The stock indices are down today and are headed for a second consecutive losing week. The stock market has struggled this week as investors remain wary about ongoing tensions between the U.S. and Russia over Ukraine and the Fed’s potentially aggressive monetary policy tightening.
The S&P 500 slid more than 5% in January, marking its worst performance since the COVID-19 pandemic began, and markets have remained choppy over the first two weeks this month. Amid geopolitical unrest, inflationary concerns, and interest rate hikes, experts predict market volatility will continue in the near term. Also, experts recommend that investors focus on high-quality stocks amid the volatility.
Given this backdrop, we believe these high-quality stocks Merck & Co., Inc. (MRK), Archer-Daniels-Midland Company (ADM), Baxter International Inc. (BAX), McKesson Corporation (MCK), and ORIX Corporation (IX) to be solid investments for stabilizing one’s portfolio.
Merck & Co., Inc. (MRK)
MRK is a global healthcare company operating through Pharmaceuticals and Animal Health segments. Its pharmaceuticals segment markets human health pharmaceuticals and vaccines, while the Animal Health segment offers veterinary pharmaceuticals, vaccines, and monitoring products. MRK is headquartered in Kenilworth, N.J.
On February 8, MRK and Ridgeback Biotherapeutics announced that approximately 3.1 million courses of molnupiravir, an investigational oral antiviral COVID-19 medicine, have been provided to the U.S. government for allocation across the country. The company has also entered advance purchase and supply agreements for the medicine in more than 30 markets globally. This is expected to benefit the company.
On January 27, MRK announced that the European Commission had approved KEYTRUDA, MRK’s adjuvant treatment of adults with renal cell carcinoma (RCC). The approval allows the marketing of the KEYTRUDA monotherapy in all 27 European Union member states plus Iceland, Lichtenstein, Norway, and Northern Ireland. This should bolster the company’s revenues.
For its fiscal fourth quarter of 2021, MRK’s sales were up 23.5% year-over-year to $13.52 billion. Its non-GAAP net income from continuing operations improved 83.5% from the prior-year quarter to $4.58 billion. Its non-GAAP EPS from continuing operations increased 83.7% from the same period in the prior year to $1.80.
The Street expects MRK’s EPS to improve 56% year-over-year to $1.81 in the quarter ending March 2022, while the Street's $14.56 billion revenue estimate for the same quarter indicates a 20.6% rise from the prior-year quarter.
The stock has gained 5.9% in price over the past year to close yesterday’s trading session at $76.36.
MRK’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 POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
MRK has a Growth, Value, Stability, Sentiment, and Quality grade of B. In the 180-stock Medical – Pharmaceuticals industry, it is ranked #1.
To see the additional POWR Rating for Momentum for MRK, click here.
Click here to checkout our Healthcare Sector Report for 2022
Archer-Daniels-Midland Company (ADM)
Chicago’s ADM is an agricultural company that engages in the procurement, transportation, storage, and processing of agricultural commodities in the United States and globally. The company operates through the Ag Services and Oilseeds; Carbohydrate Solutions, and Nutrition segments.
On January 25, ADM declared a dividend of 40.0 cents per share on the company’s common stock, payable on March 1, indicating an 8.1% increase from last quarter’s dividend of 37.0 cents per share. This reflects upon the company’s balanced financial framework for value creation.
On November 29, ADM announced that it had completed the acquisition of Sojaprotein, a European provider of non-GMO soy ingredients. The acquisition is expected to expand the company’s alternative protein capabilities significantly.
For its fourth fiscal quarter, ended December 31, ADM’s revenues increased 28.4% year-over-year to $23.09 billion. Its adjusted net earnings and adjusted EPS improved 24.3% and 24%, respectively, from the same period in the prior year to $850 million and $1.50.
The $5.20 consensus EPS estimate for fiscal 2023 indicates a 0.2% year-over-year increase. And the $82.62 billion consensus revenue estimate for the same year reflects a 0.4% improvement from the prior year. Furthermore, ADM has an impressive surprise earnings history; it has topped the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 37.1% in price over the past year and 13.4% year-to-date to close yesterday’s trading session at $76.65.
It is no surprise that ADM has an overall A rating, which translates to Strong Buy in our POWR Rating system.
ADM has a Growth, Value, Stability, and Sentiment grade of B. In the 29-stock Agriculture industry, it is ranked #1.
