As the economy recovers from the pandemic blues and factories resume operations at full capacity, most industries are projected to quickly return to pre-pandemic levels. A faster-than-expected vaccination drive, higher consumer spending and government stimulus packages are expected to further boost the economy. According to the IMF, global economic growth is projected at 6% in 2021, moderating to 4.4% in 2022.

To  increase GDP growth, the U.S. government is coming up with new strategies to generate a positive outlook  by consumers and businesses. In Federal Reserve Chairman Jerome Powell’s recent statement, he asserted that although inflation appears to be more persistent than anticipated, the Central Bank is prepared to use its price stability tools to keep it around 2%. 

Against this backdrop, investors are looking for companies that will profit from the fast-paced economic recovery. Given this, we think shares of fundamentally sound Canadian Natural Resources Limited (CNQ) and Foot Locker, Inc (FL) could be good bets now.

Canadian Natural Resources Limited (CNQ)

CNQ is an exploration, development, and production company for crude oil and natural gas that is based in Calgary, Canada. The company’s exploration and production operations are primarily centered in Western Canada, the United Kingdom sector of the North Sea, and Offshore Africa’s Cote d’Ivoire and South Africa. Last month, CNQ, Cenovus Energy Inc (CVE), Imperial Oil Limited (IMO), MEG Energy Corporation (MEGEF) and Suncor Energy Inc. (SU) announced the Oil Sands Pathways to Net Zero project initiative. Working together with the federal and provincial governments, the goal of this alliance is to achieve net zero greenhouse gas (GHG) emissions from oil sands operations by 2050, assisting Canada in meeting its climate goals, including its Paris Agreement commitments and 2050 net zero aspirations.

CNQ’s net revenue increased 46.8% year-over-year to CAD6.61 billion ($5.36 billion) in the first quarter ended March 31, 2021. Its expenses declined 17.3% year-over-year to CAD4.91 billion ($5.98 billion). Its net income came in at CAD1.38 billion ($1.12 billion) for this period, compared to a CAD$1.28 billion ($1.04 billion) net loss in the first quarter of 2020.The company’s EPS came in at CAD1.16 ($0.94), compared to a CAD$1.08 ($0.88) loss per share in the prior year period.

Analysts expect CNQ’s EPS to come in at $3.45 for the current year. A $21.03 billion consensus revenue estimate for the current year represents a 57.7% increase from the same period last year. The stock has gained 106.8% over the past year and 49.3% year-to-date.

It is no surprise that CNQ has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. The stock also has an A grade for Growth and Momentum, and a B for Sentiment and Quality. In the B-rated Foreign Oil & Gas industry, it is ranked #6 of 50 stocks.

In addition to the POWR Ratings grades we have just highlighted, one  can see the CNQ ratings for Stability and Value here.

Foot Locker, Inc. (FL)

New York City-based FL is an athletic footwear and clothing retailer. The company sells athletic footwear, apparel, accessories, equipment, and team branded products through its stores, e-commerce sites and mobile apps.

In May, FL announced the launch of a new basketball-inspired capsule collection designed by the new creative director of its women’s business, Melody Ehsani. This launch should  help the company generate  higher sales.

During the first quarter, ended May 1, 2021, FL’s sales increased 83.1% year-over-year to $2.15 billion. The company reported $282 million in operating income,, compared to a $105 million operating loss  in the prior year. Its net income came in at $202 million for this period, compared to a $110 million net loss in the first quarter of 2020. The company’s EPS came in at $1.93, compared to a loss per share of $1.06 in the prior year period.

FL’s  EPS is expected to grow 101.8% year-over-year to $5.67 in the current year. Analysts expect FL’s revenue to increase 13.5% from its  year-ago value to $8.57 billion in l 2022. FL’s stock has gained 104.3% over the past year and has surged 49.6% year-to-date.

FL’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. FL is also rated an A grade for Value, Growth, and Momentum. Within the A-rated Athletics and Recreation industry, it is ranked #1 of 34 stocks.

To see additional POWR Ratings for Stability, Quality, and Sentiment for FL, click here.

Note that FL  is one of the few stocks handpicked by our Chief Value Strategist, David Cohne, currently in the POWR Value portfolio. Learn more here.

CNQ shares rose $0.21 (+0.58%) in premarket trading Wednesday. Year-to-date, CNQ has gained 50.15%, versus a 16.66% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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