John Sheehan, a popular Wells Fargo analyst, has identified a set of companies that he believes will do well over time. In particular, he identified companies with strong long-term earnings growth, strong management teams, and return on invested capital. Some of the most notable names were Alphabet, Disney, and Omnicom. Here are other notable names:
Accenture | ACN
Accenture is a leading player in the technology industry. Unlike popular names like Google and Microsoft, it is not a mainstream name because it offers its services to large companies in industries like banking, manufacturing, and consumer staples.
Accenture helps big companies implement technologies like cloud, cybersecurity, data and artificial intelligence, and digital engineering. In most cases, the company works behind the scenes to implement these technologies.
Accenture operates in a large and highly competitive industry whose growth mostly depends on global IT spending. Some of its top competitors are companies like Kyndryl, an IBM spin off, Wipro, Infosys, and Cognizant Technologies.
Accenture’s business is expected to continue doing well this year as companies boost their IT spending. Analysts at Gartner predict that spending will rise by 7.5% this year to over $5.6 trillion. The analysts cited the growing demand for generative AI, which is expected to keep growing.
The most recent financial results showed that Accenture’s business was doing well as new bookings jumped to $20.1 billion. Its annual bookings jumped to over $81.2 billion, a 13% increase.
Notably, the company saw a $1 billion booking for generative AI work during the quarter, a number that will continue growing in the near term. Its quarterly revenue rose to $16.4 billion while its total dividends paid for the year were over $3.2 billion. Accenture stock price has soared by over 30% from its lowest point this year.
Read more: Accenture announces $4 billion share buyback as AI powers strong quarterly revenue
Kinder Morgan | KMI
Kinder Morgan, as I wrote earlier this year, has been one of the best-performing companies in Wall Street. These gains have continued as the stock has surged to a record high of $23.35. It has risen by more than 37% this year.
The rally accelerated this week as the natural gas and oil prices surged because of the rising geopolitical tensions in the Middle East.
Like Accenture, Kinder Morgan is not as popular as other energy companies like Exxon and Chevron. That’s because it works behind the scenes to move crude oil and gas through its extensive network of pipelines.
This is a good business model, because, it is not entirely dependent on oil and gas prices. Instead, the company is paid on the volume it delivers.
The most recent financial results shows that Kinder Morgan’s revenue rose to over $3.57 billion in the second quarter and $7.4 billion in the first half of the year. Its operating income rose to over $1.038 billion.
Kinder Morgan combines revenue growth with a healthy dividend yield of 5.01%. It has also paid and raised these payouts in the last six years.
NextEra Energy | NEE
Wells Fargo also recommends investing in NextEra Energy, the biggest utility company in the world. NEE is a dividend aristocrat that has raised its dividend payouts for over 28 years. It has a dividend yield of about 2.41%.
NextEra Energy’s business has done well in the past few years as its revenue has soared from over $19.2 billion in 2019 to over $28 billion last year. It has done that as energy utility bills have continued growing.
The challenge, however, is that NextEra is a highly expensive stock that after it surged by over 61% in the last 12 months. Its P/E ratio has risen to 25, higher than the S&P 500 index average of 21.
Starbucks | SBUX
Wells Fargo has also taken a contrarian statement on Starbucks, a highly embattled blue-chip company.
Starbucks has come under pressure in the past few years, with its stock falling by over 18% from its highest point in 2021.
The company has struggled because of the rising competition from China, where firms like Luckin Coffee have continued to gain market share. It has also struggled as the cost of doing business has risen, with coffee prices and wages surging.
Recently, however, Starbucks has hired a veteran expert in the restaurant industry to turn it around. While this is possible, most analysts believe that the recovery will take time,
Wells Fargo has also identified other quality blue-chip companies that have a combination of dividend growth, revenue momentum, and other catalysts. In the consumer staples industry, the company has identified names like Procter & Gamble, Sysco, and Colgate-Palmoliv.
In the consumer discretionary, the company has identified firms like Lowe’s, Home Depot, and TJX Companies. The other top names are Blackrock, Chubb, and JPMorgan.
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