On Thursday, the broad market indices closed in the red. The Dow closed down 300 points, the S&P 500 slipped about 1.5%, while the Nasdaq Composite declined 2%, as market sentiment was weighed down by Fed chair Jerome Powell’s statement regarding the potential for larger-than-usual interest rate hike in the coming month. Also, Goldman Sachs Group Inc. (GS) sees the benchmark S&P closing at 4,700 this year in the best-case scenario or declining to end at 3,600 in a recessionary scenario.
Non-cyclical stocks are from companies that enjoy stable demand for their products even in economic downturns. The consumer non-cyclical sector looks resilient in the face of inflation, given that the Consumer Staples Select Sector SPDR Fund (XLP) has gained 4.4% year-to-date, while the broader SPDR S&P 500 ETF Trust (SPY) has declined 7.8% over the same period.
Given this backdrop, we think the stocks of fundamentally strong companies Cardinal Health, Inc. (CAH), Brookfield Infrastructure Corporation (BIPC), Smith & Nephew plc (SNN), Vertex Pharmaceuticals Incorporated (VRTX), and Bunge Limited (BG) would be ideal be bets to build up a resilient portfolio during market downturns.
Cardinal Health, Inc. (CAH)
CAH in Dublin, Ohio, is an integrated healthcare service and products company that operates through the two broad segments of Pharmaceutical and Medical. The company operates primarily in the United States, Canada, Europe, and Asia, providing customized solutions for hospitals, pharmacies, clinical laboratories, and patients at home.
On March 30, CAH announced its plans to build a medical distribution center in Columbus, Ohio, integrating automation and technology. This is expected to increase the company’s medical distribution footprint and aligns with its strategy of expanding warehouse capacity and inventory space.
On March 17, CAH launched its surgical incise drape using antiseptic Chlorhexidine Gluconate (CHG), which helps reduce the risk of surgical site contamination. The new product should expand the company’s product portfolio.
For its fiscal second quarter, ended Dec. 31, 2022, CAH’s revenue increased 9.4% year-over-year to $45.46 billion. For the six months ended December 31, the company’s net cash provided by investing activities came in at $815 million, up 526.7% from the prior-year period.
The Street’s $1.21 EPS estimate for the fiscal quarter ending June 30, 2022, indicates a 57.1% improvement from the prior-year quarter. Also, the Street’s $44.85 billion revenue estimate for the same period reflects a 5.3% year-over-year rise.
Over the past month, the stock has gained 10.7% in price to close yesterday’s trading session at $63.75. It has gained 23.8% year-to-date.
CAH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
CAH has a Growth grade of A and a Value grade of B. It is ranked #9 out of the 85 stocks in the Medical – Services industry.
In addition to the POWR Rating grades we have stated above, one can see CAH ratings for Momentum, Stability, Sentiment, and Quality here.
Click here to checkout our Healthcare Sector Report for 2022
Brookfield Infrastructure Corporation (BIPC)
BIPC is the owner and operator of regulated natural gas transmission systems in Brazil. The New York City-based company also operates in the United Kingdom’s regulated gas and electricity distribution sector and in Australia’s electricity transmission and gas distribution sectors.
BIPC’s revenues increased 10.4% year-over-year to $414 million in its fiscal fourth quarter, ended Dec. 31, 2022. Its cash from operating activities rose 51.7% from the prior-year period to $220 million, while the company’s cash and cash equivalents balance came in at $469 million, up 144.3% from the same period the prior year.
BIPC’s shares have gained 28.6% in price over the past six months and 12.7% year-to-date to close yesterday’s trading session at $76.94.
It is no surprise that BIPC has an overall B rating, which translates to Buy in our POWR Rating system.
BIPC has a Momentum, Stability, and Quality grade of B. In the 62-stock Utilities – Domestic industry, it is ranked #1.
Click here to see the additional POWR Ratings for Growth, Value, and Sentiment for BIPC.
Smith & Nephew plc (SNN)
SNN, which is headquartered in Watford, U.K., operates as the developer, manufacturer, marketer, and seller of medical devices globally. The company’s offerings include knee implant products, hip implants, trauma and extremities products, and sports medicine joint repair products for surgeons.
On January 26, SNN announced the expansion of its indications on its CORI Surgical System, a handheld robotic solution for total knee arthroplasty. The system was expanded to include total hip arthroplasty (THA). This is expected to bolster the company’s Real Intelligence digital ecosystem.
On January 19, SNN announced that it had acquired Engage Surgical, a company that owns the only cementless unicompartmental (partial) knee system. This is expected to support the company’s growth and enhance its operative capability.
For its fiscal year ended Dec. 31, 2022, SNN’s revenue increased 14.3% year-over-year to $5.21 billion. Its operating profit and attributable profit rose 101% and 17%, respectively, from the prior year to $593 million and $524 million. And its EPS improved 16.6% year-over-year to 59.70¢.
