Today’s episode of Full Court Finance at Zacks explores where the stock market stands following the big December rally heading into Christmas. The episode then pivots to why investors might want to buy two large-cap S&P 500 stocks—NextEra Energy (NEE – Free Report) and PepsiCo (PEP – Free Report) —on the dip heading into 2024 for long-term gains.The stock market bounced back on Thursday and through early morning trading on Friday following its first significant pullback in December. Buyers stepped in across the board and bought the dip as the official Santa Claus rally period began today.There is little doubt that plenty of stocks are getting overheated following the surge off the October lows that ramped up after the Fed’s dovish turn. Thankfully, the bullish market backdrop remains in place heading into 2024. This means that we could see buyers race to buy up any near-term pullback down toward key moving averages.Today we look at two highly-ranked S&P 500 stocks that are in the red in 2023. Both stocks are also part of industries that might be poised for comebacks in 2024 as investors start putting money into every sector, not just technology.NextEra Energy (NEE)NextEra Energy operates one of the largest electric utilities, Florida Power & Light Company, in the U.S., and is one of the biggest producers of wind and solar energy on the planet. NextEra is a battery storage leader as well and it is exposed to the potential long-term upside of nuclear power.The $125 billion market cap firm is the largest holding in the Utilities Select Sector SPDR ETF (XLU). NextEra has climbed 380% in the last 15 years vs. the Utilities sector’s 40% and the Energy sector’s 5% decline. NEE stock trades 35% below its highs right now.NextEra faded in 2022 and then got crushed this year as higher rates slowed the expansion of major solar and wind projects. NEE fell sharply in September after its subsidiary, NextEra Energy Partners (NEP), slashed its dividends growth outlook. NextEra thankfully reaffirmed its long-term outlook at the time.
Image Source: Zacks Investment ResearchNextEra lands a Zacks rank #2 (Buy) and its dividend currently yields 3.1%. Plus, NEE is one of roughly 65 S&P 500 Dividend Aristocrats, which are firms that have both paid and raised dividends for at least 25 straight years. Plus, 10 of the 15 brokerage recommendations Zacks has for NEE are “Strong Buys,” with only one “Sell.”NextEra’s revenue is projected to climb by 31% in 2023 and then another 4% next year. The firm’s adjusted earnings are expected to jump by 8% this year and another 9% next year. NEE has also topped our bottom-line estimates for over three years running.
Image Source: Zacks Investment ResearchNextEra is mounting a comeback as rates fall and investors start to look for strong stocks trading miles below their highs as the market nears fresh peaks. NEE is up 23% since early October to retake its 50-day moving average. It still trades below its 50-month moving average and near some of its most oversold RSI levels since 2009.NextEra’s recent rebound saw it climb above its lowest valuation levels in the last 10 years. NEE trades at a 50% discount to own its highs and below its 15-year median at 17.6X forward earnings.PepsiCo (PEP)PepsiCo is a consumer packaged goods powerhouse that competes alongside Coca-Cola (KO – Free Report) and many others. PepsiCo’s brands include Gatorade, Tostitos, Pepsi, and much, much more. Pepsi has posted impressive growth over the last several years as it slowly adapts to changing consumer habits. PEP stock was on a tear in the first several months of the year.PEP then got hit in a wave of selling across the consumer staples sector as Wall Street worried about the possible impact of weight loss drugs. The sector also got hurt as rising rates made their dividend yields less impressive. These dynamics are changing.
Image Source: Zacks Investment ResearchPepsiCo topped earnings estimates last quarter and provided upbeat guidance that helps it land Zacks Rank #2 (Buy) right now. Plus, its Beverages – Soft drinks segment is in the top 8% of over 250 Zacks industries and its dividend yields 3% to roughly match Coca-Cola. PEP’s revenue is projected to jump over 6% this year and another 5% next year to help boost its adjusted earnings by 11% and 8%, respectively.PepsiCo stock is up 100% over the last 10 years to crush the Consumer Staples sector’s 10% and Coca-Cola’s 44%. Expanding our view to 20 years, PEP has climbed by 260% vs. KO’s 130% and its sector’s 75%. PEP is up 15% in the last three years. Yet it trades 15% below its May 2023 highs and its average Zacks price target.
Image Source: Zacks Investment ResearchPepsiCo stock is back above its 50-day and it found support at its 200-week moving average in October. PEP is sitting below neutral RSI levels on a 10-year timeframe.PEP trades at a 22% discount to its highs at 20.6X forward earnings and below its 10-year median. PepsiCo also trades right in line with Coca-Cola despite its long-term outperformance.More By This Author:2 Great Value Stocks To Buy For 2024
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