ABB - 2 Hot Stocks to Buy Right Now

Even though economic activities are returning to pre-pandemic levels in some of the major economies thanks to their robust coronavirus vaccination drives and supportive fiscal and monetary policies, the stock market remains volatile. This is primarily because the Fed has signaled two interest rate hikes by late 2023, a year earlier than anticipated.

With several stocks currently trading at sky-high valuations, and with rising inflation becoming a major concern, we believe turning to momentum investing could be rewarding for investors because stocks that have managed to gain momentum over the past few months might be able to maintain the same in the near-term irrespective of any short-term fluctuations in the broader market. Investors’ increasing interest in momentum stocks is evident in the iShares MSCI USA Momentum Factor ETF’s (MTUM) 2.7% returns over the past month compared to SPDR S&P 500 Trust ETF’s (SPY) 1.7% gains.

ABB Ltd (ABB) and Canadian Natural Resources Limited (CNQ) have witnessed decent momentum over the past few months and we think their fundamental strength should allow them to continue rallying. So, it could be wise to scoop up these two stocks now.

ABB Ltd (ABB)

Headquartered in Zurich, Switzerland, ABB manufactures and sells electrification, industrial automation, and robotics and motion products for customers in the utilities, industry and transport, and infrastructure sectors worldwide. It operates through four segments—Electrification, Robotics & Discrete Automation, Industrial Automation and Motion. It has a strategic collaboration with International Business Machines Corporation (IBM).

ABB  launched ABB Ability Condition Monitoring for belts on June 8. It is an advanced digital service to enable mine operators to track speed, misalignment, damage, thickness and wear, slippage and temperature of conveyor belts in real time. So, ABB is expected to see increasing demand for this  solution in the coming months given its numerous advantages.

ABB’s revenues increased 11% year-over-year to $6.9 billion for the first quarter ended March 31, 2021. Its operational EBITA grew 51% year-over-year to $959 million, while its net income increased 34% year-over-year to $502 million. The company’s EPS has increased 41% year-over-year to $0.25.

For the quarter ending September 30, 2021, analysts expect ABB’s EPS to increase 66.7% year-over-year to $0.35. It surpassed the consensus EPS estimates in each of the trailing four quarters. Its revenue is expected to be $7.01 billion for the current quarter, ending June 30, 2021, which represents a 13.9% year-over-year rise.

The stock has surged 37.5% over the past nine months to close Friday’s trading session at $34.49. ABB has gained 56.1% so far this year. It is currently trading above its 50-day and 200-day moving averages of $34.03 and $31.21, respectively, indicating an uptrend.

ABB’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 assess stocks by 118 different factors, each with its own weighting.

It has an A grade for Momentum, and a B grade for Stability, Growth, and Quality. Click here to access the additional POWR Ratings for ABB (Value and Sentiment). ABB is ranked #8 of 84 stocks in the A-rated Industrial - Machinery industry.

Click here to check out our Industrial Sector Report for 2021

Canadian Natural Resources Limited (CNQ)

CNQ acquires, explores, produces, and sells crude oil, natural gas, and natural gas liquids (NGLs). The Calgary, Canada, company offers synthetic crude oil (SCO), bitumen (thermal oil), primary heavy crude oil, and Pelican Lake heavy crude oil. Its midstream assets include two crude oil pipeline systems and a 50% working interest in an 84-megawatt cogeneration plant at Primrose.

The company’s President, Tim McKay, said, “As the global vaccine distribution increases and crude oil demand recovers, especially in the United States, we are seeing improved commodity pricing, and when combined with our top-tier execution and disciplined capital program, we are well positioned to generate significant free cash flow in 2021.”

CNQ’s net earnings surged 83.8% sequentially to $1.38 billion in the first quarter ended March 31, 2021. Its adjusted net earnings from operations grew 592.6% sequentially to $1.22 billion. Its adjusted funds flow came in at $2.71 billion, which represents a 102.8% year-over-year increase. The company’s EPS was  $1.16, compared to a  $1.08 loss per share  in the prior-year period.

Analysts expect CNQ’s EPS to increase 1,025.9% year-over-year to $0.95 for the quarter, ending September 30, 2021. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Its revenue is expected to be $5.01 billion for the current quarter, ending June 30, 2021, which represents a 131.9% year-over-year rise. The stock has surged 128.2% over the past nine months to close Friday’s trading session at $36.85. It has gained 112.9% so far this year. It is currently trading above its 50-day and 200-day moving averages of $35.48 and $29.83, respectively.

It’s no surprise that CNQ has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Growth, Sentiment, and Momentum, and a B grade for Quality. Click here to see CNQ’s rating for Value and Stability as well. CNQ is ranked #4 of 50 stocks in the B-rated Foreign Oil & Gas industry.

ABB shares were trading at $34.38 per share on Monday morning, down $0.11 (-0.32%). Year-to-date, ABB has gained 25.00%, versus a 14.75% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

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