The Federal Reserve hiked interest rates by 25 bps, in line with the market expectations. However, the indication by Jerome Powell that the Central Bank might be nearing the end of its cycle of interest-rate hikes was a pleasant surprise, cheerfully welcomed by the market with a euphoric rally.
The Fed Chair expressed cautious optimism in his speech by noting that while it would be “very premature to declare victory or to think we really got this, I think for the first time that the disinflationary process has started.”
Across the Atlantic, the Bank of England also dialed back its pessimism with the remark that it sees a ‘much shallower’ recession than feared while going ahead with a 50-bps rate hike.
With the Fed's terminal rate staying below 5% and a ‘soft landing’ for the U.S and global economy looking increasingly probable, shares of fundamentally strong and profitable businesses Cisco Systems, Inc. (CSCO), VEON Ltd. (VEON), and Nature’s Sunshine Products, Inc. (NATR) should not be overlooked to make the most of their potential upsides in the year ahead.
Cisco Systems, Inc. (CSCO)
CSCO designs, manufactures, and sells internet protocol-based networking and other products across networking, security, collaboration, applications, and the cloud. The company operates through three geographic segments: the Americas; Europe, the Middle East, and Africa (EMEA); and Asia Pacific, Japan, and China (APJC).
On January 31, CSCO showcased its new range of collaboration devices for Microsoft Teams and unveiled the new Cisco Table Microphone Pro, a digital and multi-directional table microphone for hybrid workspaces, along with audio interoperability advancements.
With the needs of hybrid workers in mind, the innovations deliver more inclusivity and choice for meetings while improving the manageability, configuration, and security required by IT.
On January 25, CSCO paid its quarterly cash dividend of $0.38 per common share. The company pays a $1.52 per share dividend annually, which translates to a forward yield of 3.13% at the current price. This compares favorably to the four-year average dividend yield of 2.98%.
CSCO has increased its dividend payouts for 11 consecutive years. Over the past five years, the company’s dividend grew at a 5.6% CAGR.
On November 29, 2022, CSCO announced the launch of AppDynamics Cloud capabilities that allow organizations to achieve observability over cloud-native applications correlated to business context across the entire IT estate. These capabilities will initially support applications and digital services running on Amazon Web Services (AWS).
For the fiscal 2023 first quarter ended October 29, 2022, CSCO’s revenue increased 5.4% year-over-year to $13.6 billion, while its operating income increased 3% year-over-year to $3.54 billion. The company’s non-GAAP net income increased 2.1% year-over-year to $3.55 billion, which translates to an EPS of $0.86, up 4.9% year-over-year.
CSCO’s trailing-12-month gross profit margin of 62.23% is 27.2% greater than the industry average of 48.94%. The company’s trailing-12-month EBITDA and net income margins of 30.34% and 22% comfortably surpass the respective industry averages of 11.14% and 3.22%.
Analysts expect CSCO’s revenue and EPS for the fiscal year 2023 to increase 5.7% and 5.6% year-over-year to $54.51 billion and $3.55, respectively. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
CSCO’s stock has gained 2.3% over the past month and 7.3% over the past six months to close the last trading session at $48.57.
CSCO’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CSCO also has an A grade for Quality and a B for Stability. It is ranked #4 of 49 stocks in the Technology – Communication/Networking industry.
Click here for additional POWR Ratings for CSCO’s Growth, Momentum, Sentiment, and Value.
VEON Ltd. (VEON)
Headquartered in Amsterdam, the Netherlands, VEON and its subsidiaries provide mobile and fixed-line telecommunications services. With a market capitalization of $878.94 million, the company offers voice, data, and other telecommunication services through wireless, fixed, and broadband internet.
On December 31, 2022, VEON announced that, per the court's order, each of the conditions of the scheme had been fulfilled. Therefore, the scheme binds the company and its creditors to the terms described therein. This order would protect the company from enforcement actions.
On December 15, VEON and Turkcell (TKC) announced their collaboration to spread the latter’s instant free communication and life platform BIP in Pakistan through VEON’s Jazz digital operator.
BIP is a free instant communication app that goes beyond secure messaging to offer a full communication and life platform, including high-quality voice and video calls, secret messages, and instant translation, along with food, sports, entertainment, and fashion channels.
On November 24, VEON announced that following a competitive process, it has agreed to sell its Russian operations to certain senior members of the management team of PJSC VimpelCom for an expected enterprise value of ₽370 billion ($5.28 billion).
It is expected that the total consideration will be paid primarily by VimpelCom taking on and discharging certain VEON Holdings B.V. debt, thus significantly deleveraging VEON’s balance sheet.
For the third quarter of fiscal 2022, which ended September 30, 2022, VEON’s revenue increased 3.6% year-over-year to $2.08 billion. During the same period, the company’s operating profit increased 22.5% year-over-year to $506 million, while its total adjusted EBITDA increased marginally to $890 million.
As a result, VEON’s profit from continuing operations increased 86.6% over the previous-year quarter to $237 million.
VEON’s trailing-12-month gross profit margin of 76.90% is 52.8% higher than the industry average of 50.32%. Its trailing-12-month EBITDA and net income margins of 36.24% and 5.57% also compare favorably to the industry averages of 18.95% and 3.94%, respectively.
Analysts expect VEON’s revenue and EPS for the fiscal year, which ended December 31, 2022, to come in at $8.86 billion and $0.39, representing increases of 13.8% and 41.3% year-over-year, respectively. Revenue and EPS are expected to increase 4% and 10.3% during the current fiscal to $9.21 billion and $0.43, respectively.
The stock has gained 27.1% over the past month and 31% over the past six months to close the last trading session at $0.60.
VEON’s promising outlook is reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. It also has an A grade for Value and a B for Growth, Stability, Sentiment, and Quality.
VEON tops the list of 47 stocks within the A-rated Telecom- Foreign industry. Click here for all POWR Ratings of VEON.
Nature’s Sunshine Products, Inc. (NATR)
NATR operates as a natural health and wellness company. It primarily manufactures and sells nutritional and personal care products in Asia, Europe, North America, Latin America, and internationally.
For the fiscal 2022 third quarter, which ended September 30, NATR’s net sales came in at $104.51 million. During the same period, the company’s selling, general, and administrative expenses came in at $36.79 million, down 6.9% year-over-year.
NATR’s total liabilities came in at $81.75 million as of September 30, 2022, compared to $97.47 million as of December 31, 2021.
NATR’s trailing-12-month gross profit margin of 71.59% is 128.2% higher than the industry average of 31.37%. Its trailing-12-month ROTC and ROTA of 7.35% and 4.96% also compare favorably to the respective industry averages of 6.17% and 3.56%.
NATR’s revenue is expected to rise marginally year-over-year to $420.60 million during the current fiscal, while its EPS is expected to come in at $0.18 during the current fiscal year, compared to a loss of $0.10 per share expected during the previous fiscal. Over the past month, the stock has gained 24.1% to close the last trading session at $10.29.
NATR’s strong fundamentals have earned it an overall A rating, which translates to a Strong Buy in our POWR Ratings system. It also has an A grade for Value and Quality and a B for Stability and Sentiment.
Unsurprisingly, NATR tops the list of 9 stocks in the B-rated Medical – Consumer Goods industry.
Click here for the additional POWR Ratings for NATR’s Growth and Momentum.
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CSCO shares were trading at $49.24 per share on Thursday morning, up $0.67 (+1.38%). Year-to-date, CSCO has gained 4.18%, versus a 8.97% 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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