Five Large-Caps to Lead S&P 500 - TheStreet

Five Large-Caps to Lead S&P 500

DirecTV, McDonald's, Medco, Quest Diagnostics and General Mills are rated 'buy.'
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BOSTON (

TheStreet

) -- The

S&P 500 Index

of the largest U.S. companies has risen 70% since reaching a 12-year low last March. As companies increase profits, the large-cap rally may stretch through most of this year. Here are five stocks to consider.

5. DirecTV

(DTV)

provides satellite television.

The numbers

: Third-quarter net income increased marginally to $366 million, and earnings per share climbed 12% to 37 cents. Revenue grew 10% to $5.5 billion. DirecTV's operating margin remained steady at 13%. A quick ratio of 1.1 demonstrates adequate liquidity. A debt-to-equity ratio of 1.7 reflects excessive leverage.

The stock

: DirecTV returned 53% over the past year, beating major U.S. indices. The stock trades at a price-to-earnings ratio of 26, a premium to media peers. DirecTV doesn't pay dividends.

4. McDonald's

(MCD) - Get Report

sells hamburgers, soft drinks and other food products.

The numbers

: Third-quarter net income increased 6% to $1.3 billion, and earnings per share climbed 10% to $1.15. Revenue declined 4% to $6 billion. The company's operating margin widened from 28% to 31%. A quick ratio of 0.9 reflects less-than-ideal liquidity. A debt-to-equity ratio of 0.8 indicates reasonable leverage.

The stock

: McDonald's climbed 6% over the past year, lagging behind major U.S. indices. The stock trades at a price-to-earnings ratio of 16, a discount to restaurant peers. Shares offer a 3.5% dividend yield.

3. Medco Health Solutions

(MHS)

is a pharmacy-benefits manager.

The numbers

: Third-quarter net income increased 13% to $336 million, and earnings per share advanced 19% to 69 cents. Revenue rose 18% to $15 billion. Medco's operating margin was unchanged at 4%. A quick ratio of 1 reflects adequate liquidity. A debt-to-equity ratio of 0.7 indicates reasonable leverage.

The stock

: Medco advanced 53% over the past year, outpacing major U.S. indices. The stock trades at a price-to-earnings ratio of 27, a premium to health-care-service peers. Medco doesn't pay dividends.

2. Quest Diagnostics

(DGX) - Get Report

offers diagnostic-testing services.

The numbers

: Third-quarter net income surged 74% to $192 million, but earnings per share climbed 26% to $1.02. Revenue increased 3% to $1.9 billion. Quest's operating margin was unchanged at 18%. A quick ratio of 1.2 and debt-to-equity ratio of 0.8 reflect a stable financial position.

The stock

: Quest Diagnostics increased 26% over the past year, less than major U.S. indices. The stock trades at a price-to-earnings ratio of 16, a discount to health-care-service peers. Shares offer a 0.7% dividend yield.

1. General Mills

(GIS) - Get Report

sells cereal and other food products.

The numbers

: Fiscal second-quarter profit increased 50% to $566 million, or $1.66 a share. Revenue inched up 2% to $4.1 billion. The company's operating margin widened from 12% to 22%. A quick ratio of 0.6 reflects poor liquidity. A 1.1 debt-to-equity ratio indicates sizable leverage.

The stock

: General Mills climbed 19% over the past year, underperforming major U.S. indices. The stock trades at a price-to-earnings ratio of 15, a discount to food-products peers. Shares offer a 2.7% dividend yield.

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