Fed Says US Growing Moderately: 10 Stocks That May Benefit

Fed Says US Growing Moderately: 10 Stocks That May Benefit

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The Federal Reserve's Tuesday afternoon announcement highlighted the US economy's exposure to financial troubles abroad while citing signs of moderate growth within the US.

"Federal Reserve policy makers said the U.S. economy is maintaining its expansion even as the global economy slows, while refraining from taking new actions to lower borrowing costs," reports Bloomberg.

According to the Fed, issues pertaining to the unemployment rate "remain elevated" and debate exists on how to approach it. Similarly, interest rates, inflation and bond purchases bear addressing.

But don't hold your breath, members of the Fed are at ends of how to address these issues. More importantly, "any additional stimulus is greatly going to depend on what happens in Europe or any changes in the U.S. outlook," said John Silvia, chief economist at Wells Fargo Securities LLC. "They will wait for a longer meeting, maybe in January, to come up with anything regarding communications."

The Fed said it expects inflation to settle at levels at or below those consistent with its price stability mandate. The Fed also noted it would keep its Fed funds target rate at low levels "at least through mid-2013."

Stocks dipped after the Fed's statement, and the dollar rose against the Euro.

Investing Ideas

In short, the Fed has taken no action, nor indicated strong intentions to make decisions in the future.

The key takeaway was that the US' greatest risk comes from troubles in Europe. Investors are sure to keep their eyes on the headline.

Think things might improve?

If so, you may be curious what companies could benefit most from increased growth in the US. For ideas we took a look at large-cap companies (market caps above $10 billion) on the S&P 500 index. We screened the names for those with the highest levels of profitability compared to their industry peers based on pretax, operating and gross margins.

Do you think these companies are operating well enough to benefit from a US rally?

List sorted by greatest difference in gross margin.

 

 

1. Prudential Financial, Inc. (PRU, Earnings, Analysts, Financials): Offers various financial products and services in the United States, Asia, Europe, and Latin America. Market cap of $22.55B. TTM gross margin at 26.76% vs. industry gross margin at 14.22%. TTM operating margin at 12.0% vs. industry operating margin at 11.36%. TTM pretax margin at 10.09% vs. industry pretax margin at 10.07%.

 

2. Paychex Inc. (PAYX, Earnings, Analysts, Financials): Provides payroll, human resource, and benefits outsourcing solutions for small-to medium-sized businesses in the United States and Germany. Market cap of $10.69B. TTM gross margin at 73.30% vs. industry gross margin at 48.42%. TTM operating margin at 38.29% vs. industry operating margin at 26.59%. TTM pretax margin at 38.57% vs. industry pretax margin at 26.60%.

 

3. Monsanto Co. (MON, Earnings, Analysts, Financials): Provides agricultural products for farmers in the United States and internationally. Market cap of $36.43B. TTM gross margin at 56.62% vs. industry gross margin at 37.60%. TTM operating margin at 21.19% vs. industry operating margin at 17.40%. TTM pretax margin at 20.08% vs. industry pretax margin at 16.40%.

 

4. Aon Corporation (AON, Earnings, Analysts, Financials): Provides risk management, insurance and reinsurance brokerage, and human resource consulting and outsourcing services in the United States and internationally. Market cap of $14.39B. TTM gross margin at 21.02% vs. industry gross margin at 14.22%. TTM operating margin at 16.0% vs. industry operating margin at 11.36%. TTM pretax margin at 12.14% vs. industry pretax margin at 10.07%.

 

5. The McGraw-Hill Companies, Inc. (MHP, Earnings, Analysts, Financials): Provides various information services for financial, educational, and business information markets worldwide. Market cap of $12.48B. TTM gross margin at 61.84% vs. industry gross margin at 42.14%. TTM operating margin at 23.45% vs. industry operating margin at 18.51%. TTM pretax margin at 22.02% vs. industry pretax margin at 14.26%.

 

6. Fastenal Company (FAST, Earnings, Analysts, Financials): Engages as a wholesaler and retailer of industrial and construction supplies. Market cap of $11.92B. TTM gross margin at 53.68% vs. industry gross margin at 37.72%. TTM operating margin at 20.47% vs. industry operating margin at 13.52%. TTM pretax margin at 20.49% vs. industry pretax margin at 12.88%.

 

7. The Chubb Corporation (CB, Earnings, Analysts, Financials): Provides property and casualty insurance to businesses and individuals. Market cap of $18.64B. TTM gross margin at 20.15% vs. industry gross margin at 14.22%. TTM operating margin at 18.01% vs. industry operating margin at 11.36%. TTM pretax margin at 18.01% vs. industry pretax margin at 10.07%.

 

8. AutoZone Inc. (AZO, Earnings, Analysts, Financials): Operates as a specialty retailer and distributor of automotive replacement parts and accessories. Market cap of $12.82B. TTM gross margin at 53.57% vs. industry gross margin at 37.90%. TTM operating margin at 18.64% vs. industry operating margin at 10.0%. TTM pretax margin at 16.54% vs. industry pretax margin at 9.33%.

 

9. Aetna Inc. (AET, Earnings, Analysts, Financials): Operates as a diversified health care benefits company in the United States. Market cap of $14.35B. TTM gross margin at 29.65% vs. industry gross margin at 21.03%. TTM operating margin at 9.68% vs. industry operating margin at 8.43%. TTM pretax margin at 8.25% vs. industry pretax margin at 6.79%.

 

10. Hershey Co. (HSY, Earnings, Analysts, Financials): Engages in manufacturing, marketing, selling, and distributing various chocolate and confectionery products, pantry items, and gum and mint refreshment products worldwide. Market cap of $13.23B. TTM gross margin at 46.01% vs. industry gross margin at 33.20%. TTM operating margin at 17.78% vs. industry operating margin at 12.09%. TTM pretax margin at 15.93% vs. industry pretax margin at 9.53%.

 

(Written by Rebecca Lipman, profitability data sourced from Fidelity.)

 

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