After a hot Consumer Price Index (CPI) report that reflected a year-over-year increase of 9.1% for June, Fed officials have indicated that the central bank will likely raise interest rates by 0.75 percentage points in its meeting later this month after its previous hike of 75 basis points last month.
Citi’s Scott Chronert said, “We anticipate volatility to remain elevated as the market toggles between pricing recession risk and soft landing probabilities with each piece of data.” In addition, Bank of America analysts predict a mild recession will hit in the second half of 2022 as inflationary pressures weigh on consumers.
The investment bank expects GDP to decline by 1.4% year-over-year in the fourth quarter of 2022, followed by a 1.0% increase in 2023.
Given the present market turbulence, we think it could be wise to invest in Enterprise Products Partners L.P. (EPD), Broadcom Inc. (AVGO), and Yelp Inc. (YELP) since they possess the requisite fundamentals to dodge the current market fluctuations.
Enterprise Products Partners L.P. (EPD)
Headquartered in Houston, Texas, EPD offers midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products.
The company has four operating segments: NGL Pipelines & Services; Crude Oil Pipelines & Services; Natural Gas Pipelines & Services; and Petrochemical & Refined Products Services.
In April, EPD and Oxy Low Carbon Ventures, LLC (OLCV), a subsidiary of Occidental (OXY), announced that they had executed a letter of intent to work towards a potential carbon dioxide transportation and sequestration solution for the Texas Gulf Coast.
The integrated project would initially emphasize providing services to emitters in the industrial corridors from the greater Houston to Beaumont/Port Arthur areas.
EPD's revenue increased 42.1% year-over-year to $13.01 billion for the first quarter ending March 31, 2022. Its operating income amounted to $1.67 billion, while its net income came in at $1.33 billion. The company's EPS stood at $0.59 over the period.
The consensus EPS estimate of $0.65 for the second quarter ending June 2022 represents a 27.2% year-over-year growth. Analysts expect revenue to increase 36.5% year-over-year to $12.90 billion for the same period.
Moreover, it has an impressive earnings history as it surpassed the consensus EPS estimate in three of the trailing four quarters. The stock has gained 13.7% year-to-date.
EPD'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.
The stock also has an A grade for Momentum and Sentiment and a B for Value. Within the A-rated MLPs - Oil & Gas industry, it is ranked #11 of 33 stocks.
To see additional POWR Ratings for Growth, Stability, and Quality, click here.
Broadcom Inc. (AVGO)
AVGO designs, develops, and supplies various semiconductor devices, emphasizing complex digital and mixed-signal complementary metal oxide semiconductor-based devices and analog III-V-based products worldwide. The company has two operational segments, Semiconductor Solutions, and Infrastructure Software.
In May, AVGO announced an agreement under which AVGO will purchase all of the outstanding shares of VMware in a cash-and-stock transaction that values VMware at approximately $61 billion, based on the closing price of Broadcom common stock on May 25, 2022. Also, AVGO will assume $8 billion of VMware net debt.
In May, AVGO announced the delivery of its high bandwidth monolithic automotive Ethernet switch device, the BCM8958X, designed to address the increasing bandwidth need for in-vehicle networking applications and facilitate the adoption of software-defined vehicles (SDV).
The BCM8958X features 16 Ethernet ports, of which up to six are 10 Gbps capable, as well as integrated 1000BASE-T1 and 100BASE-T1 PHYs, providing higher flexibility and switching capacity needed to support automotive zonal electronic control unit (ECU) and central compute ECU architectures.
During the second quarter ending March 31, 2022, AVGO’s Non-GAAP net revenue increased 23% year-over-year to $8.10 billion. Its operating income grew 71.8% from its year-ago value to $3.39 million, while its Non-GAAP net income improved significantly from its prior-year quarter to $4.00 billion. The company’s EPS rose 37% year-over-year to $9.07.
The $9.55 consensus EPS estimate for the third quarter ending July 2022 represents a 37.3% improvement year-over-year. Analysts expect its revenue to increase 24% year-over-year to $8.41 billion for the same period. In addition, it has an impressive earnings history as it surpassed the consensus EPS estimate in all of the trailing four quarters. The stock has gained 4.9% over the past year.
AVGO'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. The stock also has an A grade for Growth and Quality and a B grade for Sentiment. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked #5 of 95 stocks.
In total, we rate EPD on eight different levels. Beyond what we've stated above, we have also given AVGO grades for Stability Momentum and Value for AVGO. Get all the AVGO ratings here.
Yelp Inc. (YELP)
YELP operates a platform connecting consumers with local businesses in the United States and internationally. The company's platform covers various local business categories, including restaurants, shopping, beauty and fitness, health, and other categories, as well as home, local, auto, professional, pets, events, real estate, and financial services.
During the first quarter ending March 31, 2022, total revenues increased 19.2% year-over-year to $276.63 million. Its adjusted EBITDA grew 10% from its year-ago value to $48.09 million. The company’s loss per share has narrowed 87.5% from its prior-year quarter to $0.01.
Analysts expect YELP's revenue to increase 11.3% year-over-year to $286.25 million for the second quarter ending June 2022. The consensus EPS estimate of $0.78 represents a 25.3% improvement year-over-year for the third quarter ending September 2022.
Moreover, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters.
YELP's strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
The stock also has an A grade for Value and Quality and a B grade for Growth. Within the F-rated Internet industry, it is ranked #2 of 65 stocks.
Click here to see additional POWR Ratings for Sentiment, Stability, and Momentum for YELP.
EPD shares were trading at $25.22 per share on Tuesday afternoon, up $0.26 (+1.04%). Year-to-date, EPD has gained 19.20%, versus a -17.32% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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