The U.S. market is under tremendous pressure due to soaring consumer prices, aggressive rate hikes, and rising recession fears. Amid such macroeconomic uncertainties, the fiscal third-quarter financial report came in lower than expected. Moreover, analysts are also projecting a decline in the U.S. fourth-quarter earnings for the first time in two years. This is weighing further on the stock market.
However, on the positive side, Goldman Sachs expects a significant decline in inflation next year as prices and wage growth slow down. The bank expects core personal consumption expenditure (PCE) to fall to 2.9% by December 2023 from the current 5.1% level. PCE is the Federal Reserve’s preferred measure of inflation. In addition, the Fed’s policy meeting held earlier this month also suggested a slower pace of interest rate hikes in the future.
Amid this backdrop, investors could consider buying and holding quality stocks AbbVie Inc. (ABBV), CSX Corporation (CSX), Waste Management, Inc. (WM), Stellantis N.V. (STLA), and Molina Healthcare, Inc. (MOH).
AbbVie Inc. (ABBV)
ABBV is a healthcare company that discovers, develops, manufactures, and sells pharmaceuticals worldwide with a focus and capabilities to address health challenges.
On November 23, ABBV announced that the European Commission (EC) approved SKYRIZI as the first specific interleukin-23 (IL-23) inhibitor for treating adults with moderately to severely active Crohn’s disease who have had inadequate or lost response to conventional or biologic therapy. This marks a significant milestone in the company’s pursuit to expand its IBD portfolio.
In the same month, ABBV announced that Health Canada approved UBRELVY® (ubrogepant tablet) for acutely treating migraine, with or without aura, in adults.
“UBRELVY® as the first oral repent approved in Canada for the acute treatment of migraine is an important milestone in our commitment to bring innovative new medicines to Canadians with the goal to make a meaningful difference for patients,” said Tracey Ramsay, Vice President, and General Manager of ABBV.
On September 9, ABBV declared a quarterly dividend of $1.41 per common share, payable to shareholders on November 15. ABBV pays a $5.92 per share dividend annually, which translates to a 3.71% yield on the current price. Its dividend payouts have grown at a CAGR of 9.6% over the past three years and 17.3% over the past five years. The company has nine years of consecutive dividend growth.
ABBV’s net revenues increased 3.3% year-over-year to $14.81 billion in the third quarter ended September 30, 2022. The company’s operating income increased 6.9% year-over-year to $4.60 billion. Its adjusted after-tax earnings increased 29.1% year-over-year to $6.53 billion, while its adjusted EPS rose 29.3% year-over-year to $3.66.
Street EPS estimate of $3.67 for the fourth fiscal quarter ending December 2022 reflects a rise of 10.8% year-over-year. Likewise, its revenue estimate of $15.35 billion for the same quarter indicates an improvement of 3.1% from the prior-year quarter. Additionally, ABBV has topped consensus EPS estimates in each of the trailing four quarters.
ABBV’s stock has gained 34.5% over the past year, closing its last trading session at $159.62. It has gained 17.9% year-to-date.
ABBV’s POWR Ratings reflect this promising outlook. The company 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.
ABBV also has an A grade for Quality and a B grade for Growth and Value. It is ranked #4 out of 162 stocks in the Medical – Pharmaceuticals industry.
To see the additional POWR Ratings for ABBV for Momentum, Stability, and Sentiment, click here.
CSX Corporation (CSX)
CSX provides rail-based freight transportation services. The company offers rail services; and transportation of intermodal containers and trailers through a network of approximately 30 terminals, as well as other transportation services, such as rail-to-truck transfers and bulk commodity operations.
CSX’s $0.40 annual dividend yields 1.25% at its current share price. The company declared its latest quarterly dividend of $0.10 on October 6, payable on December 15, 2022. Its dividend payouts have increased at a 5.2% CAGR over the past three years and a 7.9% CAGR over the past five years. CSX has a record of 17 consecutive years of dividend growth.
For the third quarter that ended September 30, 2022, CSX’s revenue came in at $3.90 billion, up 18.3% year-over-year. Its net earnings came in at $1.11 billion, up 14.8% year-over-year, while its EPS came in at $0.52, up 20.9% year-over-year. Moreover, its cash and cash equivalents stood at $2.31 billion for the period ended September 30, 2022, compared to $2.24 billion for the period ended December 31, 2021.
Analysts expect CSX’s revenue for the fiscal quarter ending December 2022 to come in at $3.77 billion, representing an increase of 10.1% year-over-year. Its EPS is expected to increase 14.5% year-over-year to $0.48 in the same period. The company has an impressive earnings surprise history as it surpassed the consensus EPS estimates in all four trailing quarters.
