McDonald's, Baxter: Top 5 Large-Cap Stocks
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BOSTON (
) -- These companies have market caps over $10 billion and "buy" ratings from our quantitative model, which considers more than 60 factors. They're ordered by their potential to appreciate, starting with the company with the best growth prospects.
Oracle
(ORCL) - Get Report
sells business software worldwide.
The numbers
: Fiscal fourth-quarter net income fell 7% to $1.9 billion as revenue declined 5% to $6.9 billion. Its gross margin rose from 82% to 84% and its operating margin remained steady at 43%. The company holds $13 billion of cash reserves, amounting to a quick ratio of 1.9. A debt-to-equity ratio of 0.4 indicates conservative leverage.
The stock
: Oracle has increased 23% this year, outpacing the
Dow Jones Industrial Average
and
S&P 500 Index
. The stock trades at a price-to-earnings ratio of 20, which is equal to the market, but a discount to software peers. The shares offer a dividend yield less than 1%.
McDonald's
(MCD) - Get Report
sells hamburgers and French fries at its fast-food franchises.
The numbers
: Second-quarter net income fell 8% to $1.1 billion, or 98 cents. Revenue declined 7% to $5.6 billion. Its gross margin climbed from 42% to 44% and its operating margin climbed from 27% to 29%. The company's quick ratio of 1.1, debt-to-equity ratio of 0.8 and consistent dividend growth reflect its stability. We give McDonald's a financial strength score of 8.5 out of 10, higher than the "buy"-list average of 7.
The stock
: McDonald's is down 10% this year, trailing major U.S. indices. The stock trades at a price-to-earnings ratio of 15, a discount to the market and restaurants. The shares offer a 3.6% dividend yield.
Medco Health Solutions
(MHS)
is one of the largest pharmacy benefit managers in the U.S.
The numbers
: Second-quarter net income rose 19% to $312 million and earnings per share jumped 26% to 64 cents, boosted by a lower share count. Revenue increased 17% to $15 billion. Its gross margin was little changed at 7% and its operating margin remained steady at 4%. Medco has less-than-ideal liquidity, reflected in its quick ratio of 0.9. A debt-to-equity ratio of 0.8 indicates reasonable leverage.
The stock
: Medco is up 31% this year, beating major U.S. indices. The stock trades at a price-to-earnings ratio of 23, a premium to the market and health care peers. The company doesn't pay dividends.
Baxter International
(BAX) - Get Report
sells health care equipment.
The numbers
: Second-quarter revenue declined 2% to $3.1 billion, but net income rose 8% to $587 million and earnings per share climbed 13% to 96 cents, boosted by a lower share count. Its gross margin increased from 56% to 57% and its operating margin rose from 22% to 24%. A quick ratio of 1.2 indicates ample liquidity and a debt-to-equity ratio of 0.6 demonstrates conservative leverage.
The stock
: Baxter has climbed 4% this year, less than major U.S. indices. The stock trades at a price-to-earnings ratio of 16, a discount to the market and medical equipment makers. The shares offer a 1.8% dividend yield.
PG&E
(PCG) - Get Report
sells electricity and natural gas in California.
The numbers
: Second-quarter revenue fell 11% to $3.2 billion, but net income increased 32% to $392 million, or $1.01. Its gross margin jumped from 28% to 33% and its operating margin increased from 16% to 21%. PG&E has a poor financial position, evident in its quick ratio of 0.6 and debt-to-equity ratio of 1.2.
The stock
: PG&E is up 5% this year, lagging behind major U.S. indices. The stock trades at a price-to-earnings ratio of 12, a discount to the market and utilities. The shares pay a 4.2% dividend yield, higher than the S&P 500 average.
-- Reported by Jake Lynch in Boston
.
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