Economies on both sides of the Atlantic had a robust end to the previous year with a higher-than-expected GDP growth rate. The Commerce Department reported that the U.S. economy grew at a 2.9% annualized rate, while Preliminary Eurostat data released Tuesday showed that the eurozone grew at 0.1% in the fourth quarter of 2022.
With economic resilience accompanied by moderating inflation in wages as well as prices of goods and services in both the U.S. and Europe, a slower interest rate hike by the Fed today should boost consumer and investor sentiment alike by making a ‘soft landing’ much more likely.
In such a scenario, it could be wise not to miss out on the opportunity to invest in fundamentally sound stocks, Exxon Mobil Corporation (XOM), Novo Nordisk A/S (NVO), and Bridgestone Corporation (BRDCY), to boost your portfolio returns.
Exxon Mobil Corporation (XOM)
XOM is engaged in the energy business through exploration for, and production of, crude oil and natural gas and the manufacture, trade, transport, and sale of crude oil, natural gas, petroleum products, petrochemicals, and a range of specialty products. The company’s segments include Upstream; Downstream; and Chemicals.
On January 26, XOM announced that its majority-owned affiliate, Imperial Oil Ltd, will invest about $560 million to move forward with the construction of the largest renewable diesel facility in Canada. The project is expected to produce 20,000 barrels of renewable diesel per day, primarily from locally sourced feedstocks, and could help reduce greenhouse gas emissions by about 3 million metric tons per year.
On January 11, XOM announced that it had reached an agreement with Bangchak Corporation to sell its interest in Esso Thailand, which includes the Sriracha Refinery, select distribution terminals, and a network of Esso-branded retail stations. The company believes that this transaction would help it deliver on its commitment to strengthening value and overall competitiveness.
On December 14, 2022, XOM announced the startup of one of North America's largest advanced recycling facilities at its integrated manufacturing complex in Baytown, Texas. The facility would use proprietary technology to break down more than 80 million tonnes of hard-to-recycle plastics and transform them into raw materials for new products.
This would help XOM support a circular economy for post-use plastics and divert plastic waste currently sent to landfills.
During the fiscal fourth quarter, which ended December 31, 2022, XOM’s total revenue and other income increased 12.3% year-over-year to $95.43 billion. Excluding unfavorable identified items of $1.3 billion associated with additional European taxes on the energy sector and asset impairments, the company’s earnings increased 65.9% year-over-year to $3.40 per share.
XOM’s trailing-12-month ROCE, ROTC, and ROTA of 29.9%, 16.9%, and 14.01% exceed the respective industry averages of 20.99%, 8.50%, and 6.88%.
Analysts expect XOM’s revenue and EPS for the first quarter of the current fiscal year (ending March 2023) to increase 12.3% and 32.9% year-over-year to $98.76 billion and $2.75, respectively. Moreover, the company has impressed by surpassing consensus EPS estimates in three of the trailing four quarters.
The stock has gained 6.4% over the past month and 22.8% year-to-date to close the last trading session at $116.01.
XOM’s fundamental strength is reflected in its POWR Ratings. It has an A grade for Momentum and Quality. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
XOM is ranked #38 of 93 stocks in the B-rated Energy - Oil & Gas industry.
Click here for additional POWR Ratings for Growth, Value, Sentiment, and Stability for XOM.
Novo Nordisk A/S (NVO)
Headquartered in Bagsvaerd, Denmark, NVO is a global healthcare company engaged in the research, development, manufacture, and marketing of pharmaceutical products worldwide. The company operates through two segments: Diabetes and Obesity care and Biopharm.
On January 31, NVO updated that it acquired 4.25 million B shares for Kr3.82 billion ($556.55 million) as part of its share repurchase program. This is part of its overall share repurchase program of up to Kr24 billion ($3.50 billion) to be executed during a 12-month period beginning February 2, 2022.
While demonstrating the management’s confidence in the company’s growth prospects, this repurchase program also raises the intrinsic value of the holdings of the existing shareholders.
On November 22, 2022, NVO announced its plans to invest Kr5.4 billion ($787.46 million) in expanding existing facilities in Bagsværd, including constructing a new plant. This expansion would provide additional capacity in R&D for manufacturing active pharmaceutical ingredients (API) for developing NVO’s future oral and injectable product portfolio.
On October 14, NVO announced the completion of the acquisition of Forma Therapeutics Holdings, Inc. (Forma), which was announced on September 1. The former has acquired all outstanding shares of common stock of Forma at a price of $20 per share in cash, without interest and less any applicable tax withholding.
