The S&P 500 index has seen modest growth this year amid easing inflation and rising consumer spending. Against this backdrop, it could be wise to consider fundamentally strong S&P 500 stocks NVIDIA Corporation (NVDA), Howmet Aerospace Inc. (HWM), and Vistra Corp. (VST) emerging as the strongest performers.
During July, the US inflation rate was at 2.89%, compared to the higher 2.97% in June and 3.18% last year for the same period. Also, this rate is lower than the long-term average of 3.28%. Further, the U.S. consumer prices rose moderately in July at 0.2%, supported by the slowed annual increase in inflation, opening doors wider for the interest rates cut by the Fed.
Thus, with the rising expectations that the Federal Reserve will likely start cutting interest rates next month, brokerages have raised their year-end targets for U.S. stocks benchmark S&P 500. Goldman Sachs raised its 2024 year-end target to 5,600, which was 5,200 earlier, driven by solid earnings growth by five mega-cap U.S. tech stocks.
Given these encouraging trends, let's delve deeper into the fundamentals of the strongest performers in the S&P 500 right now.
NVIDIA Corporation (NVDA)
NVDA offers graphics, computing, and networking solutions worldwide. The company operations in two segments: Compute & Networking; and Graphics. It provides GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms.
On August 27, NVDA announced NVIDIA NIM™ Agent Blueprints, a catalog of pre-trained, customizable AI workflows that offers enterprise developers a full suite of software for building and deploying generative AI applications for canonical use cases.
With this innovation, companies can build and operationalize their AI applications, creating data-driven AI flywheels with the help of NIM agent blueprints, NIM microservices, and nemo framework, part of the NVIDIA AI enterprise platform.
Also, on June 18, NVDA and Hewlett Packard Enterprise (HPE) announced NVIDIA AI Computing by HPE, a portfolio of co-developed AI solutions and joint go-to-market integrations enabling enterprises to accelerate the adoption of generative AI. The lineup marked the expansion of a decades-long partnership and reflects both companies' substantial commitment of time and resources.
NVDA's revenue for the second quarter, which ended on July 28, 2024, increased 122.4% year-over-year to $30.04 billion. The company's non-GAAP operating income grew 156.4% from the year-ago value to $19.94 billion. The company’s non-GAAP net income came in at $16.95 billion and $0.68 per share, indicating increases of 151.5% and 151.8% year-over-year, respectively.
In addition, the company’s free cash flow rose 122.9% from the prior-year quarter to $13.48 billion.
As per the company’s outlook for the third quarter of fiscal 2025, NVDA’s revenue is expected to be $32.50 billion, plus or minus 2%.
Street expects NVDA's revenue and EPS for the third quarter (ending October 2024) to increase 81.6% and 84.1% year-over-year to $32.91 billion and $0.74, respectively. Furthermore, the company surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Shares of NVDA have surged 24.7% over the past six months and 120.8% over the past year to close the last trading session at $107.21.
NVDA's robust growth prospects are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Sentiment and a B grade for Quality. Within the Semiconductor & Wireless Chip industry, NVDA is ranked #34 out of 91 stocks.
Click here to access additional ratings of NVDA for Stability, Growth, Value, and Momentum.
Howmet Aerospace Inc. (HWM)
HWM offers advanced engineered solutions for the aerospace and transportation industries internationally. The company operates through four segments: Engine Products; Fastening Systems; Engineered Structures; and Forged Wheels.
On July 30, HWM’s Board of Directors declared a dividend of $0.08 per share on its common stock, paid on August 26, 2024 to the holders of record at the close of business on August 9, 2024. It also declared a dividend of $0.94 per share on the outstanding $3.75 cumulative preferred stock, to be paid on October 1, 2024 to the holders of record on September 13, 2024.
HWM pays an annual dividend of $0.32, which translates to a yield of 0.34% at the current share price. Its four-year average dividend yield is 0.19%. Moreover, the company’s dividend payouts have increased at a CAGR of 125.7% over the past three years.
During the second quarter that ended June 30, 2024, HWM’s sales increased 14.1% year-over-year to $1.88 billion. Its operating income grew 39.6% from the year-ago value to $398 million. The company’s net income stood at $266 million and $0.65 per share, up 37.8% and 38.3% from the prior year’s quarter, respectively.
Furthermore, the company’s adjusted EBITDA increased 37.7% year-over-year to $489 million.
According to the company’s guidance, HWM expects revenue of $1.84 billion - $1.86 billion for the fiscal 2024 third quarter. The company anticipates its adjusted EBITDA to range between $460 million and $470 million and adjusted EPS to be $0.63 – $0.65 for the same period.
Further, for the full year 2024, the company’s revenue is expected to range from $7.40 billion to $7.48 billion. Its adjusted EBITDA is projected to be $1.85 billion—$1.87 billion, and its adjusted EPS is set at $2.53 to $2.57. HWM’s free cash flow is anticipated to be between $840 million and $900 million.
Analysts expect HWM's revenue and EPS for the third quarter (ending September 2024) to increase 11.8% and 42.2% year-over-year to $1.85 billion and $0.65, respectively. Also, the company has topped the consensus revenue and EPS estimates in all of the trailing four quarters.
HWM's shares have gained 38.6% over the past six months and 95% over the past year to close the last trading session at $94.21.
HWM's sound fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Quality, Sentiment, Momentum, and Growth. Within the A-rated Industrial - Machinery industry, HWM is ranked #13 among 78 stocks.
In addition to the POWR Ratings we've stated above, we also have HWM ratings for Value and Stability. Get all HWM ratings here.
Vistra Corp. (VST)
VST operates as an integrated retail electricity and power generation company. It operates in six segments: Retail; Texas; East; West; Sunset; and Asset Closure. The company retails electricity and natural gas to residential, commercial, and industrial customers.
On July 30, VST received approval from the Nuclear Regulatory Commission on its request to extend the operation of Comanche Peak Nuclear Power Plant through 2053, an additional 20 years beyond its original licenses. VST submitted the application for license renewal with the NRC in October 2022.
On the same day, VST’s subsidiary, Homefield Energy, announced a multi-year contract with the U.S. General Services Administration to facilitate carbon pollution-free electricity to federal facilities in Illinois.
During the second quarter, which ended June 30, 2024, VST's operating revenues rose 20.6% year-over-year to $3.84 billion. Its operating income increased 36.7% from the year-ago value to $808 million. The company's ongoing operations adjusted EBITDA of $1.41 billion, reflecting a growth of 40.3% from the prior year's quarter.
Analysts expect VST's EPS for the fiscal year (ending December 2024) to increase 77.2% year-over-year to $5.25, and its revenue is estimated to increase 9.4% year-over-year to $16.17 billion for the same period.
VST's stock has soared 28.8% over the past six months and 133.3% over the past year to close the last trading session at $75.83.
VST's POWR Ratings reflect its robust outlook. VST has a B grade for Growth and Momentum. It is ranked #32 among the 59 stocks in the Utilities - Domestic industry.
Click here to access additional VST ratings for Value, Sentiment, Quality, and Stability.
What To Do Next?
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NVDA shares were trading at $102.83 per share on Friday afternoon, down $4.38 (-4.09%). Year-to-date, NVDA has gained 107.68%, versus a 14.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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