Yesterday, U.S. stocks fell sharply amid fears over the key inflation data. The S&P 500 plunged 2.4%, while the Dow Jones Industrial Average tumbled 1.9%. Moreover, the market is severely worried about the Federal Reserve’s tighter monetary policy, skyrocketing oil prices, lingering supply chain issues, the raging war in Russia-Ukraine, and escalating recession risks. The former Fed vice chair hints at a 50% to 60% chance of a mild recession coming year.
Amid the current risk-off environment, the investors are drawn toward fundamentally sound wide-moat stocks. A company with a “wide moat” implies that it has a unique competitive advantage over its peers in its industry. Therefore, certain companies with solid earnings performance are more likely to withstand market downturns and uncertain times without a prominent effect on their businesses. The wide-moat stocks are held in the VanEck Morningstar Wide Moat ETF (MOAT). The ETF gained 1% over the past month, while the S&P 500 index declined over this period.
Against the backdrop, it is advisable to add fundamentally solid wide-moat stocks Veeva Systems Inc. (VEEV), Kellogg Company (K), and Zimmer Biomet Holdings, Inc. (ZBH) to one’s portfolio.
Veeva Systems Inc. (VEEV)
VEEV provides cloud-based software for the life sciences industry in North America, Europe, the Asia Pacific, Africa, the Middle East, and Latin America. The company provides Veeva Commercial Cloud, a suite of software, data, and analytics solutions. Additionally, it offers professional and support services, requirement analysis, systems environment management services, and technical consulting services.
On May 4, VEEV’s Veeva Vault CDMS was selected by Lucid Diagnostics Inc. (LUCD), a commercial-stage cancer prevention medical diagnostics company, to provide electronic data capture (EDC) coding and data cleaning for the EsoGuard study involving Barrett’s esophagus and esophageal adenocarcinoma patients.
On April 27, VEEV announced the expansion of its partnership with LEO Pharma, a leader in medical dermatology. LEO Pharma will leverage Veeva Link for Key People, a real-time intelligence application, to expand engagement with scientific experts in the dermatology community. This partnership is expected to boost the company’s business growth.
VEEV's revenues increased 16.5% year-over-year to $505.10 million in the fiscal 2022 first quarter ended April 30, 2022. Its non-GAAP gross profit rose 15.7% year-over-year to $378.08 million. Its non-GAAP operating income improved 10% year-over-year to $199.55 million. The company’s non-GAAP net income and non-GAAP net income per share came in at $159.79 million and $0.99, registering a rise of 8.8% and 8.8% from the prior-year period, respectively.
Analysts expect VEEV's revenue to come in at $530.75 million for the fiscal 2022 second quarter, ending July 2022, representing a rise of 16.50% from the same period in 2021. Also, Street expects the company's EPS for the ongoing quarter to increase 7.4% year-over-year to $1.01. It's no surprise that the company has topped the consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has increased 11.3% over the past month and closed yesterday's trading session at $187.73.
VEEV's POWR Ratings reflect this promising outlook. The stock has an overall grade of B, equating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its weighting.
VEEV has a grade of A for quality and B for Sentiment and Growth. Within the Medical-Services industry, it is ranked #23 of 85 stocks. Click here to see additional POWR Ratings (Stability, Momentum, Value, and Quality) for VEEV.
Kellogg Company (K)
K manufactures, markets, and sells snacks and convenience foods. The company operates through four segments: North America; Europe; Latin America; Asia, Middle East and Africa (AMEA). Its primary products include savory snacks, crackers, toaster pastries, cereal bars, ready-to-eat cereals, veggie foods, and noodles. K distributes and sells its products to retailers through direct sales, brokers, and distributors.
On April 29, K’s Board of Directors declared a dividend of $0.58 per share, payable on June 15. It marks the 390th dividend the company has paid to shareowners since 1925. Also, the Board of Directors announced plans to raise the regular quarterly dividend to $0.59 beginning with the third quarter of 2022. The regular dividend payments reflect the company’s strong financial position.
In the fiscal 2022 first quarter ended April 2, 2022, K's net sales grew 2.5% year-over-year to $3.67 billion. Its operating profit improved 9.5% from the year-ago value to $517 million. The company's net income and earnings per share amounted to $424 million and $1.23, registering a rise of 14.3% and 15% year-over-year, respectively. In addition, its comprehensive income came in at $538 million, up 25.7% year-over-year.
The $3.55 billion consensus revenue estimate for the fiscal 2022 fourth quarter, ending December 2022, represents a 3.8% improvement from last year's period. Analysts expect the company's EPS for the same quarter to come in at $0.93, representing a 12.6% increase year-over-year. It has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
K’s shares have improved 10.7% over the past six months and 6% over the past year to close yesterday's trading session at $68.66. Its year-to-date gain translates to 6.2%
K's strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, which translates to Buy in our proprietary rating system.
K has a grade of B for Stability and Quality. Within the B-rated Food Makers industry, it is ranked #22 of 86 stocks. To see additional POWR Ratings (Growth, Momentum, Quality, and Sentiment) for K, click here.
Zimmer Biomet Holdings, Inc. (ZBH)
ZBH operates in the musculoskeletal healthcare business in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company offers a wide range of orthopedic reconstructive products, including knee and hip products, S.E.T. products, spine products, and skull reconstruction products. Also, it provides dental products such as dental reconstructive implants and prosthetic products.
Last month, ZBH introduced artificial intelligence (AI) capabilities within Omni Suite, an intelligent operating room (OR). The new AI capabilities optimize surgical workflow and procedural efficiency by automating manual tasks and data collection. Omni Suite, along with the intelligent, digital, and robotic solutions provided by ZBEdge™ Connected Intelligence Suite, allows the company to unlock data-driven insights that enhance the surgical experience for surgeons and patients.
ZBH's net sales increased 3.9% year-over-year to $1.66 billion in the fiscal 2022 first quarter ended March 31, 2022. As of March 31, 2022, the company's cash and cash equivalents came in at $435.80 million compared to $378.10 million as of December 31, 2021. In addition, its total current assets stood at $4.52 billion as of March 31, 2022.
The consensus revenue estimate of $7.10 billion for the fiscal year 2023, ending December 2023, represents an increase of 3.8% from the previous year. The $7.14 consensus EPS estimate for the next year indicates a 6.1% year-over-year rise. Furthermore, it has surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained marginally over the past month and closed yesterday's trading session at $115.03.
ZBH's POWR Ratings reflect a strong outlook. The stock has an overall B rating, which translates to Buy in our POWR Rating system.
ZBH has a grade of B for Growth. It is ranked #25 of 149 stocks in the Medical-Devices & Equipment industry. Click here to see ZBH's POWR Ratings for Sentiment, Value, Momentum, Stability, and Quality.
VEEV shares closed at $183.66 on Friday, down $-4.07 (-2.17%). Year-to-date, VEEV has declined -28.11%, versus a -17.67% 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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