The market has been so obsessed with interest rate hikes by the Federal Reserve and their impact on the economy that what might otherwise have been encouraging labor and industry statistics for November served to dampen investor sentiments and triggered a fresh bout of downward volatility.
However, it might be an ideal opportunity to load up on stocks of fundamentally strong and profitable businesses, which could tide over any possible economic slowdown with relative ease because of their resilient demand and robust margins.
To that end, it could be wise to invest in AbbVie Inc. (ABBV), AT&T Inc. (T), and Molina Healthcare, Inc. (MOH), which have the potential to keep your portfolios gaining regardless of the macroeconomic climate.
AbbVie Inc. (ABBV)
ABBV is a biopharmaceutical company engaged in the research, development, manufacturing, commercialization, and sale of medicines and therapies worldwide. The company’s products are segmented into seven categories: Immunology; Oncology; Anaesthetics; Neuroscience; Eyecare; Women’s Health; and Others.
On December 6, ABBV and HotSpot Therapeutics, Inc. announced an exclusive worldwide collaboration and option to license agreement for HotSpot's discovery-stage IRF5 program for treating autoimmune diseases.
The company expects this collaboration to deliver an entirely new target class of modulators to patients with severe autoimmune diseases, strengthening its robust immunology pipeline.
ABBV’s worldwide net revenues increased 3.3% year-over-year to $14.81 billion in the third quarter that ended September 30, 2022. During the same period, the company’s adjusted net earnings increased 29.1% from the year-ago value to $6.53 billion, while its adjusted EPS rose 29.3% from the prior-year quarter to $3.66.
ABBV’s trailing-12-month EBITDA margin of 50.85% is significantly higher than the industry average of 3.91%. Its trailing-12-month net income margin is 23.19%, compared to the industry average of negative 5.94%. Furthermore, its trailing-12-month ROTC of 14.63% compares to the industry average of negative 21.95%.
Analysts expect ABBV’s revenue and EPS to increase 3.9% and 9.1% year-over-year to $58.33 billion and $13.85, respectively, in the current fiscal. Moreover, the company’s impressive earnings surprise history has seen it beat Street EPS estimates in each of the trailing four quarters.
The stock has gained 12.2% over the past month and 20.9% year-to-date to close the last trading session at $163.72.
ABBV’s strong fundamentals are reflected in its POWR Ratings. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
ABBV also has an A grade for Quality and grade B for Growth and Sentiment. It is ranked #5 of 162 stocks in the Medical – Pharmaceuticals industry.
Click here to see the additional POWR Ratings of ABBV for Value, Momentum, and Stability.
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 December 6, T’s COO Jeff McElfresh indicated that the company expects full-year capital investment in the $24 billion range to meet the growing demand for core connectivity while meeting full-year 2022 guidance for free cash flow in the $14 billion range.
On November 1, T paid its quarterly dividend of $0.28 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 5.79% at the current price.
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.
T's trailing 12-month EBITDA margin of 34.13% easily surpasses the industry average of 17.90%. Moreover, the company’s trailing 12-month net income margin of 12.90% is significantly higher than the industry average of 4.51%. Furthermore, its trailing-12-month ROTC of 5.98% compares to the industry average of 4.11%.
The stock has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive. It has gained 5.2% over the past month and 32.2% year-to-date to close the last trading session at $19.17.
T has an overall rating of B, which equates to Buy in our POWR Ratings system. It also has a B grade for Value, Sentiment, and Quality.
T is ranked #4 of 19 stocks in the Telecom – Domestic industry.
Click here to access the additional ratings for T’s Stability, Growth, and Momentum.
Molina Healthcare, Inc. (MOH)
MOH offers managed healthcare services under Medicaid and Medicare programs and through state insurance marketplaces. The company operates through four segments: Medicaid; Medicare; Marketplace; and Other.
On October 3, MOH announced the closure of its acquisition of AgeWell New York’s Medicaid Managed Long Term Care (MLTC) business. As of September 30, AgeWell’s MLTC business served approximately 13,000 members. This is expected to have a positive impact on MOH’s topline.
On September 26, MOH announced that it had been selected by the Nebraska Department of Health and Human Services (DHHS) to provide healthcare services to Nebraskans under the state’s Medicaid managed care program. The 5-year contract is expected to begin on January 1, 2024.
On August 31, MOH announced that it had won the Iowa Medicaid Contract for four years beginning July 1, 2023, with a possible extension for another four years.
These developments are expected to have a positive impact on MOH’s topline.
During its fiscal third quarter, ended September 30, MOH’s total revenue increased 12.6% year-over-year to $7.93 billion, while its operating income rose 51.6% from its year-ago value to $335 million. During the same period, the company’s adjusted net income came in at $254 million or $4.36, up 54.9% and 54.1% year-over-year.
MOH’s trailing 12-month EBITDA margin of 4.76% is higher than the industry average of 3.91%. Its trailing-12-month net income margin is 2.77%, compared to the industry average of negative 5.94%. Furthermore, its trailing-12-month ROTC of 15.99% compares to the industry average of negative 21.95%.
Analysts expect MOH’s revenue and EPS for the fiscal ending December 2022 to increase 13.8% and 31.5% year-over-year to $31.61 billion and $17.80, respectively. The company has impressed further by surpassing the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 3.3% over the past month and 17.7% over the past year to close the last trading session at $335.63.
MOH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has a grade B for Growth, Value, and Quality.
MOH is ranked #4 of 11 stocks in the A-rated Medical – Health Insurance industry.
Click here to see the other ratings of MOH for Stability, Sentiment, and Momentum.
ABBV shares were trading at $164.68 per share on Wednesday afternoon, up $0.96 (+0.59%). Year-to-date, ABBV has gained 26.36%, versus a -16.48% 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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