With Forma becoming a wholly owned subsidiary, NVO expects to expand its presence in sickle cell disease and rare blood disorders.
NVO’s net sales for the fiscal ended December 31, 2022, increased 25.7% year-over-year to Kr176.95 billion ($25.80 billion), while its operating profit increased 27.6% year-over-year to Kr74.81 billion ($10.91 billion). As a result, the company’s net profit during the period increased 16.3% and 17.8% year-over-year to Kr55.53 billion ($8.10 billion) and Kr24.44 per share, respectively.
NVO’s trailing-12-month gross profit margin of 84.19% is 51.8% higher than the industry average of 55.48%. Likewise, the company’s trailing-12-month EBITDA and net income margins of 46.44% and 31.59% compare favorably to the respective industry averages of 3.91% and negative 4.82%. Moreover, its trailing-12-month ROCE, ROTC, and ROTA of 73.99%, 49.35%, and 21.75% comfortably surpass their respective industry averages.
Analysts expect NVO’s EPS and revenue for the fiscal ending December 31, 2023, to increase 23.1% and 14.5% year-over-year to $4.36 and $29.30 billion, respectively.
The stock has gained marginally over the past month and 19.6% over the past six months to close the last trading session at $138.78.
NVO’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It has an A grade for Quality and a B for Value, Stability, and Sentiment.
Unsurprisingly, NVO tops the list of 172 stocks in the Medical – Pharmaceuticals industry.
Click here for additional ratings for NVO’s Growth and Momentum.
Bridgestone Corporation (BRDCY)
Headquartered in Tokyo, Japan, BRDCY primarily manufactures and sells tires and rubber products worldwide. The company operates through two segments, Tires and Diversified Products.
On December 19, 2022, Thai Bridgestone Co., Ltd. (TBSC), a subsidiary of BRDCY, announced that it had installed solar rooftop panels to directly power the tire production process in its Nong Khae plant in Saraburi province. The company’s largest solar rooftop panel, with a total capacity of 9.95 MWp, is expected to cut 97,500 tons reduction in total CO2 emissions over the next 15 years.
On November 30, BRDCY updated that according to the resolution at its Board of Directors meeting held on February 15, 2022, for the acquisition of up to 25 million of its treasury stock for a total consideration of up to ¥100 billion. The company had acquired 20.23 million shares worth ¥99.99 billion until the announcement.
While demonstrating the management’s confidence in the company’s growth prospects, this repurchase program also raises the intrinsic value of the holdings of the existing shareholders.
On November 18, BRDCY announced an investment of approximately US$190 million to renovate and expand its tire manufacturing plant located in Heredia, Costa Rica. This investment would help the company extend its facilities, increase its production capacity up to 36% by 2026, and add more than 160 new permanent jobs.
BRDCY’s revenue for the nine months ended September 30, 2022, increased 28.4% year-over-year to ¥2.98 trillion ($22.86 billion). During the same period, the company’s gross profit increased 21.2% year-over-year to ¥1.15 trillion ($8.86 billion), while its adjusted operating profit increased 18.6% year-over-year to ¥342.20 billion ($2.63 billion).
As a result, the profit attributed to owners of the parent increased 6.2% year-over-year to ¥217.20 billion ($1.67 billion).
BRDCY’s trailing-12-month gross profit margin of 39.64% is 11.4% higher than the industry average of 35.58%. Likewise, the company’s trailing-12-month EBITDA margin of 18.60% compares favorably to the industry average of 11.09%. Moreover, its trailing-12-month ROTC of 7.43% also surpassed the industry average of 6.46%.
BRDCY’s revenue and EPS for the fiscal year ending December 31, 2023, are expected to increase 2.4% and 27.2% year-over-year to $31.85 billion and $1.90, respectively.
The stock has gained 4.4% over the past month to close the last trading session at $18.62.
BRDCY’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 also has an A grade for Stability and Quality and a B for Growth and Value.
BRDCY is ranked #4 of 62 stocks in the A-rated Auto Parts industry. Additional ratings for BRDCY’s Momentum and Sentiment can be found here.
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XOM shares were trading at $116.43 per share on Wednesday morning, up $0.42 (+0.36%). Year-to-date, XOM has gained 5.56%, versus a 6.20% 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.
3 High-Quality Stocks to Pick up in 2023 StockNews.com
