Market turbulence is expected to persist as the Fed is likely to continue with its rate hikes as it is yet to achieve its 2% inflation target. However, despite lingering headwinds, optimism regarding the course of this year is rising.
According to Main Street Research's Demmert, "Although there may be further weakness in the first part of 2023, we expect 2023 to end with stock prices significantly higher than today's levels."
Moreover, experts believe the U.S. economy might avoid a severe recession despite a noticeable growth slowdown. Professor Harvey of Duke University thinks the odds of a mild recession in the U.S. economy are higher.
Therefore, investors could consider buying quality stocks Verizon Communications Inc. (VZ) and Hillenbrand, Inc. (HI) in the new year. However, WeWork Inc. (WE) might be best avoided considering its weak fundamentals.
Stocks to Buy:
Verizon Communications Inc. (VZ)
VZ and its subsidiaries provide communications, technology, information, and entertainment products and services worldwide to consumers, businesses, and governmental entities. Its segments are Consumer and Business.
On January 5, 2023, VZ announced STARZ as the latest streaming service to join +play beta.
Erin McPherson, VZ's Chief Content Officer, said, "Adding STARZ to the entertainment services available through +play beta gives our customers even more choice when it comes to accessing the content they love, and we're thrilled to have them aboard."
VZ's trailing-12-month EBITDA margin of 32.02% is 68.1% higher than the industry average of 19.05%, while its trailing-12-month net income margin of 14.22% is 215.5% higher than the industry average of 4.51%.
VZ's total operating revenues came in at $34.24 billion for the third quarter that ended September 30, 2022, up 4% year-over-year. Its small and medium business revenue came in at $3.20 billion, up 8.8% year-over-year. Also, its WIRELESS service revenue came in at $3.27 billion, up 5.7% year-over-year.
Analysts expect VZ's revenue to increase marginally year-over-year to $138.72 billion in 2023. Its EPS is expected to rise 2.2% per annum for the next five years. It surpassed EPS estimates in three of four trailing quarters. Over the past month, the stock has gained 10.6% to close the last trading session at $41.37.
VZ's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
VZ has a B grade for Growth and Stability. In the Telecom – Domestic industry, it is ranked #4 out of 19 stocks. Click here for the additional POWR Ratings for Value, Momentum, Sentiment, and Quality for VZ.
Hillenbrand, Inc. (HI)
HI operates as a diversified industrial company in the United States and internationally. It operates through three segments: Advanced Process Solutions; Molding Technology Solutions; and Batesville.
On December 1, 2022, HI completed the acquisition of the Peerless Food Equipment division of Illinois Tool Works Inc. for a purchase price of approximately $59 million. This acquisition is expected to complement HI's products under its LINXIS Group brands and help the company offer better services to customers.
HI's trailing-12-month EBITDA and net income margins of 17.79% and 7.10% are higher than the industry averages of 13.27% and 6.75%.
HI's net revenue came in at $2.94 billion for the year ended September 30, 2022, up 2.7% year-over-year. Its U.S. revenue came in at $1.35 billion, up 2.9% year-over-year. Moreover, its Advanced Process Solutions segment's adjusted EBITDA came in at $249.10 million, up 6.2% year-over-year.
For 2023, HI's revenue is expected to increase 5.5% year-over-year to $3.10 billion. Its EPS is expected to grow 12% per annum for the next five years. It surpassed EPS estimates in all four trailing quarters. The stock has gained 15.9% over the past three months to close the last trading session at $44.22.
HI has an overall B rating, equating to a Buy in our proprietary rating system. It also has a B grade for Value and Quality.
HI is ranked #6 out of 36 stocks in the A-rated Industrial – Manufacturing industry. Get additional POWR Ratings for HI (Growth, Momentum, Stability, and Sentiment) here.
Stock to Avoid:
WeWork Inc. (WE)
WE provides flexible workspace solutions to individuals and organizations worldwide.
WE's trailing-12-month EBITDA margin of negative 26.46% is lower than the industry average of 56.34%. Its trailing-12-month net income margin of negative 73.67% is lower than the industry average of 17.00%.
WE's revenue came in at $817 million for the third quarter that ended September 30, 2022, up 23.6% year-over-year. However, its cash and cash equivalents came in at $460 million for the period ended September 30, 2022, compared to $924 million for the period ended December 31, 2021, while its long-term net debt came in at $1 billion compared to $666 million.
WE's EPS is expected to remain negative in 2023. It has lost 34.4% over the past month to close the last trading session at $1.26.
WE's POWR Ratings reflect its poor prospects. It has an overall F grade, equating to a Strong Sell in our proprietary rating system.
It has an F for Stability and Quality and a D for Value and Sentiment. It is ranked #39 out of 40 stocks in the F-rated Real Estate Services industry. To see WE ratings for Growth and Momentum, click here.
VZ shares were trading at $41.34 per share on Tuesday morning, down $0.03 (-0.07%). Year-to-date, VZ has gained 6.57%, versus a 1.19% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
2 Stocks to Buy in the New Year and 1 to Avoid StockNews.com
