3 'Strong Buy'-Rated Mega-Caps to Invest in Now

As we wrap up the first full month of 2024, the stock market is navigating some ups and downs amidst global uncertainties. While U.S. economic data has impressed lately, officials in China are reportedly weighing new stimulus measures - and with some huge names set to report this week, corporate earnings have been a mixed bag so far this quarter. 

However, there are a few standout mega-cap stocks that have the mettle to weather this kind of uncertain macro environment. These heavyweights, all valued at over $300 billion by market cap, have proven they have the business models and operating prowess to navigate just about every type of economic cycle. 

Here, we'll focus on three of these giants: global payments processor Mastercard (MA), discount retailer Walmart (WMT), and pharmaceutical bigwig Merck & Co. (MRK).

Already in 2024, Mastercard stock has hit a new 52-week high, and analysts believe more upside is in store. Similarly, Walmart is up 4.2% for the month so far, outperforming a 2.5% gain for the S&P 500 Index ($SPX). Over in the healthcare realm, Merck is trading near all-time highs, driven by promising results from its oncology pipeline.

What makes these companies stand out? Along with proven long-term track records, they've got strategic plans honed in on growth areas like digital payments, e-commerce, and biopharma innovation - plus, they all offer reliable dividend payments to help investors create a steady stream of passive income, too.

Here's a closer look at these mega-cap stock picks.

Mastercard Stock

Mastercard is a giant of the global financial services industry, facilitating transactions between consumers and merchants. Along with processing payments and managing branded credit cards, Mastercard also provides services such as analytics, business intelligence, cybersecurity, and more. 

Over the last 52 weeks, Mastercard's stock price has increased by about 17% - underperforming the broader SPX, but outpacing the roughly 8.5% return of the S&P 500 Financial Sector SPDR (XLF). MA is now valued at over $409 billion by market cap.

Mastercard, which is included in Warren Buffett's stock portfolio, keeps crushing earnings expectations. In its Q3 2023 earnings report, the company reported diluted EPS of $3.39 compared to the $3.21 consensus estimate, representing 26.5% EPS growth year-over-year. 

Looking ahead, MA is slated to report quarterly earnings this Wednesday, Jan. 31. Analysts are looking for EPS of $3.08 for the final quarter of 2023, and $12.16 for the next fiscal year - which would mark an increase of about 16.7% from expected 2023 levels.

At $0.66 per share, MA's quarterly dividend translates to a yield of 0.60% - not exceptionally high, but it's backed by over a decade of consistent growth. Plus, with a low payout ratio of around 19%, and healthy free cash flow to back it up, additional dividend hikes could be in Mastercard's future.

Analysts have a consensus “strong buy” rating for Mastercard, with 24 out of 28 giving it a “strong buy,” 3 suggesting a “moderate buy,” and 1 saying “hold.”

The mean target price for MA is $457.00, which is only about 4.2% higher than current levels, but the Street-high price target of $510 implies more than 16% potential upside.

Walmart Stock

Walmart is a dominant player in retail, both physically and online. The Arkansas-based mega-retailer operates hypermarkets and discount stores worldwide under the Walmart and Sam's Club brands, and they've also built a thriving e-commerce division.

In the past 52 weeks, Walmart's stock has gained 15.5%, which is good enough to outperform the S&P Retail SPDR (XRT) - up just about 5% for the period. WMT is now valued at $438.4 billion by market cap.

In its last quarterly earnings report, Walmart beat Wall Street's profit and revenue estimates, reporting adjusted EPS of $1.53 on revenue of $159.4 billion. However, the company's tepid full-year profit outlook and comments about a cautious consumer sent the stock lower. 

Walmart tends to report later in the earnings season, so investors won't get their next update until Feb. 20. 

Looking ahead to the next fiscal year, ending in January 2025, analysts have higher hopes for growth. WMT is expected to report EPS growth of 8.4% to $6.98, on average.

Investors should also note that WMT is a legit Dividend King, with the current forward yield of 1.4% backed by five decades of consistent annual growth. 

Among the 30 analysts tracking Walmart, 21 are shouting “strong buy,” and four more say “moderate buy.” The remaining five call it a “hold.” The mean price target stands at $180.03, indicating upside potential of 9.6%.

Merck Stock

Merck & Co. (MRK) is a global pharmaceutical giant focused primarily on oncology, vaccinations, infectious diseases, and cardio-metabolic diseases. The pharma firm sports a hefty market cap of $304.4 billion - and that's after spinning off its multi-billion, woman-focused Organon (OGN) healthcare business.

Merck stock is up 13% over the past 52 weeks, and it's fresh off a new record high. After bottoming out in November, the shares got a shot in the arm when a mid-stage clinical trial for its experimental cancer vaccine with Moderna (MRNA) yielded positive results.

In Q3 2023, Merck beat expectations with adjusted EPS of $2.13 on revenue of $15.96 billion. Mark your calendars for this Thursday, Feb. 1 – that's when Merck spills the beans on their Q4 2023 earnings, with Wall Street targeting a loss of $0.09 per share.

Looking ahead, fiscal year 2024 earnings are expected to increase to $8.49 per share over 2023 levels.

MRK offers a quarterly dividend of $0.77 per share, which translates to a generous yield of 2.56%. The company has consistently raised its dividend each year for well over a decade.

Analysts call the stock a “strong buy,” with 18 out of 20 in coverage giving Merck their highest recommendation. The remaining 2 say it's a “hold.” The average price target of $126.71 is roughly 5% above current prices, while the Street-high target of $138.00 is a 14.2% premium.