Wall Street wrapped up 2022 with the worst loss since 2008 due to various macroeconomic and geopolitical headwinds. However, the stock market finished January with impressive gains, with the Dow Jones, the S&P 500, and the Nasdaq Composite rallying 2.5%, 5.8%, and 10.8%, respectively.
Better-than-expected corporate earnings and encouraging inflation data allowed stocks to have a stellar start to this year. Inflation consistently retreated from its four-decade peak of 9.1% in June last year. December marked the sixth consecutive month of slowing inflation.
Moreover, according to Kiplinger’s Inflation Outlook, annual inflation is expected to reach 3.2% by the end of 2023. With inflation showing signs of easing, there are increased expectations of the Fed slowing down the pace of its interest rate hikes this year. However, since price increases remain well above the Fed’s 2% target, the rate hikes may not stop this year.
The International Monetary Fund (IMF) yesterday raised its 2023 growth outlook due to “surprisingly resilient” demand in the United States and Europe, declining energy costs, and the reopening of China’s economy following the lifting of its strict COVID-19 restrictions. The IMF now expects U.S. GDP growth of 1.4% in 2023, up from its earlier prediction of 1% in October and after a 2% growth in 2022.
Amid growing investor optimism, it could be wise to invest in fundamentally sound stocks Halliburton Company (HAL), Cardinal Health, Inc. (CAH), and Jabil Inc. (JBL) and hold them for a lifetime for solid returns.
Halliburton Company (HAL)
HAL offers products and services to the energy industry worldwide. The company operates through two segments, Completion and Production; and Drilling and Evaluation. It provides production enhancement services, production solutions, drilling services, pipeline and process services, wireline and perforating services, and digital services.
In January 2023, HAL’s Board of Directors announced an increase in the quarterly dividend to $0.16 per share beginning the first quarter of fiscal 2023. The dividend increase demonstrates the company’s confidence in its business, customers, employees, and value proposition.
HAL pays a $0.64 per share dividend annually, which translates to a 1.55% yield on the current price. Its four-year average dividend yield is 2.42%.
On November 29, 2022, HAL installed the industry’s first single trip, electro-hydraulic wet connect in deepwater for Petrobras in Brazil, a significant achievement in downhole electric completion technology.
“The Fuzion-EH connector is the first step in the fully electric intelligent completion journey and is a product of collaborative development with Petrobras and Shell. This achievement paves the way for us to give customers the autonomous capability to control and manage reservoirs across their wells and assets and deliver on our Future of Completions®,” said Mark Dawson, vice president of Halliburton Completion Technology, Halliburton.
For the fiscal fourth quarter ended December 31, 2022, HAL’s revenue increased 30.5% year-over-year to $5.58 billion. The company’s operating income grew 77.5% from the prior-year period to $976 million. Adjusted net income attributable to the company rose 105% year-over-year to $656 million, while adjusted net income per share came in at $0.72, up 100% year-over-year.
Analysts expect HAL’s revenue and EPS for the current fiscal year (ending December 2023) to come in at $23.70 billion and $3.07, indicating increases of 16.8% and 42.9% year-over-year, respectively. Moreover, the company has surpassed the consensus EPS estimates in each of the trailing four quarters.
In addition, the company’s revenue and EPS for the next fiscal year are expected to grow 11.4% and 20.9% from the previous year to $26.41 billion and $3.71, respectively.
Shares of HAL have gained 46.2% over the past six months and 34.1% over the past year to close the last trading session at $41.22.
HAL’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Momentum and a B for Growth, Sentiment, and Quality. Within the B-rated Energy-Services industry, it is ranked #6 of 43 stocks.
Beyond what we stated above, we also have HAL’s value and stability ratings. Get all HAL ratings here.
Cardinal Health, Inc. (CAH)
CAH provides integrated healthcare services and solutions in the United States, Canada, Europe, Asia, and internationally. The company operates in two segments, Pharmaceutical and Medical. It offers specialized solutions for healthcare organizations like hospitals, pharmacies, ambulatory surgery facilities, clinical labs, doctor’s offices, and individuals receiving care at home.
