This year has been challenging for businesses and investors as they grappled with geopolitical tensions, multi-decade high inflation, and the Fed’s aggressive interest rate hikes to combat it. After six interest rate hikes, inflation finally showed signs of easing in October.
Federal Reserve Chairman Jerome Powell stated that smaller interest rate increases are likely ahead. Nonetheless, he cautioned that monetary policy would probably stay restrictive for some time until real signs of progress emerge on inflation.
A slower pace of interest rate hikes is expected to bring relief to investors. Many analysts now believe that the economy could face a mild recession.
Amid this backdrop, it could be wise to invest in fundamentally strong stocks CVS Health Corporation (CVS), Archer-Daniels-Midland Company (ADM), and Box, Inc. (BOX). Wall Street analysts believe that these stocks have more room to run.
CVS Health Corporation (CVS)
CVS provides health services in the United States. It operates through three segments: Health Care Benefits, Pharmacy Services, and Retail/LTC.
Over the last three years, CVS’ dividend payouts have grown at a 3.23% CAGR. Its four-year average dividend yield is 2.78%, and its forward annual dividend of $2.20 per share translates to a 2.14% yield. It paid a quarterly dividend of $0.55 per share on November 1, 2022.
On September 5, 2022, CVS and Signify Health (SGFY) entered a definitive agreement under which CVS Health will acquire Signify Health. CVS Health President and CEO Karen S. Lynch said, “This acquisition will enhance our connection to consumers in the home and enables providers to better address patient needs as we execute our vision to redefine the health care experience. In addition, this combination will strengthen our ability to expand and develop new product offerings in a multi-payor approach.”
For the fiscal third quarter ended September 30, 2022, CVS’ total revenues increased 10% year-over-year to $81.16 billion. Its adjusted operating income increased 3.9% year-over-year to $4.23 billion. The company’s adjusted income attributable to CVS increased 5.3% year-over-year to $2.76 billion. Moreover, its adjusted EPS came in at $2.09, representing an increase of 6.1% year-over-year.
Analysts expect CVS’ revenue and EPS for fiscal 2022 to increase 7.6% and 2.6% year-over-year to $314.35 billion and $8.62, respectively. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 14% to close the last trading session at $102.58. Wall Street expects the stock to hit $117.86 in the near term, indicating a potential upside of 14.9%.
CVS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked first out of 4 stocks in the B-rated Medical - Drug Stores industry. It has an A grade for Growth and a B for Stability and Sentiment.
We have also given CVS grades for Value, Momentum, and Quality. Get all CVS ratings here.
Archer-Daniels-Midland Company (ADM)
ADM procures, transports, stores, processes, and merchandises agricultural commodities, products, and ingredients worldwide. The company operates through three segments: Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition.
Over the last three years, ADM’s dividend payouts have grown at a 4.6% CAGR. Its four-year average dividend yield is 2.77%, and its forward annual dividend of $1.60 per share translates to a 1.74% yield. It is expected to pay a quarterly dividend of $0.40 per share on December 7, 2022.
On September 14, 2022, ADM and PepsiCo (PEP) announced a ground-breaking 7.5-year strategic commercial agreement to collaborate on projects that significantly expand regenerative agriculture. The partnership is expected to reach up to 2 million acres by 2030, and reaching the partnership’s goals could eliminate 1.4 million metric tons of greenhouse gasses.
For the fiscal third quarter ended September 30, 2022, ADM’s revenues increased 21.4% year-over-year to $24.68 billion. Its adjusted net earnings increased 91.2% year-over-year to $1.05 billion. Additionally, its adjusted EPS came in at $1.86, representing a 91.8% increase from the prior-year quarter.
ADM’s EPS and revenue for the quarter ending December 31, 2022, are expected to increase 9.5% and 8.8% year-over-year to $1.64 and $25.12 billion, respectively. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. The stock has gained 35.7% year-to-date to close the last trading session at $91.71. Wall Street expects the stock to hit $98.20 in the near term, indicating a potential upside of 7.1%.
It is no surprise that ADM has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It is ranked #3 out of 28 stocks in the Agriculture industry. It has an A grade for Growth and a B for Sentiment.
Click here to see the additional ADM ratings for Value, Momentum, Stability, and Quality.
Box, Inc. (BOX)
BOX provides a cloud content management platform that enables organizations of various sizes to manage and share their content from anywhere on any device. The company's Software-as-a-Service platform allows users to collaborate on content, automate content-driven business processes, develop custom applications, and implement data protection, security, and compliance features.
On October 19, 2022, BOX announced a renewed partnership with Japan’s Ministry of the Environment. Through this partnership, the Ministry of the Environment will digitize and streamline administrative operations contributing to improved productivity and better public services by transforming the work styles of employees. It also strengthens the Ministry’s security posture and defense against serious issues such as internal fraud or information leaks.
For the fiscal third quarter ended October 31, 2022, BOX’s revenue increased 11.6% year-over-year to $249.95 million. The company’s non-GAAP gross profit increased 14.3% year-over-year to $191.24 million. Its non-GAAP net income attributable to common stockholders increased 31.8% year-over-year to $46.64 million. Moreover, its non-GAAP net EPS attributable to common stockholders increased 40.9% from the prior-year period to $0.31.
BOX’s EPS and revenue for the quarter ending January 31, 2023, are expected to increase 43% and 10% year-over-year to $0.34 and $256.56 million, respectively. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. The stock has gained 10.8% year-to-date to close the last trading session at $29.02. Wall Street expects the stock to hit $32.83 in the near term, indicating a potential upside of 13.1%.
BOX’s POWR Ratings reflect solid prospects. The company has an overall rating of A, which equates to a Strong Buy. It is ranked #4 out of 77 stocks in the Technology - Services industry. In addition, it has an A grade for Growth and Quality and a B for Value.
Click here to see the additional ratings of BOX for Momentum, Stability, and Sentiment.
CVS shares were trading at $102.64 per share on Monday morning, up $0.06 (+0.06%). Year-to-date, CVS has gained 1.74%, versus a -14.24% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
3 Hot Stocks With More Room to Run in 2023 StockNews.com
