s total assets and tangible book value have grown at CAGRs of 6.8% and 4.2%, respectively, over the past three years. A $3.28 consensus EPS estimate for its fiscal year 2021 represents a 117.2% improvement year-over-year. Meanwhile, the $16.37 billion consensus revenue estimate for the current year indicates a 25.9% increase year-over-year. The stock has gained 76.8% over the past year and 6.4% so far this year.
COVTY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock also has an A grade for Momentum, Growth and Value. We have also graded COVTY for Quality, Stability, and Sentiment. Click here to access all COVTY’s ratings.
COVTY is ranked #1 of 99 stocks in the A-rated Chemicals industry.
Foot Locker, Inc. (FL)
Founded in 1879, FL is an athletic footwear and apparel retailer operating in the United States and internationally. It sells footwear, apparel, accessories, equipment, and team licensed merchandise under the brand names Foot Locker, Lady Foot Locker, Kids Foot Locker, Sidestep, among others, through various retail stores, e-commerce sites and mobile apps.
Last month, the company collaborated with the new creative director of its women’s business, Melody Ehsani, to launch a basketball-inspired capsule collection designed by her. By hosting a virtual festival entitled “No More Next” to celebrate the launch, FL provided fans the opportunity to be a part of a unique digital experience and market their collection at a global level.
In the first quarter, ended May 1, 2021, FL’s total sales increased 83.1% year-over-year to $2.15 billion. Its income from operations came in at $282 million, compared to a $105 million operating loss in the prior-year quarter. The company reported $205 million in non-GAAP net income, compared to a $70 million net loss in the prior-year period. Its cash and cash equivalents totaled $1.96 billion at the end of the first quarter.
FL’s revenue and total assets have grown at CAGRs of 3% and 23.4%, respectively, over the past three years. Its net income has increased at an 33.2% annualized rate over the past three years.
Analysts expect FL’s revenue for its fiscal year 2022 to be $8.57 billion, representing a 13.5% year-over-year growth. FL has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. The company’s EPS is likely to increase 40.8% for the current quarter, ending July 2021. FL’s stock has surged 52.4% year-to-date and 50.4% over the past six months.
FL’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which translates to Strong Buy in our POWR Ratings system. It has an A grade for Momentum, Growth and Sentiment also. In addition to the POWR Ratings grades we’ve just highlighted, one can see FL’s ratings for Stability, Value, and Quality here.
Of the 34 stocks in the A-rated Athletics & Recreation industry, FL is ranked #1.
Gates Industrial Corporation plc (GTES)
GTES is a manufacturer and seller of engineered power transmission and fluid power solutions worldwide under the Gates brand. The company provides metal drive components and kits for stationary and mobile drives, mobile hydraulics, tubing, and fittings, as well as hydraulic hoses.
In April, GTES launched MEGASys MXT with XtraTuff Plus cover (MXT-XTP), a universally applicable hydraulic hose, to expand its MXT-XTP hydraulic hose lineup. This premium solution should allow the company to meet the needs of challenging applications and broaden its portfolio of products.
In March, GTES introduced its new Carbon Drive Moto X9 synchronous drive belt for use in motor-driven two-wheelers. This innovative design should enable the company to deliver industry-leading solutions and increase customer satisfaction.
GTES’ revenue increased 24.1% year-over-year to $881.3 million in the first quarter, ended April 3, 2021. Its adjusted EBITDA under the power transmission segment grew 66.9% from its year-ago value to $132.7 million, while its 23.7% adjusted EBITDA margin expanded 570 basis points year-over-year. GTES reported $76.4 million in net income, representing a 91.5% year-over-year increase.
The company’s total assets have grown at a 2.6% CAGR over the past three years. GTES’ EPS is expected to increase 1,100% in the current quarter, ending June 2021, and 13.8% in 2022. A $904.95 million consensus revenue estimate for the current quarter represents a 57% improvement from the same period last year. Over the past year, the stock has returned 71.4%. Also, GTES’ stock surged 41.1% year-to-date.
It’s no surprise that GTES has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has an A grade for Momentum, and a B grade for Growth and Sentiment. Click here to see the additional POWR Ratings for GTES’ Stability, Value and Quality.
In the B-rated Auto – Parts industry, GTES is ranked #4 of 65 stocks.
COVTY shares were trading at $32.62 per share on Tuesday morning, down $0.67 (-2.01%). Year-to-date, COVTY has gained 8.13%, versus a 14.03% rise in the benchmark S&P 500 index during the same period.
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.