The $1.71 consensus EPS estimate for its fiscal year ending Dec. 31, 2022, indicates a 5.6% year-over-year increase. Likewise, the $5.38 billion consensus revenue estimate for the same year reflects a rise of 3.3% from the prior year.
The stock has gained 2.6% in price over the past month and 8.3% over the past five days to close yesterday’s trading session at $33.71.
This promising prospect is reflected in SNN’s POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
SNN has a B grade for Value, Stability, and Quality. In the 159-stock Medical – Devices & Equipment industry, it is ranked #2.
Click here to see the additional POWR Ratings for SNN (Growth, Momentum, and Sentiment).
Click here to checkout our Healthcare Sector Report for 2022
Vertex Pharmaceuticals Incorporated (VRTX)
VRTX develops and commercializes therapies for treating cystic fibrosis, a condition that causes persistent lung infections. The South Boston, Mass., company’s offerings include SYMDEKO/SYMKEVI, ORKAMBI, and KALYDECO therapies for treating patients with the disease. It has a $64.65 billion market capitalization.
On April 20, VRTX announced that Health Canada had granted marketing authorization for the expanded use of PrTRIKAFTA® (elexacaftor/tezacaftor/ivacaftor and ivacaftor) to include children with cystic fibrosis (CF) ages six through 11 years, who are living with at least one F508del mutation in the cystic fibrosis transmembrane conductance regulator (CFTR) gene. Last month, VRTX announced that Health Canada had granted marketing authorization for the expanded use of PrKALYDECO® (ivacaftor) for treating patients from four months to 18 years of age living with the R117H mutation in the CFTR gene. These approvals might prove to be profitable for VRTX.
VRTX’s non-GAAP total revenues increased 27.4% year-over-year to $2.07 billion in its fiscal fourth quarter, ended Dec. 31. Its non-GAAP net income and non-GAAP net income per common share came in at $865.90 million and $3.37, respectively, up 31.1% and 34.3% from the prior-year quarter.
Analysts expect VRTX’s EPS to increase 16.8% year-over-year to $3.48 for the quarter ended March 31, 2022. The Street expects its revenue to improve 25.1% from the prior-year quarter to $2.07 billion for the same quarter. In addition, VRTX has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the trailing four quarters.
VRTX’s shares have gained 28.2% in price over the past year to close yesterday’s trading session at $281.71. It has gained 28.3% year-to-date.
VRTX has an overall A rating, which translates to Strong Buy in our POWR Rating system.
VRTX has an A grade for Quality and a B grade for Growth, Value, and Sentiment. In the 403-stock Biotech industry, it is ranked #1.
To see the additional POWR Ratings for Momentum and Stability for VRTX, click here.
Click here to checkout our Healthcare Sector Report for 2022
Bunge Limited (BG)
BG in White Plains, N.Y. is an agribusiness and food company that operates worldwide through its four broad segments of Agribusiness; Refined and Specialty Oils; Milling; and Sugar and Bioenergy.
In February, BG declared a common quarterly cash dividend of $0.525 per share, payable to shareholders on June 2, 2022. The company also announced a quarterly cash dividend of $1.21875 per share on its 4.875% cumulative convertible perpetual preference shares, payable on June 1, 2022. These dividends reflect BG’s ability to pay back shareholders.
On February 22, BG and Chevron U.S.A. Inc., a subsidiary of Chevron Corporation (CVX), announced their agreement to create a joint venture to produce renewable feedstocks. Greg Heckman, BG CEO, said, "I am confident that our shared networks, global footprint and expertise is the right partnership to build a successful long-term and low-cost enterprise that will help meet the demand for next-generation, renewable fuels."
For its fiscal fourth quarter, ended Dec. 31, 2021, BG’s net sales increased 32.3% year-over-year to $16.68 billion. Its adjusted net income available to common shareholders and adjusted net income per common share came in at $533 million and $3.49, respectively, up 17.1% and 14.4% from the prior-year quarter.
The Street EPS $2.61 estimate for the quarter ending June 30, 2022, indicates a 17% year-over-year improvement.
The stock has gained 47.7% in price over the past year and 31% year-to-date to close yesterday’s trading session at $122.33.
BG has an overall B rating, which equates to Buy in our proprietary rating system.
BG has a Growth and Sentiment grade of B. It is ranked #9 out of the 32 stocks in the Agriculture industry.
In addition to the POWR Rating grades we have stated above, one can see additional BG ratings for Value, Momentum, Stability, and Quality here.
CAH shares were trading at $62.07 per share on Friday afternoon, down $1.68 (-2.64%). Year-to-date, CAH has gained 21.58%, versus a -8.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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