The stock has gained 11.3% over the past month to close the last trading session at $32.02.
CSX’s POWR Ratings reflect this promising outlook. The stock has a B grade for Quality, Momentum, and Sentiment. In the 16-stock B-rated Railroads industry, CSX is ranked #5.
Click here to get additional POWR Ratings for CSX (Growth, Value, and Stability).
Waste Management, Inc. (WM)
WM provides waste collection, transfer, disposal, recycling, and resource recovery and owns landfill gas-to-energy facilities in the United States. The company serves residential, commercial, industrial, and municipal customers.
On November 15, WM and Dow Inc. (DOW) announced a new collaboration to improve residential recycling for hard-to-recycle plastic films by allowing consumers to recycle them directly in their curbside recycling. Once operating at full capacity, this program is expected to help WM divert more than 120,000 metric tons (MT) of plastic film from landfills annually. This should be strategically beneficial for the company.
On November 8, WM declared a quarterly cash dividend of $0.65 per share, which is payable to shareholders on December 16, 2022. The company has a record of 18 consecutive years of dividend growth.
For the fiscal third quarter that ended September 30, 2022, WM’s revenue came in at $5.08 billion, up 8.8% year-over-year. Its net income came in at $639 million, up 18.8% year-over-year, while its EPS came in at $1.54, indicating an increase of 20.3% year-over-year.
WM’s revenue is expected to increase by 10.1% year-over-year to $19.74 billion in fiscal 2022. Its EPS is expected to grow 18.1% year-over-year to $5.71 in the same period. It also surpassed EPS estimates in three of four trailing quarters.
Over the past nine months, the stock has gained 13.3% to close the last trading session at $164.46.
WM’s overall A rating indicates a Strong Buy in our proprietary rating system. The stock has a B grade for Stability and Quality. In the A-rated, 15-stock Waste Disposal industry, WM is ranked #4.
Beyond what is stated above, one can access WM’s additional POWR Ratings for Growth, Value, Sentiment, and Momentum here.
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 November 17, STLA acquired aiMotive, a leading artificial intelligence, and autonomous driving start-up, to accelerate its autonomous driving journey. AiMotive will operate as a subsidiary of STLA and will aid the company in the development of its autonomous driving tech platform, STLA AutoDrive. This should be strategically beneficial for STLA.
The company’s $1.12 annual dividend yields 7.38% at its current share price. Its dividend payouts have increased at a 17.3% CAGR over the past three years.
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 consensus revenue estimate of $183.81 billion for the current fiscal year ending December 2022 indicates an increase of 6.9% year-over-year. Its EPS is expected to increase 2.9% year-over-year to $5.79 in the same period. STLA also beat the consensus revenue estimate in each of its trailing four quarters, which is excellent.
The stock has gained 13.3% over the past month to close the last trading session at $15.21.
It’s no surprise that STLA has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade in Value and a B in Stability and Sentiment. In the Auto & Vehicle Manufacturers industry, STLA is ranked #8 out of 61 stocks
In addition to the POWR Ratings stated above, we have also given STLA grades for Growth, Quality, and Momentum. Get all STLA ratings here.
Molina Healthcare, Inc. (MOH)
MOH offers managed healthcare services to low-income families and individuals under the Medicaid and Medicare programs and through the state insurance marketplaces. It operates through four segments- Medicaid; Medicare; Marketplace; and Other.
For the fiscal third quarter ended September 30, 2022, MOH’s total revenues increased 12.6% year-over-year to $7.93 billion. Its adjusted net income and adjusted net income per share came in at $254 million and $4.36, up 54.9% and 54.1% from the prior-year period.
Street EPS estimate for the fiscal year ending December 2022 of $17.80 reflects a rise of 31.5% year-over-year. Likewise, Street revenue estimate for the same quarter of $31.61 billion indicates an improvement of 13.8% from the prior-year period.
Over the past year, MOH’s stock has gained 6.5% to close its last trading session at $327.08.
This promising prospect is reflected in MOH’s POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
MOH has a B grade for Growth, Value, and Quality. It is ranked #4 out of 11 stocks in the A-rated Medical – Health Insurance industry.
Click here to see the additional POWR Ratings for MOH (Momentum, Sentiment, and Stability).
ABBV shares were trading at $159.72 per share on Monday morning, up $0.10 (+0.06%). Year-to-date, ABBV has gained 22.56%, versus a -14.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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