Believe it or not, increasing interest rates do actually help a few industries. And, an increasing number of stock analysts are concerned that the interest rate cycle is only beginning. Inflation rates in the United States are at more than 40-year highs, and Federal Reserve Chairman Jerome Powell recently stated that a 0.5% rate rise is “on the table” for the Fed’s next meeting.
According to CME Group, the bond market is pricing at least a 2.5% cumulative interest rate rise from the Fed by the end of 2022. According to analysts, there are certain buy-rated stocks that have shown some of the best outperformance when interest rates have risen in the past. I’ve tried to narrow it down to three with the most potential to benefit investors looking to combat inflation and rate hikes.
That being said, let’s take a quick look at three well-performing, buy-rated stocks that – in anticipation of upcoming market changes – make for smart additions to our portfolios:
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Marathon Petroleum Corp (MPC)
Marathon Petroleum Corp (MPC) is a private firm based in the U.S. that specializes in the refining, marketing, and transportation of petroleum products. The firm was established in 1887 and is based in Findlay, Ohio. MPC has had a stronger performance sensitivity to 10-year U.S. Treasury rates than any other stock since 1972. According to analysts, U.S. refiners are on the verge of another “golden age” as they have the opportunity to earn much greater margins than their overseas counterparts and profit from comparatively low natural gas costs in the U.S. compared to the rest of the globe.
Now, let’s break down the numbers. MPC has that favorite distinction of mine in that it’s outperformed Wall Street’s earnings projections for the last four consecutive fiscal quarters. Most recently, it beat EPS and revenue projections by 131.38% and 38.10%, respectively. Year-over-year, MPC shows revenue growth of 96.66 and EPS growth of 188.64%. MPC currently has a dividend yield of 2.59%, with a quarterly payout of 58 cents per share. MPC’s current quarterly figures come in at $1.26 per share, with $30.8 billion in sales. MPC has a consensus 12-month price target of 96.00, with a high estimate of 115.00 and a low of 88.00 among analysts issuing 12-month price forecasts. The median estimate reflects an increase of 7.02% over its most recent price, and MPC boasts a well-earned buy rating.
United Rentals Inc (URI)
United Rentals, Inc. (URI) is a company that rents out many types of equipment. Construction and industrial firms, manufacturers, utilities, municipalities, homeowners, and government bodies all rent equipment from the company. URI is the largest rental company in the world. Rental of specialist construction goods, power and HVAC equipment, fluid solutions equipment, transportable storage equipment, and modular office space are just a few prime examples of what they offer. Bradley S. Jacobs created the firm in 1997, and it is based in Stamford, Connecticut.
URI’s financials are solid. URI shows $2.6 billion in sales for its current quarter, with an impressive EPS of $6.10 per share. In its most recent earnings report, it beat EPS predictions by 17.43% and revenue by 3.41%. Year-over-year, URI shows revenue growth of 21.81% and EPS growth of 61.61%. Looking ahead, analysts predict positive sales and earnings growth on both an annual and quarterly basis. URI has a consensus price target of 423.00 among the analysts that provide 12-month price estimates, with a high of 665.00 and a low of 300.00. The median estimate reflects an increase of 32.92% from current pricing, and the consensus also gives URI a strong buy rating worthy of our attention.
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NXP Semiconductors NV (NXPI)
NXP Semiconductors (NXPI) is a holding company specializing in semiconductor solutions. In the areas of cryptography-security, high-speed interface, radiofrequency, mixed-signal analog-digital, power management, digital signal processing, and embedded system design, NXPI has intellectual property, extensive application knowledge, and manufacturing competence. NXPI’s solutions are employed in a variety of end-market applications. NXPI is divided into the following geographic segments: China, the Netherlands, the United States, Singapore, Germany, Japan, South Korea, Malaysia, and others.
NXPI’s financials impress on nearly every level. It has a successful earnings history, most recently exceeding Wall Street’s expectations on EPS and revenue by 6.28% and 1.20%, respectively. NXPI’s current quarter’s figures come in with sales of $3.1 billion, at $3.19 per share. Year-over-year, NXPI shows revenue growth of 21.22% and impressive EPS growth of 107.41%. Annual and quarterly growth is forecasted by analysts to continue in regards to sales and earnings. NXPI currently has a dividend yield of 1.91%, with a quarterly payout of 85 cents per share. The consensus price target for NXPI from the analysts that provide 12-month predictions is 222.50, with a high of 320.00 and a low of 170.00. The median estimate is up 25.42% from its previous price, and the consensus also gives NXPI a confident buy rating that prospective investors shouldn’t overlook.
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