Inflation continues to take a toll on the economy. A closely watched survey from the National Association for Business Economics has shown a decline in sales for companies nearing past recession levels.
The Net Rising Index (NRI) for sales that peaked at 74% of firms in April 2021 is down to 36% in October. NRI for sales is the percentage of survey respondents reporting rising sales minus the percentage reporting falling sales.
While many business leaders and economic models have warned of a recession, Goldman Sachs Group Inc.’s top economist said there’s still a “very plausible” path for the U.S. economy to avoid a recession. The bank still sees a 35% chance of a U.S. recession in the next 12 months, which is well below Wall Street’s consensus.
However, given the prevailing uncertainties, it could be best to invest in fundamentally strong stocks Johnson & Johnson (JNJ), Volkswagen AG (VWAGY), Stellantis N.V.(STLA), and Core Molding Technologies, Inc. (CMT).
Johnson & Johnson (JNJ)
JNJ researches, develops, manufactures, and sells various products in the healthcare field worldwide. The company operates through the broad segments of Consumer Health; Pharmaceuticals; and MedTech.
On November 1, JNJ announced that it had entered into a definitive agreement with Abiomed, Inc. (ABMD) to acquire all outstanding ABMD shares through a tender offer for an enterprise value of approximately $16.60 billion. The agreement is expected to broaden JNJ’s position as a cardiovascular innovator.
On September 20, JNJ opened its San Francisco Bay Campus, a cutting-edge Research and Development (R&D) center in the Bay Area. The facility connects essential scientific and technical resources and is expected to expand the company’s presence in the area.
On July 18, JNJ declared a quarterly dividend of $1.13 per common share, which was payable to shareholders on September 6. The company has a record of 59 years of consecutive dividend growth. This reflects the good liquidity position of the company.
JNJ’s gross profit increased 1.8% year-over-year to $47.91 billion in the fiscal third quarter that ended September 30, 2022. Its sales to customers grew 3.3% from the year-ago value to $71.24 billion, while its net earnings improved 21.6% year-over-year to $4.46 billion. The company’s net earnings per common share rose 22.6% from its year-ago value to $1.68.
The consensus EPS estimate of $10.04 for the fiscal year ending December 2022 indicates a 2.5% improvement year-over-year. Its revenue is expected to increase by 1.4% year-over-year to $95.04 billion for the same year. Additionally, JNJ has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 8% over the past month to close its last trading session at $172.98.
JNJ’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
JNJ is rated an A in Stability and a B in Quality. Within the Medical - Pharmaceuticals industry, it is ranked #9 out of 163 stocks. To see additional POWR Ratings for Momentum, Value, Growth, and Sentiment for JNJ, click here.
Volkswagen AG (VWAGY)
VWAGY, headquartered in Wolfsburg, Germany, manufactures and sells automobiles through four segments — Passenger cars; Commercial vehicles; Power Engineering, and Financial Services. It provides its products under the Volkswagen Passenger Cars, Audi, KODA, SEAT, Bentley, Porsche, Lamborghini, Ducati, and Bugatti brands.
On October 28, VWAGY announced that it will invest $763.5 million between 2022 and 2025 at its complex in the central state of Puebla, Mexico, one of Volkswagen’s largest facilities, to build a new paint plant and start production of a new gasoline-powered car. The plant is nearly completed, with openings expected early next year.
On October 27, it was reported that VWAGY plans to expand its cooperation with Intel Corporation (INTC) Mobileye to include its automated driving program. Mobileye, which develops autonomous driving technologies, already cooperates with VW’s software unit Cariad. This extended partnership should bolster its capabilities.
VWAGY’s sales revenue increased 24.2% year-over-year to €70.71 billion ($70.57 billion) for the third quarter ended September 30, 2022. Its operating result improved 64.5% year-over-year to €4.27 billion ($4.26 billion) over the quarter, while its gross cash flow increased 15.1% from its year-ago value to €37.50 billion ($37.42 billion).
VWAGY’s revenue estimate of $76.56 billion for the fiscal fourth quarter ending December 2022 represents a 10% year-over-year increase.
The stock has gained 10% over the past month to close its last trading session at $18.12.
As reflected by its strong fundamentals, the stock has an overall A rating, which translates to Strong Buy in our proprietary rating system. VWAGY is also rated an A for Value and a B in Growth, Stability, and Quality. Within the Auto & Vehicle Manufacturers industry, it is ranked #5 of 63 stocks.
Click here for additional POWR Ratings for VWAGY (Momentum and Sentiment).
Stellantis N.V. (STLA)
STLA designs, engineers, manufactures, distributes, and sells automobiles and light commercial vehicles, engines, transmission systems, metallurgical products, and production systems. It is headquartered in Hoofddorp, the Netherlands.
On October 27, STLA announced that its new investment at Hordain is scaling up production of the Peugeot Expert, Citroën Jumpy, and Opel Vivaro fuel cell light commercial vehicles to an industrial level.
Moreover, STLA inaugurated a new software center in Bengaluru, India. The new center will focus on developing software and technological innovations crucial to the advancement of automobiles and mobility.
The facility, spread across 50,000 square feet, is the company’s second global innovation center in the country, in line with CEO Carlos Tavares’ vision of marking a new era for STLA in India and the long-term Dare Forward 2030 strategic plan. The company is growing rapidly in the low-carbon mobility space.
STLA’s net revenues rose 21.2% year-over-year to €88 billion ($87.81 billion) for the first half-yearly period ended June 30, 2022. The company’s adjusted operating income increased 46.6% year-over-year to €12.37 billion ($12.34 billion), while its net profit increased 37.2% year-over-year to €7.96 billion ($7.94 billion).
STLA’s revenue is expected to increase 2.7% year-over-year to $176.60 billion in the current fiscal year ending December 2022.
The stock has gained 15.7% over the past month to close the last trading session at $13.80.
It’s no surprise that STLA has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It has an A grade in Value and a B in Stability, Sentiment, and Quality. It is ranked #2 of 63 stocks in the Auto & Vehicle Manufacturers industry.
In addition to the POWR Ratings stated above, we have also given STLA grades for Growth and Momentum. Get all STLA ratings here.
Core Molding Technologies, Inc. (CMT)
CMT operates as a molder of thermoplastic and thermoset structural products. The company serves various markets such as medium and heavy-duty trucks, automobiles, power sports, construction, agriculture, building products, and other commercial markets, offering a range of manufacturing processes.
CMT’s forward Price/Sales multiple of 0.24 is 78.3% lower than the industry average of 1.09. In terms of its forward EV/Sales, the stock is currently trading at 0.34x, 75.7% lower than the industry average of 1.38x.
CMT’s total net sales grew 22.7% year-over-year to $ 98.74 million for the second quarter of 2022 ended June 30. Its adjusted EBITDA amounted to $7.94 billion, while its net income and earnings per share came in at $2.19 million and $0.26.
Analysts expect CMT’s EPS for the current fiscal year ending December 2022 to increase 96.4% from the prior-year quarter to $1.08. The company’s revenue for the current year is expected to be $351.37 million.
CMT has gained 18.1% year-to-date to close its last trading session at $10.05.
CMT’s POWR Ratings reflect this promising outlook. It has an overall A rating, which translates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Sentiment and a B for Growth, Value, and Stability. It is ranked #2 out of 37 stocks in the A-rated Industrial - Manufacturing industry.
Beyond what we’ve stated above, we have also given CMT grades for Momentum and Quality. Get all CMT ratings here.
JNJ shares fell $0.91 (-0.53%) in premarket trading Tuesday. Year-to-date, JNJ has gained 2.57%, versus a -18.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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