After the inflation came in below expectations for October, Federal Reserve officials indicated that the central bank should soon moderate the pace of interest rate hikes. The market widely expects a 50 basis points hike in December.
“A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate. A slower pace in these circumstances would better allow the Committee to assess progress toward its maximum employment and price stability goals,” according to the Fed’s latest meeting minutes.
Markets have rallied lately, with the S&P 500 gaining 4% over the past month, while the Nasdaq Composite and Dow Jones climbed 2.1% and 4.9%, respectively. Moreover, according to Veteran Strategist Ed Yardeni, the stock market could see another 8% rise before year-end.
However, the recent bullish stock-market pattern could be set to collide with fears that stagflation will rule 2023, keeping stocks in danger. Nearly half of the 388 respondents to the latest MLIV Pulse survey said that a scenario where growth continues to slow while inflation remains lifted would dominate next year globally. The second most likely outcome is a recession.
Given the backdrop, it could be wise to invest in fundamentally sound stocks, Cisco Systems, Inc. (CSCO), Bridgestone Corporation (BRDCY), and KT Corporation (KT). These stocks have been recently upgraded to A (Strong Buy) in our proprietary POWR Ratings system.
Cisco Systems, Inc. (CSCO)
CSCO manufactures and sells internet protocol-based networking and other products related to the communications and information technology industry. The company serves businesses, public institutions, governments, and service providers.
On November 1, CSCO expanded its portfolio of specializations available through the company’s partner program. The six new specializations would focus on customer priorities and represent fast-growing market opportunities for the company and its partners.
On October 26, CSCO announced new features and capabilities for the reimagined Webex Customer Experience (CX) portfolio. The new capabilities are expected to deliver new omnichannel customer experiences.
On October 12, CSCO and tech giant Microsoft Corporation (MSFT) announced their partnership where CSCO and MSFT Teams will be able to run natively on CSCO Room and Desk devices, and CSCO will be a partner in the Certified for MSFT Teams program in the first half of 2023. Through this partnership, CSCO is helping drive interoperability and is meeting its customers’ needs.
In the fiscal 2023 first quarter ended October 29, 2022, CSCO’s revenue increased 5.7% year-over-year to $13.63 billion. Its non-GAAP gross margin increased by 3.1% from the prior-year quarter to $8.58 billion. Its operating income was $3.54 billion, up 3% year-over-year. The company’s non-GAAP net income and non-GAAP EPS rose 2.1% and 4.9% year-over-year to $3.55 billion and $0.86, respectively.
CSCO pays a $1.52 per share dividend annually, which translates to a 3.14% yield on the current share price. Its four-year dividend yield is 2.97%. The company’s dividend payouts have grown at a CAGR of 3.05% over the past three years and 5.97% over the past five years. It paid a quarterly dividend of $0.38 on October 26, 2022. Also, the company has raised dividends for 11 consecutive years.
The consensus EPS estimate of $3.55 for the fiscal year 2023 (ending July 2023) indicates a 5.6% year-over-year improvement. The consensus revenue estimate for the ongoing year of $54.49 billion reflects an increase of 5.7% from the prior year. Also, the company’s EPS and revenue for the next year are expected to increase 8.1% and 4% year-over-year to $3.83 and $56.67 billion, respectively.
Furthermore, CSCO has topped the consensus EPS estimates in all four trailing quarters, which is impressive.
Shares of CSCO have gained 9.9% over the past month and 10% over the past six months to close its last trading session at $48.40.
CSCO’s strong fundamentals are reflected in its POWR Ratings. On November 18, the stock’s overall rating was upgraded to an A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CSCO has a grade of A for Quality and a B for Stability. In the 48-stock Technology - Communication/Networking industry, it is ranked #3.
Click here to see the additional POWR Ratings for CSCO (Growth, Value, Momentum, and Sentiment).
Bridgestone Corporation (BRDCY)
Headquartered in Tokyo, Japan, BRDCY manufactures and sells tires and rubber products. The company operates through two segments: Tires and Diversified Products. It provides tires and tire tubes for passenger cars, buses, trucks, construction and mining vehicles, industrial machinery, agricultural machinery; automotive parts; and other tire-related products.
