Investors’ concerns over rising inflation and the Fed’s constant effort to fight it have caused immense market volatility. The stock market posted losses earlier this week as investors remained worried about headlines speculating a recession with the possibility of a 100 basis point rate hike.
The Consumer Price Index soared 9.1% from a year ago, above the 8.8% Dow Jones estimate. 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.
Therefore, investors should consider fundamentally sound stocks AutoNation, Inc. (AN), Hugo Boss AG (BOSSY), CVS Health Corporation (CVS), and Hillenbrand, Inc. (HI), which have the potential to outperform the broader market in the second half of the year.
AutoNation, Inc. (AN)
AN functions as an automotive retailer in the United States. The company operates through Domestic, Import, and Premium Luxury segments. It offers a range of automotive products and services, including new and used vehicles; parts, and services, such as automotive repair and maintenance and wholesale parts and collision services.
In May, AN announced that 129 AutoNation stores had been certified in the J.D. Power 2022 Dealer of Excellence Program, SM, which recognizes a selected number of vehicle dealerships throughout the United States that provide exceptional customer service. "This certification sets us apart, especially coming from such an authority as J.D. Power," said Marc Cannon, Executive Vice President, and Chief Customer Experience Officer.
AN's revenues increased 14% year-over-year to $6.75 billion for the first quarter ending March 31, 2022. The operating income grew 54% from its year-ago value to $519 million, while its adjusted net income improved 55% from its prior-year quarter to $362.1 million. The company's adjusted EPS rose 107% year-over-year to $5.78.
Analysts expect AN's revenue to increase 10.2% year-over-year to $7.03 million in the third quarter ending September 2022. The consensus EPS estimate of $6.11 for the second quarter ending June 2022 represents a 26.5% improvement year-over-year. Moreover, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters.
The stock has soared 13.2% over the past year and 7.7% over the past three months.
AN’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
AN also has an A grade for Value and a B for Quality and Growth. Within the B-rated Auto Dealers & Rentals industry, it is ranked #3 of 24 stocks.
Click here to see the additional POWR Ratings for AN (Momentum, Stability, and Sentiment).
Hugo Boss AG (BOSSY)
Headquartered in Metzingen, Germany, BOSSY develops, markets, and distributes clothes, shoes, and accessories for men and women worldwide. It offers business, casual, athleisure, evening wear; shoes and accessories; and licensed products, including fragrances, eyewear, watches, and children's fashion products.
In the first quarter ending March 31, 2022, BOSSY's sales increased 55% year-over-year to €772.00 million ($723.21 million). Its operating result (EBIT) grew significantly from its year-ago value to €40.00 million ($40.07 million), while its net income amounted to €26.00 million ($26.04 million), compared to a net loss of €8.00 million ($8.01 million) in the prior quarter. The company's EPS stood at €0.35 compared to a loss per share of €0.13 a year ago.
Analysts expect BOSSY's revenue to increase 10.8% year-over-year to $824.70 million for the second quarter ending June 2022.
BOSSY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The stock also has an A grade for Growth and Quality and a B grade for Value. Within the B-rated Fashion & Luxury industry, it is ranked #2 of 68 stocks.
In total, we rate BOSSY on eight different levels. Beyond what we've stated above, we have also given BOSSY grades for Sentiment, Momentum, and Stability. Get all the BOSSY ratings here.
CVS Health Corporation (CVS)
CVS, headquartered in Woonsocket, Rhode Island, provides health services in the United States. The company's Health Care Benefits segment offers traditional, voluntary, and consumer-directed health insurance products and related services. Its Pharmacy Services segment offers pharmacy benefit management solutions.
For the first quarter ending March 31, 2022, CVS' total revenues increased 11.2% year-over-year to $76.83 billion. Its adjusted operating income grew 6.6% from its year-ago value to $4.48 billion, while its net income amounted to $2.31 billion, up 4% from its year-ago value. The company's adjusted EPS improved 8.8% year-over-year to $2.22.
Analysts expect CVS' revenue to increase 5.1% year-over-year to $76.35 billion for the second quarter ending June 2022. The company's EPS is expected to grow 2.9% year-over-year to $2.03 in the third quarter ending September 2022. Moreover, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters.
It is no surprise that CVS has an overall A rating, equating to Strong Buy in our POWR Ratings system. CVS has a B grade for Value and Stability. In the C-rated Medical - Drug Stores industry, it is ranked #1 of 5 stocks
Click here to see the additional POWR Ratings for CVS (Growth, Quality, Momentum, and Sentiment).
Hillenbrand, Inc. (HI)
Headquartered in Batesville, Indiana, HI operates as a diversified industrial company in the United States and internationally. It has three operational segments: Advanced Process Solutions, Molding Technology Solutions, and Batesville.
Last month, HI entered into a conclusive agreement to acquire Herbold Meckesheim GmbH (Herbold) for an enterprise value of approximately €79 million. The transaction is expected to close during the fiscal fourth quarter of 2022, subject to regulatory approval and customary closing conditions.
During the second quarter ending March 31, 2022, HI’s net revenue increased 2.7% year-over-year to $742.00 million. Its gross profit amounted to $243.30 million, while its net income amounted to $54.30 million over the period. The company's EPS stood at $0.74 over the period.
Analysts expect HI’s revenue to increase 1.4% year-over-year to $704.80 million for the third quarter ending June 2022. The consensus EPS estimate of $0.87 represents a 1.8% improvement year-over-year for the third quarter ending June 2022. Moreover, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters.
HI's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has a B grade for Growth, Value, and Quality. Within the A-rated Industrial - Manufacturing industry, it is ranked #2 of 36 stocks.
In total, we rate HI on eight different levels. Beyond what we've stated above, we have also given HI grades for Sentiment, Momentum, and Stability. Get all the HI ratings here.
AN shares were trading at $114.35 per share on Friday afternoon, up $2.72 (+2.44%). Year-to-date, AN has declined -2.14%, versus a -18.59% 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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