Persistent inflation and robust consumer spending, among other favorable economic figures, have strengthened the case for the Fed’s rate increase in June. The growing probability of another rate hike next month and other macroeconomic uncertainties would cause immense volatility in the stock market.
Amid volatile market conditions, it could be wise to invest in quality stocks ABB Ltd (ABBNY), AmerisourceBergen Corporation (ABC), and Accel Entertainment, Inc. (ACEL) with significant analyst sentiment. Let’s discuss this in detail.
The Fed’s preferred inflation gauge heated up in April, underscoring the need for further rate increases. The Personal Consumption Expenditures (PCE) index rose 4.4% year-over-year last month, surpassing the 4.2% increase in March. The core PCE index, which excludes food and energy, also unexpectedly ticked up by 0.4% in April, higher than the 0.3% rise in the prior month.
Furthermore, consumer spending, which drives most of the economy, surged 0.8% last month, backed by solid job gains and wage increases. Nonfarm payrolls rose by 253,000 in April, surpassing economists’ estimates of 180,000, while the unemployment rate hit 3.4%, tying the lowest level since 1969.
Continued strength in consumer spending, labor market, and inflation poses a key challenge for the central bank. With ongoing signs of inflationary pressures, Wall Street traders are increasingly betting on the Fed raising interest rates for the 11th consecutive time in June. CME Group’s FedWatch tool provides more than a 60% chance of a 25-basis-point hike at Fed's meeting next month.
Moreover, BNY Mellon’s Alicia Levine foresees several headwinds for the stock market. The Bank’s head of equities has cited a “difficult environment” due to diverging views between the Federal Reserve and the market on interest rates, credit-related risks, and other economic factors, potentially impacting stocks in the coming weeks.
Against this backdrop, investing in fundamentally sound stocks ABBNY, ABC, and ACEL, which garnered positive analyst sentiment, could be wise.
Let’s delve deeper into the fundamentals of these stocks:
ABB Ltd (ABBNY)
Headquartered in Zurich, Switzerland, ABBNY manufactures and sells electrification, automation, robotics, and motion products. Its product portfolio caters to customers in the utilities, industry and transport, and infrastructure sectors. The company’s segments include Electrification; Robotics & Discrete Automation; Motion; and Process Automation.
On May 3, ABBNY announced it had successfully acquired Siemens’ low-voltage NEMA motor business. The acquisition aligns with ABBNY’s profitable growth strategy in the Motion business area. It would also strengthen the company’s position as a leading industrial NEMA motor manufacturer and enhance its ability to serve global customers effectively.
On April 4, ABBNY announced that it is investing around $170 million in the U.S. to accelerate its growth strategy. The company focuses on investing in electrification and automation businesses that cater to the increased demand from industry-leading customers, demonstrating its commitment to expanding in the U.S. market.
ABBNY's confidence in investing further stems from recently passed legislation such as the Inflation Reduction Act, CHIPS Act, and Infrastructure Investment and Jobs Act. These laws assure the company to invest in manufacturing capacity, distribution systems, and technological innovation to bring products and services closer to customers.
For the first quarter that ended March 31, 2023, ABBNY’s revenues increased 12.8% year-over-year to $7.86 billion. Its gross profit grew 19.1% year-over-year to $2.72 billion. Also, the company’s net income and EPS increased 67.7% and 77.4% from the year-ago values to $1.06 billion and $0.55, respectively.
The consensus revenue estimate of $32.01 billion for the fiscal year (ending December 2023) reflects an 8.7% year-over-year improvement. Likewise, the consensus EPS estimate of $1.76 for the current year indicates a 35.6% rise year-over-year. The stock has gained 28.4% over the past year to close the last trading session at $37.08.
ABBNY’s strong fundamentals are apparent 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 are calculated by considering 118 different factors, each weighted to an optimal degree.
ABBNY has an A grade for Growth and a B for Quality, Stability, and Sentiment. It has topped the A-rated 78-stock Industrial - Machinery industry.
In addition to the POWR Ratings I’ve just highlighted, you can see ABBNY’s ratings for Value and Momentum here.
AmerisourceBergen Corporation (ABC)
ABC sources and distributes pharmaceutical products. Its U.S. Healthcare Solutions segment distributes brand-name and generic pharmaceuticals, over-the-counter healthcare products, and more. Its International Healthcare Solutions segment offers global commercialization and transportation services for the biopharmaceutical industry.
On April 20, ABC and TPG Inc. (TPG), a global alternative asset management firm, announced the acquisition of OneOncology, a network of prominent oncology practices, from General Atlantic, a leading global growth equity firm. This would enable ABC to strengthen its partnerships with community oncologists and expand its specialty solutions.
Additionally, on January 3, ABC completed the acquisition of PharmaLex Holding GmbH. This purchase bolsters ABC’s growth strategy by enhancing its position as a leader in specialty services and broadening its global platform for pharmaceutical manufacturer services capabilities.
For the fiscal 2023 second quarter that ended March 31, ABC’s non-GAAP gross profit grew 6.2% year-over-year to $2.35 billion. Its non-GAAP operating income rose 1.7% from the year-ago value to $932.13 billion. Moreover, non-GAAP net income attributable to ABC increased 4.7% year-over-year to $715.36 billion, while non-GAAP EPS came in at $3.50, up 8.7% from the prior year’s period.
Analysts expect ABC’s revenue to increase 6.8% year-over-year to $254.85 billion for the fiscal year ending September 2023. The company’s EPS for the ongoing year is expected to grow 7.6% from the prior year to $11.86. Also, the company surpassed its consensus revenue and EPS estimates in all four trailing quarters, which is impressive.
Shares of ABC have gained 8.1% over the past year to close the last trading session at $168.41.
ABC’s robust outlook is apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
ABC has an A grade for Growth and a B for Stability, Value, and Sentiment. It has ranked #2 out of 74 stocks within the Medical - Services industry.
Click here to access additional ABC ratings for Quality and Momentum.
Accel Entertainment, Inc. (ACEL)
ACEL functions as a distributed gaming operator. It is involved in the setup, upkeep, and operation of gaming terminals; redemption devices that disburse winnings, and contain automated teller machine (ATM) functionality. Additionally, ACEL manages other amusement devices in authorized non-casino establishments.
In the first quarter of fiscal 2023, ACCEL repurchased around $4 million worth of ACEL Class A-1 common stock. This strategic action could drive up share prices by reducing the number of outstanding shares, benefiting the company and its shareholders.
For the first quarter that ended March 31, 2023, ACEL’s net revenues increased 48.9% year-over-year to $293.21 million. Its operating income rose 30.5% from the year-ago value to $27.67 million. The company’s adjusted EBITDA grew 30.9% from the prior-year period to $46.12 million, while adjusted net income stood at $21.06 million, up 19.6% year-over-year.
The consensus revenue estimate of $1.15 billion for the fiscal year (ending December 2024) reflects a 2.2% year-over-year improvement. Likewise, the consensus EPS estimate of $0.88 for the same period indicates an 11.7% rise year-over-year. Furthermore, the company surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.
The stock has gained 17.9% year-to-date to close the last trading session at $9.35.
ACEL’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
ACEL has a B grade for Value, Quality, Sentiment, and Momentum. It is ranked #5 within the B-rated 28-stock Entertainment - Casinos/Gambling industry.
Click here to access additional ACEL ratings (Growth and Stability).
What To Do Next?
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ABBNY shares were trading at $37.35 per share on Tuesday morning, up $0.27 (+0.72%). Year-to-date, ABBNY has gained 24.74%, versus a 10.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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