On January 26, 2023, CAH entered a strategic partnership with Palantir Technologies Inc. (PLTR), a leading builder of operating systems for the modern enterprise. CAH aims to reshape the pharmaceutical supply chain with innovative procedures, products, and solutions to improve access to critical pharmaceuticals and streamline pharmacy inventory management by employing PLTR’s platform.
Also, on November 15, 2022, CAH introduced Velocare, a last-mile fulfillment and supply chain network that enables patients to receive hospital-level care at home in a matter of hours. This alliance could aid CAH’s expansion as it is expected to revolutionize patient care delivery.
For the fiscal first quarter that ended September 30, 2022, CAH’s total revenue increased 12.8% year-over-year to $49.60 billion, while Pharmaceutical segment revenue rose 15.1% year-over-year to $45.80 billion due to sales growth from pharmaceutical distribution and specialty pharmaceutical customers.
In addition, the Pharmaceutical segment profit came in at $431 million, up 6.2% year-over-year, primarily driven by the performance of its generics program and increased contribution from branded and specialty pharmaceutical products.
CAH has increased its dividends for 28 consecutive years. It pays a $1.98 per share dividend annually, which translates to a 2.57% yield on prevailing prices. The company’s dividend payments have grown at a 1.5% CAGR over the past five years, and its four-year average dividend yield is 3.62%.
The consensus revenue estimate of $201.30 billion for the fiscal year ending June 2023 indicates an 11% year-over-year improvement. The consensus EPS estimate of $5.31 for the current year reflects a rise of 4.9% from the prior year. The stock has gained 28.1% over the past six months and 49.8% over the past year to close the last trading session at $77.25.
CAH’s strong prospects are apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
CAH has a B grade for Growth and Value. Within the Medical – Services industry, it has ranked #5 of 79 stocks.
In addition to the POWR Ratings I’ve just highlighted, you can access CAH’s ratings for Momentum, Sentiment, Stability, and Quality here.
Jabil Inc. (JBL)
JBL offers manufacturing services and solutions internationally. The company operates through two segments: Electronics Manufacturing Services and Diversified Manufacturing Services. It serves 5G, wireless and cloud, retail, networking and storage, automotive, healthcare, and mobility industries.
On November 14, 2022, JBL inaugurated a new design center in Wroclaw, Poland, to create leading-edge technologies for various industries, including healthcare and automotive. JBL is expected to benefit significantly from this 10,000-square-foot design center supporting sector growth.
JBL’s net revenues came in at $9.64 billion, up 12.5% year-over-year in the fiscal 2023 first quarter ended November 30, 2022. Diversified Manufacturing Services (DMS) recorded revenue growth of 8% year-over-year, while Electronics Manufacturing Services (EMS) revenue grew 18% year-over-year. Its gross profit increased 10.1% year-over-year to $743 million.
Furthermore, the company’s core operating income increased 15.3% year-over-year to $461 million. Its core earnings rose 12.3% year-over-year to $319 million, while its core earnings per share came in at $2.31, up 20.3% year-over-year.
JBL pays a $0.32 per share dividend annually, which translates to a 0.41% yield on current share prices. Its four-year average dividend yield is 0.77%.
Analysts expect JBL’s revenue to increase 3.1% year-over-year to $34.51 billion for the fiscal year ending August 2023. The company’s EPS is estimated to rise 9.5% year-over-year to $8.38 for the same year. Also, it surpassed its EPS and revenue consensus estimates in all four trailing quarters, which is impressive.
Over the past year, the stock has gained 27.9% to close the last trading session at $78.63. Moreover, it has gained 32.7% over the past six months.
JBL’s POWR Ratings reflect this strong outlook. It has an overall A rating, equating to a Strong Buy in our proprietary rating system.
JBL has a B grade for Value, Momentum, and Quality. Within the Technology – Services industry, it’s ranked #4 out of 78 stocks.
To access the additional POWR Ratings for Growth, Stability, and Sentiment for JBL, click here.
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HAL shares fell $0.21 (-0.51%) in premarket trading Wednesday. Year-to-date, HAL has gained 4.75%, versus a 6.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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