For nine months ended September 30, 2022, BRDCY’s revenue increased 28.4% year-over-year to ¥2.98 trillion ($21.40 billion). The company’s gross profit grew 21.2% from the prior-year period to ¥1.15 trillion ($8.26 billion). Its operating profit was ¥307.23 billion ($2.21 billion), up 11% year-over-year. Its profit from continuing operations increased 5.8% from the year-ago value to ¥221.76 billion ($1.59 billion).
Furthermore, the company’s comprehensive income stood at ¥619.91 billion ($4.45 billion), up 11.8% year-over-year.
BRDCY pays a $0.65 per share dividend annually, which translates to a 3.47% yield on the current share price. Its four-year dividend yield is 3.57%.
Street expects BRDCY’s revenue for the current fiscal year ending December 2022 to be $1.81, indicating a 31.7% improvement year-over-year. The company’s revenue for fiscal 2022 and 2023 is expected to increase 296.1% and 4.9% year-over-year to $28.76 billion and $30.16 billion, respectively. Additionally, BRDCY has surpassed the consensus revenue estimates in three of the trailing four quarters.
The stock has gained 5.5% over the past month to close its last trading session at $18.82.
BRDCY’s fundamental strength is reflected in its POWR Ratings. The stock’s overall rating was upgraded to an A (Strong Buy) in our POWR Ratings system on November 18. It has a grade A for Value and a grade B for Quality.
In the B-rated Auto Parts industry, it is ranked #4 of 63 stocks. Click here for BRDCY’s additional POWR Ratings for Value, Sentiment, and Momentum.
KT Corporation (KT)
KT offers integrated telecommunications and platform services internationally. The company operates through four segments: Information and Communications Technologies; Finance; Satellite Broadcasting; and Other. It is headquartered in Seongnam, South Korea.
On October 7, KT announced that it would strengthen its strategic partnership with Hyundai Motor Company (HYMTF). KT will expand the Connected Car business, for which the company has been collaborating with HYMTF for many years, and further plans to provide communication modules and connectivity to HYMTF’s domestic and overseas OEM vehicles.
Also, on September 7, both companies agreed to acquire shares of each company mutually through a treasury stock exchange to aid the development of their partnership. KT decided to swap ₩750 billion ($561.14 million) shares with Hyundai Motor and Hyundai Mobis.
For the third quarter of fiscal 2022, KT’s operating revenue increased 4.2% year-over-year to ₩6.48 trillion ($4.85 billion). Its operating income came in at ₩452.90 billion ($338.85 million), up 18.4% year-over-year. The company’s EBITDA increased 6.4% year-over-year to ₩1.36 trillion ($1.02 billion). The company’s assets stood at ₩40.65 trillion ($30.41 billion), compared to ₩35.83 trillion ($26.81 billion) a year ago.
KT pays a $0.75 per share dividend annually, which translates to a 5.45% yield on the current share price. Its four-year dividend yield is 4.62%. The company’s dividend payouts have grown at a CAGR of 16.7% over the past three years and 16.6% over the past five years.
Analysts expect KT’s revenue for the fiscal year ending December 2023 to increase 3.3% year-over-year to $20.01 billion, while the company’s EPS is expected to increase 4.2% year-over-year to $1.96. The stock has gained 11.6% over the past month and 10.7% year-to-date to close the last trading session at $13.94.
KT’s POWR Ratings reflect this strong outlook. On November 25, the stock’s overall rating was upgraded to A, which equates to a Strong Buy in our POWR Ratings system.
KT has a grade of A for Value and Stability. KT is ranked #5 of 47 stocks in the A-rated Telecom - Foreign industry.
Click here to access additional POWR Ratings (Momentum, Sentiment, Quality, and Growth) for KT.
CSCO shares fell $0.18 (-0.37%) in premarket trading Monday. Year-to-date, CSCO has declined -21.23%, versus a -14.31% 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.
3 Upgraded Stocks to Check out This Week StockNews.com
