With inflation showing signs of cooling down, markets heated up toward the end of last week on hopes of softer rate hikes by the Fed next month. A larger-than-expected drop in consumer inflation has sent U.S. stocks soaring. Over the past month, the S&P 500 climbed approximately 8%, while the Nasdaq Composite and the Dow Jones gained more than 5% and 11%, respectively.
Goldman Sachs Group Inc. economists think that the economy’s soft landing is still possible, with improving inflation figures and other factors suggesting that the Fed may be able to pull off its aggressive interest rate hike plan.
With confidence increasing among investors and institutions that the economy can avoid a recession, it may be an excellent time to invest in fundamentally strong stocks with ample growth potential.
To that end, AT&T Inc. (T) and McKesson Corporation (MCK), which can enrich their owners through significant capital appreciation and steady income generation, could be ideal bets now.
AT&T Inc. (T)
T is a global provider of telecommunications, media, and technical services worldwide. The company operates through two segments: Communications; and Latin America. Its offerings include wireless communications, data/broadband, Internet services, video services, local exchange services, long-distance services, telecommunications equipment, managed networking, and wholesale services.
On November 1, T paid its quarterly dividend of $0.2775 per share on the company’s common shares; Series A dividend of $312.50 per preferred share, or $0.3125 per depositary share; and Series C dividend of $296.875 per preferred share, or $0.296875 per depositary share. The company pays $1.11 as dividends annually, which translates to a yield of 5.83% at the current price.
On August 8, T announced that it delivered ‘FirstNet and Family,’ a simplified experience that gives America’s first responders the best of 2 networks – public safety of the FirstNet network and the AT&T commercial network – to keep their worlds connected. This should help T continue to witness growing demand from various agencies and organizations.
For its fiscal 2022 third quarter ended September 30, 2022, T’s revenues came in at $30 billion. Excluding the impact of U.S. Video separation in July 2021, standalone operating revenues for T were up 3.1% from $29.1 billion in the year-ago quarter. Its income from continuing operations increased 26% year-over-year to $6.3 billion. As a result, the company’s adjusted EPS grew 3% year-over-year to $0.68.
The stock has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive. It has gained 28.1% over the past month to close the last trading session at $19.05.
T’s POWR Ratings reflect its solid prospects. It has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
T also has a grade B for Value, Sentiment, and Quality. It is ranked #4 of 20 stocks in the Telecom – Domestic industry.
Click here to access the additional ratings for T’s Stability, Growth, and Momentum.
McKesson Corporation (MCK)
MCK is a diversified healthcare service provider focusing on advancing patients’ health outcomes globally. The company operates through four segments: U.S. Pharmaceutical, Prescription Technology Solutions (RxTS), Medical-Surgical Solutions, and International.
On October 27, MCK announced a regular quarterly dividend of $0.54 per share of common stock. The dividend will be paid out on January 3, 2023, to shareholders of record on December 1, 2022. The company pays $2.16 annually as dividends, which translates to a yield of 0.61% at the current price. It has increased its dividend payouts for 14 consecutive years.
On September 29, MCK announced that it had extended its pharmaceutical distribution agreement with CVS Health (CVS) through June 2027. MCK and CVS have been partnering to develop patient value propositions for over 20 years.
On September 19, MCK signed a definitive agreement to acquire Rx Savings Solutions (RxSS), a prescription price transparency and benefit insight company. The acquisition, valued at a maximum of $875 million, aligns with McKesson’s strategic growth focus by connecting biopharma and payer services to patients.
In the fiscal 2022 second quarter ended September 30, 2022, MCK’s total revenues increased 5.4% year-over-year to $70.16 billion. During the same period, its income from continuing operations increased 249.1% year-over-year to $932 million, while EPS increased 277.8% year-over-year to $6.46.
Analysts expect MCK to report revenue and EPS of $275.97 billion and $24.73 for the fiscal year ending March 2023, indicating increases of 4.6% and 4.4% year-over-year, respectively.
MCK’s stock has gained 2.3% over the past month and 43.6% year-to-date to close the last trading session at $356.21.
MCK has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It also has an A grade for Growth and grade B for Value, Stability, Sentiment, and Quality.
It tops the list of 79 stocks in the Medical – Services industry
Click here to see the additional ratings of MCK.
T shares were trading at $19.13 per share on Monday afternoon, up $0.08 (+0.42%). Year-to-date, T has gained 9.99%, versus a -14.98% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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