SPECIAL REPORT The Top 7 Stocks for 2024

The Importance of Brand Power: 3 Stocks to Consider

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  • Remember the importance of brand power, and consider these three stocks.
  • Shell (SHEL): The oil major’s brand is known worldwide, and it just launched a new $3.5 billion stock buyback program.
  • Eli Lilly (LLY): The pharma company’s reputation and brand are growing thanks to the popularity of its weight loss drug. 
  • Deckers Outdoor (DECK): The shoe company is riding high due to the popularity of Uggs and Hoka running shoes. 
popular brand stocks - The Importance of Brand Power: 3 Stocks to Consider

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Brand power is real. The brand that consumers associate with a company is quantifiable and something valued. For example, Statista claims that Amazon (NASDAQ:AMZN) is currently the world’s most valuable brand and is worth nearly $300 billion. That’s impressive. Of course, much of a brand’s value is tied up in a company’s reputation and the popularity of the goods and services it provides. When consumers like and trust a brand, the company behind it is said to have goodwill. However, that goodwill can quickly be squandered if an organization takes a misstep or makes a blunder, especially in today’s climate of cancel culture. Coming out of this year’s third-quarter earnings season, several brands are shining and looking stronger than ever. Here is the importance of brand power and three stocks to consider for your portfolio.

Shell (SHEL)

logo on a gas station in Iceland.
Source: JuliusKielaitis / Shutterstock.com

British oil producer Shell (NYSE:SHEL) is a global brand whose logo and name are known the world over. The company has a track record of delivering for shareholders, as it did with its recent third-quarter earnings report. Shell reported a profit of $6.2 billion, in line with Wall Street forecasts and significantly higher than the $5.1 billion it reported in this year’s second quarter. Shell said its Q3 profit was bolstered by higher oil prices and improved refining margins.

Along with the earnings results, Shell announced a new $3.5 billion stock buyback program to be carried out over the next three months. The company has now bought back more than $6 billion of its own stock in this year’s second half. Company executives said the new share buyback program is made possible by free cash flow that stood at $7.5 billion at the end of Q3. Shell also pays a hefty quarterly dividend of 70 cents per share, giving it a yield of 4.10%. All of these are great reasons to take a position in SHEL stock. So, too, is the fact that the company’s share price has gained 22% this year.

Eli Lilly (LLY)

Eli Lilly (LLY) sign on corporate building with blue sky in background
Source: shutterstock.com/Michael Vi

Eli Lilly (NYSE:LLY) is one of the largest pharmaceutical companies in the U.S. by market capitalization and a fairly well-known brand among consumers. However, Eli Lilly’s brand power is rising due to the red-hot popularity of its weight loss medication, Mounjaro. Currently, the drug isn’t even approved to treat weight loss. Yet, Eli Lilly still sold $1.41 billion of the drug in Q3 of this year. Approved to treat diabetes in May 2022, Mounjaro’s sales were only $97.3 million in Q3 2022.

However, the medication is being prescribed off-label by doctors to treat obesity, pending regulatory approval as a weight loss treatment. In October, Eli Lilly applied to the U.S. Food and Drug Administration (FDA) for approval of Mounjaro to treat chronic weight gain. A ruling by the regulator is expected within months. Some analysts forecasted it will become a top-selling medication. Eli Lilly is pulling out all the stops to be ready for the FDA approval.

Owing to the hype around Mounjaro, LLY stock has increased 58% this year. The company also pays a quarterly dividend of $1.13 for a yield of 0.78%.

Deckers Outdoor (DECK)

Deckers Outdoor (DECK) logo displayed on smartphone screen
Source: shutterstock.com/Piotr Swat

Deckers Outdoor (NYSE:DECK) thrives on its popular shoe brands, which include Ugg boots and Teva sandals. The company’s Hoka running shoes are particularly popular and helping to drive the company to record earnings, pushing its share price to new heights. DECK stock is up 54% this year, including a double-digit gain after the company announced record financial results for Q3 of this year. In the last 12 months, the stock has risen 69% and is up 348% over five years. The Hoka running shoe brand has become a global bestseller and is taking share from rivals, such as Nike (NYSE:NKE).

Deckers Outdoor’s Q3 print was a blowout. The company reported earnings per share (EPS) of $6.82, well ahead of the $4.40 forecast on Wall Street. Revenue in the quarter rose 25% year-over-year to $1.09 billion, which topped the consensus estimate of $960.62 million. Both the earnings and revenue were records for Deckers Outdoor.

Looking forward, the company guided for EPS of $22.90 to $23.25 and revenue of $4.025 billion for its entire fiscal year. Both estimates are ahead of Wall Street forecasts. The company doesn’t pay a dividend, but its stock performance has been red hot.

On the date of publication, Joel Baglole held long positions in LLY and DECK. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.


Article printed from InvestorPlace Media, https://investorplace.com/2023/11/the-importance-of-brand-power-3-stocks-to-consider/.

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