The Fed has hiked its policy rate significantly this year from near zero to a 4.25%-4.50% range, the highest since late 2007. Last week, the Fed projected at least an additional 75 basis points of increases in borrowing costs by the end of 2023.
Moreover, while the U.S. economy grew at a 2.9% annual rate in the third quarter, the unemployment rate is near a 50-year low. The Federal Reserve last week lowered its forecast for growth in the United States next year to just 0.5% and a jobless rate rising to 4.6% by the end of 2023.
As the Federal Reserve wages war on inflation by trying to cool demand for everything from housing to labor, fears of a recession have weighed heavily on the stock market.
Given the macroeconomic volatility, it is wise to invest in large-cap stocks, as they tend to be less volatile. Hence, quality large-cap stocks Eli Lilly & Co. (LLY), Agilent Technologies, Inc. (A), and Fortinet, Inc. (FTNT) might be wise additions to your portfolio.
Eli Lilly & Co. (LLY)
LLY discovers, develops, and markets human pharmaceuticals worldwide. The company provides diabetes, oncology, neuroscience, and other products. It has a market capitalization of $349.675 billion.
On December 14, LLY and EVA Pharma announced a collaboration to deliver a sustainable supply of high-quality, affordable human and analogue insulin to at least one million people living with type 1 and type 2 diabetes in low- to middle-income countries (LMICs), most of which are in Africa.
This collaboration is part of the Lilly 30x30 initiative, which aims to improve access to quality healthcare for 30 million people living in limited-resource settings annually by 2030.
On December 1, LLY announced the successful completion of its acquisition of Akouos, Inc. (AKUS). By including AKUS’s portfolio of potential first-in-class adeno-associated viral gene therapies for treating inner ear conditions, the company aims to expand its efforts in genetic medicines.
Moreover, on December 12, LLY announced a 15% increase in its quarterly dividend and declared a dividend of $1.13 per share on outstanding common stock for the first quarter of 2023, payable on March 10, 2023.
Its annual dividend of $4.42 yields 1.23% on prevailing prices. It has a 4-year average dividend yield of 1.66%. The company’s dividend has increased at a CAGR of 15% over the past three years. Moreover, it has consecutively raised its dividend for the past eight years.
LLY’s revenue increased 2.5% year-over-year to $6.94 billion in the third quarter ended September 30, 2022. The company’s non-GAAP net income increased 10.8% year-over-year to $1.79 billion during the same quarter, while its non-GAAP EPS rose 11.8% year-over-year to $1.98.
The consensus EPS estimate of $1.94 for the fiscal second quarter ending June 2023 represents a 54.9% improvement year-over-year. The consensus revenue estimate of $7.26 billion for the same quarter represents an 11.9% increase from the same quarter last year. The company has an impressive earnings surprise history, as it surpassed the consensus revenue estimates in three of the trailing four quarters.
The stock has gained 38.9% over the past year to close the last trading session at $368.01.
LLY’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It also has a grade of B for Stability and Quality. The stock is ranked #26 of 159 in the Medical – Pharmaceuticals industry.
Click here to access additional ratings for LLY’s Growth, Value, and Sentiment.
Agilent Technologies, Inc. (A)
With a market cap of $44.27 billion, A provides application-focused solutions worldwide to the life sciences, diagnostics, and applied chemical markets. Its segments are Life Sciences and Applied Markets; Diagnostics and Genomics; and Agilent CrossLab.
On December 5, 2022, A announced the opening of a new Customer Experience Center in Lexington, with solutions focused on A’s genomics and diagnostics product portfolios.
Sam Raha, president of A’s Diagnostics and Genomics Group, said, “The Agilent genomics and diagnostics customer base continues to expand, and we are committed to supporting their success through hands-on and virtual training experiences.”
On November 16, A increased its quarterly dividend to 22.5 cents per share of common stock, reflecting a 7% increase over the previous quarter. The quarterly dividend will be paid on January 25, 2023.
Its annual dividend of $0.90 yields 0.59% on current prices, and its four-year average yield is 0.69%. The company’s dividend payouts have increased at 9.7% CAGR over the past five years.
A’s net revenue grew 11.4% year-over-year to $1.85 billion for the fourth quarter that ended October 31, 2022. Its income from operations rose 19.2% year-over-year to $471 million. Its non-GAAP net income increased 23.9% from its prior quarter to $456 million.
A’s revenue is expected to increase by 1.4% year-over-year to $1.70 billion in the first fiscal quarter ending January 2023. Its EPS is expected to grow 8.2% year-over-year to $1.31 in the same quarter. It surpassed EPS estimates in all four trailing quarters.
Over the past six months, the stock has gained 31.8% to close the last trading session at $150.09.
A’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
It has a B grade for Growth, Stability, and Quality. It is ranked first among 51 stocks in the Medical – Diagnostics/Research industry.
Beyond what is stated above, we’ve also rated A for Value, Sentiment, and Momentum. Get all A’s ratings here.
Fortinet, Inc. (FTNT)
FTNT offers comprehensive, integrated, and automated cybersecurity solutions worldwide. It provides FortiGate hardware and software licenses for various security and networking services. It has a market capitalization of $39.07 billion.
On December 14, FTNT announced that five new managed security service providers (MSSP) had adopted Fortinet Secure SD-WAN to help drive better business outcomes and experiences for their customers. MSSPs continue to rely on Fortinet Secure SD-WAN to deliver flexible, on-demand access to business-critical applications, whether they’re deployed in the cloud, the data center, or on-premises.
On November 28, FTNT announced the availability of FortiGate Cloud-Native Firewall (FortiGate CNF) on Amazon Web Services (AWS) to simplify, scale, and modernize security operations.
As a managed next-generation firewall service, FortiGate CNF removes the heavy lifting around network security operations and provides a frictionless experience to help customers easily deploy best-in-class security on the cloud.
During the third quarter ended September 30, 2022, FTNT’s revenue increased 32.6% year-over-year to $1.15 billion. Its non-GAAP operating income grew 45.3% year-over-year to $324.90 million.
Also, the company’s non-GAAP net income attributable to FTNT grew 58.3% from the year-ago value to $262.70 million, while its non-GAAP net income per share attributable to FTNT grew 65% from the prior-year quarter to $0.33.
Analysts expect FTNT’s revenue and EPS to rise 32.6.5% and 44.4% year-over-year to $4.43 billion and $1.15, respectively, in the current fiscal year ending December 2022. Also, FTNT has topped Street EPS and revenue estimates in each of the trailing four quarters.
The stock has gained marginally over the past six months to close the last trading session at $50.01.
It is no surprise that FTNT has an overall rating of B, which translates to a Buy in our POWR Ratings system.
It also has an A grade for Quality and a B for Growth and Sentiment. The stock ranked at the top of the 22 Software – Security industry stocks.
To see additional POWR Ratings for Value, Momentum, and Stability for FTNT, click here.
LLY shares fell $0.02 (-0.01%) in premarket trading Thursday. Year-to-date, LLY has gained 35.04%, versus a -17.75% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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