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Finance

Intel, Fastenal, and NRG Energy

2021 is expected to be the year of recovery. The U.S.  is taking steps to bolster its  economic and industrial performance.  The Federal Reserve assumed a dovish monetary stance at  the onset of the COVID-19 pandemic, holding interest rates at  near zero. The Fed plans to maintain this position until at least 2022 to boost borrowing and consumer spending. Moreover, with the new Treasury Secretary pushing for fiscal more stimulus checks,  average consumer spending is expected to rise significantly, kickstarting the anxiously awaited economic revival.

However, according to Bloomberg consensus data, the annualized U.S. GDP for the fourth quarter of 2020 is expected to rise 4.2% sequentially, significantly lower than the 33.4% rise reported in the prior quarter. This, coupled with the Treasury Secretary’s plans to raise corporate taxes by 70 basis points to 28% in the near future, is expected to negatively affect the stock market’s current bull run.

Intel Corporation (INTC), Fastenal Company (FAST) and NRG Energy, Inc. (NRG) have not only managed to remain healthy during this period, but have also increased their dividend payouts. In addition, these companies reported strong balance sheets in their last quarterly reports, indicating sustainable dividend payouts in the near term.

Intel Corporation (INTC)

INTC is an original equipment manufacturer, original design manufacturer and cloud service provider renowned for its processor chips for high performance computing solutions. The company also markets essential technologies for the cloud, smart and connected devices worldwide. It operates through seven segments, namely, DCG, IOTG, Mobileye, NSG, PSG, CCG, and others.

INTC has undertaken several leadership changes over this month, including appointing Sunil Shenoy as Vice President of Design Engineering Group and Pat Gelsinger as the CEO. The company seeks  to boost its position in the chip making foundry by leveraging the new appointees’ decades of experience.

On December 4, INTC announced its progress in developing integrated photonics for data centers. Optical technology is expected to increase the average speed of the internet, making the technology more efficient and thereby much  demanded in the era of remote working.

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INTC’s non-GAAP revenues have increased 8% year-over-year to $77.90 billion in the fiscal year ended December 26, 2020. Its non-GAAP net income has risen 3% from the year-ago value to $22.40 billion, while its non-GAAP EPS increased 7% from the same period last year to $5.30. Non-GAAP free cash flow has increased 25% year-over-year to $21.10 billion.

INTC pays $1.34 in dividends annually, yielding 2.5% at  the current share price. The company recently increased its dividend payout value by 5%, effective from the fiscal first quarter. INTC  will pay $1.39 as dividend annually from this year.

Analysts expect INTC’s EPS to rise 2.5% next year, and at a rate of 5.4% per annum over the next five years. The company has an impressive earnings surprise history; it surpassed the Street’s EPS estimates in three out of trailing four quarters.

INTC has gained more than 20% since hitting its 52-week low of $43.61 in October. The stock has gained 8.1% over the past six months.

How does INTC stack up for the POWR Ratings?

A for Trade Grade

A for Industry Rank

B for Overall POWR Rating.

In the 102-stock Semiconductor & Wireless Chip industry, INTC is currently ranked #25.

Fastenal Company (FAST)

FAST manufacturers and sells industrial and construction supplies globally. It engages in wholesale fastener distribution, non-fastener maintenance and supply in the manufacturing and non-residential markets. The company operates as an original equipment manufacturer and maintenance, repair (ORM) and operations (MRO) supplier.

FAST’s net sales have increased 6.4% year-over-year to $1358 in the fourth quarter ended December 31, 2020. Its operating income has improved 10.6% from the year-ago value to $264.40 million, while its net income has risen 9.7% from the same period last year to $196.10. Its EPS has increased 9.6% from the prior-year quarter to $0.34.

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FAST pays $1.03 in dividends annually, yielding 2.15% at  the prevailing share price. On January 20, the company raised its quarterly dividend payout by 12% to $0.28. Dividends for the first quarter of 2021 are scheduled to be paid on March 3.A consensus EPS estimate of $1.57 for fiscal year 2021 represents  a 9.6% improvement year-over-year. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $5.90 billion for the ongoing year represents  a 4.5% increase from the same period last year.

FAST has gained more than 75% since hitting its 52-week low of $26.72 in March. the stock hit its 52-week high of $51.89 on January 12.

It is no surprise that FAST is rated Buy in our POWR Ratings system, with an A for Trade Grade, and a B for Buy & Hold Grade and Industry Rank. It is currently ranked #22 of 93 stocks in the Industrial – Equipment industry.

NRG Energy, Inc. (NRG)

NRG is an energy company that produces and supplies electricity and associated products to industrial and residential consumers in the United States. The company operates through two segments – Generation and Retail. With a 3.70 million consumer base, NRG provides fuel related services as well as transportation facilities nationwide . The company also trades financial derivatives, such as futures, options, forward and swaps.

On January 5, NRG acquired Direct Energy from Centrica plc, giving it access to more than three  million additional customers across North America. The acquisition should also help NRG solidify its status as an integrated energy provider.

In December, NRG issued secured first lien notes in a landmark financing , thereby raising $900 million. This allowed the company to become the first energy services company to issue sustainability linked bonds in the U.S. a milestone in the clean energy sector.

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NRG’s income from continuing operations has increased 4% year-over-year to $683 million in the nine-month period ended September 30, 2020. Cash from continuing operations has risen 55.9% from the same period last year to $1.39 billion, while adjusted EBITA grew 5.1% from the year-ago value to $1.67 billion.

NRG paid $1.23 annually as dividends, yielding 3.09% at the  current share price. On January 21, the company raised its quarterly dividends by 8% to $0.33, effective the first quarter of this year. The first quarter dividends are scheduled to be distributed on February 16.

A consensus EPS estimate of $4.65 for the current year represents  a 22% rise year-over-year. The consensus revenue estimate of $10.77 billion for fiscal 2021 represents  a 12.7% improvement from the same period last year.

NRG has doubled in value since hitting its 52-week low of $19.54 in March. The stock hit its 52-week high of $42.95 on January 25.

NRG’s POWR Ratings reflect this promising outlook. It is rated Buy, with an A for Trade Grade and Peer Grade, and a B for Buy & Hold Grade. In the 59-stock Utilities – Domestic industry, it is currently ranked #14.

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INTC shares were unchanged in after-hours trading Thursday. Year-to-date, INTC has gained 12.53%, versus a 1.00% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don’ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More…

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