Stocks continued to back off recent highs on Wednesday. Two days of declines does not a trend make, and employment data signaled what may be a blip: the ADP report just missed forecasts. Arguably more important data will come at the end of the week with the release of the February payroll report, which may give hints as to the eventual interest rate hike so many investors are expecting.
Stocks to Watch:
Honeywell International Inc. (Ticker: HON)
Honeywell announced Wednesday that it is seeking to grow dividends faster than earnings, and that acquisitions are at the top of its near-term strategy. The company also guided current quarter and full year expectations in line with the Street. The shares are trading at a decent 15x forward estimates, with a yield of 2% that could get a boost.
Cognizant Technology Solutions Corporation (Ticker: CTSH)
With a focus on information technology, consulting and health care/logistics and financial services, Cognizant stands to benefit from continued strength in the labor market. The shares continue to trade above both the 50- and 200-day moving averages, despite some recent volatility. Operating margins continue to be strong, with 18% logged most recently. In addition, any uptick in the 19% sales growth expected for this year should be a boon to the bottom line.
Chart – Six-month chart of CTSH
Dealertrack Technologies, Inc. (Ticker: TRAK)
Despite some volatility in the name in recent sessions, Dealertrak reported strong results late last month that showed 26% gains in revenues ex acquisitions, and this extends a long string of better than 20% top line growth. Recent acquisitions are proving a drag on near term results, as full year guidance came in under expectations. But that is due in part to financial reporting standards, and management still targets better than 20% growth near term.
AMC Entertainment Holdings, Inc. (Ticker: AMC)
Lower prices at the pump translate into higher discretionary spending for the consumer, which in turn, some would argue, translates into a richer entertainment budget. The Street certainly looks for upside this year for AMC, as earnings estimates have the company growing the bottom line by as much as 75% on revenue upside of 9%. That in turn should temper in 2016 to 23% and 4% growth, respectively. But continued job growth, relatively low energy prices and strong demand for the movies bodes well for the stock, which also yields 2.3%.
Maximus Inc. (Ticker: MMS)
Consensus has Maximus growing earnings by 20% in the next fiscal year (ended Sept 2016), while revenue growth should be fairly steady at 14%. That speaks to strong leverage in the government business processing segment (MMS’s bread and butter). The PEG ratio is roughly 1x, while the adjusted PE ratio is just about in line with expected growth. Free cash flow yield of 4% may hint at dividend increases.
TiVo Inc. (Ticker: TIVO)
Shares in TiVo jumped as much as 6% on Wednesday after earnings were reported, yet retreated to roughly 2% gains by session’s end. As the company transitions from core DVR services to embrace subscription services, the company posted profit of $0.07 a share, better than the four pennies the consensus had expected. Current quarter management guidance matched expectations, and cable TV should continue to be strong. TIVO shares trade for forward EPS multiples of 18x, yet the Street has fiscal year growth of 43% by comparison.
About the author: John Carter has been a full time trader for 15 years, serving over 100,000 subscribers in over 100 countries. For more analysis on high growth stocks visit www.SimplerStocks.com.
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