The S&P 500 Index celebrated a historic moment on Feb 9, as it closed above the key level of 5,000 for the first time in its history. This pinnacle came as a remarkable achievement following a strong rally in 2023 and a positive start to 2024, with the index surging 6% since the beginning of the year.
The solid performance of the S&P 500 Index in 2023, which saw a 23.9% increase, has been a considerable improvement from the disappointing trends of 2022. The index’s momentum continued with a 1.4% surge last week, marking its fifth consecutive week of gains and the 14th positive week out of the last 15.
Macro Factors Driving Growth
Amidst this bullish climate, robust U.S. economic data has significantly contributed to the index’s upward trajectory. The Department of Commerce reported that the U.S. economy expanded by 3.3% in the fourth quarter of 2023, surpassing the consensus estimate of 2%. Additionally, the solid performance of nonfarm payrolls and consumer spending in December, along with improvements in the manufacturing index, have dispelled concerns about a looming recession. Moreover, core PCE inflation, a key indicator for the Federal Reserve, rose 2.9% annually in December, marking the slowest increase since March 2021.
Earnings Growth and Expectations
Furthermore, as of Feb 9, 338 companies in the S&P 500 Index have reported their financial results for the fourth quarter of 2023. Their total earnings have seen a 5.5% year-over-year increase, accompanied by a 3.7% growth in revenues. Notably, 80.5% of these companies have exceeded earnings-per-share (EPS) estimates, while 65% have surpassed revenue estimates. The positive trend in earnings is expected to continue, with a projected 4.9% increase in total earnings for the index’s constituents in the fourth quarter.
Market Expectations for Interest Rate Cut
Given the Federal Reserve’s reluctance to signal a rate cut in the near term, market participants anticipate a rate reduction later in the year. The CME FedWatch tool shows a 60.7% probability of a 25 basis-point rate cut in May, with the expectation of four additional cuts of the same magnitude throughout 2024. Despite the Fed’s cautious approach, investors remain hopeful about a potential reduction in the lending rate.
Top Stock Picks
We have identified five prominent U.S. companies listed on the S&P 500 Index that offer strong growth potential for 2024 and have witnessed positive earnings estimate revisions in the past month. Each of these selections carries a Zacks Rank #1 (Strong Buy), reflecting investor enthusiasm and favorable market sentiment.
Please refer to the chart below for the price performance of these five picks over the past three months.
Image Source: Zacks Investment Research
Amazon.com Inc. (AMZN) continues to exhibit promising performance, propelled by the strong momentum of its Prime services, swift delivery offerings, and an extensive content portfolio. The company’s growing association with third-party sellers and the increasing adoption of Amazon Web Services (AWS) further enhance its market position.
Meta Platforms Inc. (META) is experiencing steady user growth across various regions, particularly in the Asia Pacific. Its platforms, including Instagram, WhatsApp, Messenger, and Facebook, have demonstrated increased engagement, supported by the deployment of AI technology to recommend content and drive traffic.
Netflix Inc. (NFLX) added 13.12 million paid subscribers worldwide in the fourth quarter of 2023, attributing the impressive top-line growth to a subscription-sharing initiative, price adjustments, and an overall robust business model. The company’s continued focus on diversified content production and distribution reinforces its dominance in the streaming industry.
The Progressive Corp. (PGR) has capitalized on a surge in premiums, thanks to its compelling product range, leadership position, and robust offerings in both the Vehicle and Property segments. The company’s strategy to cater to customers seeking combined home and auto insurance policies has yielded positive results.
HCA Healthcare Inc.
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Growth and Gains: HCA Healthcare’s Promising 2024 Outlook
HCA Healthcare is poised for a significant uptick in its financial performance in 2024, driven by a notable surge in admissions and outpatient surgeries. The company is expecting equivalent admissions to grow in the range of 3-4% this year, laying a solid foundation for expanded revenue streams. Furthermore, the significant growth in its Managed Medicare operations is anticipated to be a key driver in bolstering its overall performance.
Strategic Expansion and Earnings Projections
The company’s strategic expansion through multiple buyouts has played a crucial role in increasing patient volumes. These strategic acquisitions have also facilitated network expansion and added hospitals to the company’s portfolio. As a result, HCA Healthcare is not only witnessing an escalation in admissions and surgeries but is also poised to enhance its revenue streams substantially.
For the fiscal year 2024, HCA Healthcare is forecasting its earnings per share (EPS) to be in the range of $19.7-$21.2, signifying notable growth compared to the figures reported in the previous year. This surge in profitability is underpinned by the company’s flourishing telemedicine business line, which is continuously gaining traction and contributing significantly to its top-line growth.
Capital Deployment and Shareholder Returns
A key factor reinforcing HCA Healthcare’s robust financial outlook is its prudent approach to capital deployment. The company has been actively engaging in share buybacks and dividend payments, which bode well for enhancing shareholder value. Notably, HCA Healthcare has increased its quarterly dividend by 10% to $0.66 in the first quarter of 2024, underlining its relentless commitment to creating value for its shareholders.
Analyst Projections and Market Sentiment
Looking at analyst expectations, HCA Healthcare’s anticipated revenue and earnings growth rate for the current year stand at 6% and 6.8%, respectively. The Zacks Consensus Estimate for current-year earnings has also witnessed a positive trajectory, improving by 4% over the last 30 days. These upward revisions reflect the market’s confidence in the company’s ability to deliver sustained growth and profitability in the coming year.
