The onset of 2021 has brought with it widespread hope for an economic recovery. With the ongoing deployment of COVID-19 vaccines and a new Presidential administration at the helm in the U.S., investors are optimistic about a solid economic recovery this year. Experts believe that the distress of 2020 will fade out by the end of this year as the services and manufacturing industries return to full operation.
Nonetheless, many expect economic sluggishness to continue through the first half of the year at least. This, along with the slower-than-expected vaccine roll out, might foster continued market volatility in the near term. Against this backdrop, blue chip companies usually perform well. Their business models are typically sufficiently strong to withstand most sudden economic downturns. Most blue-chip companies were resilient in 2020. Moreover, when industries restart their operations fully, these blue-chip companies will likely benefit from their economies of scale. So, in addition to dodging possible market volatility, these stocks have plenty of upside potential this year.
Johnson & Johnson (JNJ), 3M Company (MMM), and Lockheed Martin Corporation (LMT) are three stocks that generated decent momentum last year. While JNJ benefitted immensely from undertaking COVID-19 vaccine development, MMM found strength in selling huge numbers of N-95 face masks and respirators. Meanwhile, the rise of global terrorism and geopolitical tensions have spurred demand for defense products, benefitting U.S. defense major LMT. Each of these companies has unique market tailwinds that we think could drive their stocks higher in the near term.
Johnson & Johnson (JNJ)
JNJ is a global leader in consumer products such as baby care, women’s health, and wound care. It has a major presence in the pharmaceutical and medical devices segments also. JNJ’s pharmaceutical segment focuses on immunology, pulmonary hypertension, neuroscience, infectious diseases, oncology, and cardiovascular diseases. The company’s medical segment deals with surgical, orthopedic, cardiovascular, and diabetes care.
JNJ recently announced that its single-shot Janssen COVID-19 vaccine candidate has met primary endpoints in interim analysis of its Phase 3 ENSEMBLE trial. As of day 28 of the trial, the vaccine candidate is 85% effective overall in preventing severe disease and has demonstrated complete protection against COVID-19 related hospitalization and death.
JNJ’s revenue during the fourth quarter, ended December 31, 2020 rose 8.3% year-over-year to $22.5 billion, driven by substantial growth in its Pharmaceutical segment, followed by Consumer health. In the Pharmaceutical segment, STELARA, a biologic for the treatment of several immune-mediated inflammatory diseases, DARZALEX, for the treatment of multiple myeloma, and IMBRUVICA were the winners, However, JNJ’s EPS for the quarter declined 56.7% over the year to $0.65.
Analysts expect revenue for the quarter ending March 31, 2021 to be $22 billion, representing 6.2% year-over-year growth. Its EPS is likely to grow at the rate of 5.3% per annum over the next five years.
JNJ climbed 6.8% during the past year to close yesterday’s session at $164.95. Over the past six months, the stock rallied 10.8%.
It is no surprise that JNJ has an overall rating of A, which equates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
JNJ has a grade of B for Sentiment, Value, Stability, and Quality. Of 239 stocks in the Medical – Pharmaceuticals industry, it is ranked #8.
In addition to the POWR Ratings grades I have just highlighted, you can see JNJ’s ratings for Growth and Momentum here.
3M Company (MMM)
MMM, through its Safety and Industrial, Transportation and Electronics, Health Care and Consumer segments develops, manufactures, and markets various industrial products. Industrial adhesives and tapes display materials and systems, electronic materials solutions, medical and surgical supplies, as well as home improvement, and office supplies are some of the products manufactured and marketed by MMM.
MMM plans to contribute $100 million – $200 million to its global defined benefit plans in 2021. During the last year, the company contributed $92 million to its non-U.S. pension plans and $61 million to its U.S. plans.
During the fourth, MMM’s revenue rose 5.8% year-over-year to $8.6 billion, driven by its Safety and Industrial segment. Its EPS for the quarter climbed to $2.38 versus $1.66 posted in the same period last year. In 2020, MMM distributed two billion respirators globally, and the company’s CEO and Chairman Mike Roman, said recently “We do expect demand in our N95 respirator masks to be strong as we go through the year,”
Analysts expect MMM’s revenue for the quarter ending March 31, 2021 to be $8.5 billion, representing a 5.1% increase year-over-year. Its EPS for the quarter is likely to increase 6.9% to $2.31.
MMM ended yesterday’s trading session at $180.66, climbing 10.3% over the past year. During the past six months, MMM has gained 15.2%.
MMM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. It has a grade of A for Quality, and a B for Stability. It is ranked #37 of 89 stocks in the A-rated Industrial – Machinery industry. In total, we rate MMM on eight different levels. Beyond what we stated above, we have also given MMM’s grades for Growth, Value, Sentiment, and Momentum. Get all the MMM ratings here.
Lockheed Martin Corporation (LMT)
LMT is a global leader in the security and aerospace industry. It is primarily engaged in the research, design, manufacturing, integration and sustainment of technology systems and products and services globally. Aeronautics, Rotary and Mission Systems, Missiles and Fire Control, and Space are some of the segments in which it operates.
Earlier this month, LMT signed an agreement with India’s Hindustan Aeronautics Limited to explore a possible collaboration in the country’s aerospace sector. LMT stated that by strengthening its collaboration with India, it is working towards consolidating LMT’s global aerospace and defense ecosystem.
During the fourth quarter, ended December 31, 2020, LMT’s revenue rose 7.3% year-over-year to $17 billion. Its EPS for the quarter climbed to $6.38 from $5.29 posted in the same period last year. The company also entered into an agreement to acquire Aerojet Rocketdyne Holdings during the fourth quarter for $56 per share in cash.
A consensus revenue estimate for the quarter ending March 31, 2021 is $16.4 billion, which represents a 4.9% increase year-over-year. Meanwhile, its EPS is likely to grow 3.8% to $6.31.
Over the past year, LMT has lost 22.6% to end yesterday’s trading session at $337.78. Over the past six months, the stock declined 12.1%.
The POWR Ratings are also favorable for LMT. It has an overall rating of B, which equates to Buy in our proprietary rating system. LMT has a grade of B for Value, Stability and Quality. It is ranked #4 in the 69-stock Air/Defense Services industry.
Click here to see the additional POWR Ratings for LMT (Growth, Momentum and Sentiment).
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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JNJ shares were trading at $166.54 per share on Tuesday morning, up $1.62 (+0.98%). Year-to-date, JNJ has gained 5.82%, versus a 4.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More…
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