Click here to see the additional POWR Ratings for ADM (Momentum and Quality).
Baxter International Inc. (BAX)
BAX operates as a worldwide developer and provider of a portfolio of healthcare products. The Deerfield, Ill.-based company provides peritoneal dialysis and hemodialysis and additional dialysis therapies and services and biological products and medical devices.
On February 14, BAX declared a quarterly dividend of $0.28 per share of common stock, payable to shareholders on April 1, and indicated an annual dividend rate of $1.12 per share of common stock. This reflects upon the company’s ability to pay back shareholders.
On December 13, BAX announced the completion of its acquisition of Hillrom, a medtech organization for approximately $12.5 billion. The acquisition is expected to create opportunities for the company’s growth across its broad geographic footprint.
BAX’s net sales increased 10.5% year-over-year to $3.51 billion in its fiscal fourth quarter, ended Dec. 31, 2021. Its adjusted net income rose 27.5% from the prior-year quarter to $529 million, while its adjusted EPS came in at $1.04, up 30% from the same period in the prior year.
The Street’s $0.86 EPS estimate for the quarter ending March 2022 indicates a 13.2% year-over-year increase, while its $3.70 billion revenue estimate for the same quarter reflects a 27.8% improvement from the prior-year period. In addition, BAX has topped consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 6.6% in price, and 9% over the past six months, to close yesterday’s trading session at $82.80.
This promising outlook is reflected in BAX’s POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
BAX has a B grade for Growth, Value, and Stability. It is ranked #8 out of the 167 stocks in the Medical – Devices & Equipment industry.
Click here to see the additional POWR Ratings for Momentum, Sentiment, and Quality for BAX.
Click here to checkout our Healthcare Sector Report for 2022
McKesson Corporation (MCK)
MCK is a provider of healthcare supply-chain management, retail pharmacy, community oncology, specialty care, and healthcare information solutions worldwide. The San Francisco, Calif.-based company operates through the four broad segments of U.S. Pharmaceutical; International; Medical-Surgical Solutions; and Prescription Technology Solutions (RxTS).
On January 27, MCK declared a regular dividend of 47 cents per share of common stock, payable to stockholders on April 1. This reflects MCK's ability in cash generation.
On December 20, the company announced that it had agreed to sell its Austrian business to Quadrifolia Management GmbH, which includes the sale of McKesson Austria’s Herba Chemosan Apotheker-AG and Sanova Pharma GesmbH. “Today’s transaction marks another milestone in advancing McKesson’s intent to streamline the portfolio and prioritize investments in areas where we have deep expertise and are central to our long-term growth strategy,” the company said.
MCK’s revenues increased 9.6% year-over-year to $68.61 billion in its fiscal third quarter, ended De. 31, 2021. Its adjusted earnings and adjusted EPS stood at $944 million and $6.15, respectively, registering an improvement of 27.4% and 33.7% from the prior-year period.
The $6.04 consensus EPS estimate for the quarter ending March 2022 indicates a 19.6% year-over-year rise. And the $63.69 billion consensus revenue estimate for the same period reflects a 7.7% increase from the same period in the prior year. MCK has beaten consensus EPS estimates in each of the trailing four quarters.
MCK’s shares have gained 50.8% in price over the past year and 34.6% over the past six months to close yesterday’s trading session at $273.35.
MCK has an overall A rating, which translates to Strong Buy in our POWR Rating system.
The stock has an A grade for Value and a B grade for Growth, Stability, and Sentiment. In the 86-stock Medical – Services industry, it is ranked #2.
To see the additional POWR Ratings for Momentum and Quality for MCK, click here.
Click here to checkout our Healthcare Sector Report for 2022
ORIX Corporation (IX)
IX provides diversified financial services internationally. The company operates through Corporate Financial Services and Maintenance Leasing; Real-Estate; PE Investment and Concession; Environment and Energy; Insurance; Aircraft and Ships; ORIX USA; and ORIX Europe. It is headquartered in Tokyo, Japan.
For its fiscal third quarter, ended Dec. 31, 2021, IX’s total revenues increased 7.9% year-over-year to ¥626.58 billion ($5.44 billion). Its net income and EPS, both attributable to IX shareholders, rose 34.2% and 38.5%, respectively, from the prior-year period to ¥64.66 billion ($561.61 million) and ¥54.00.
Analysts expect IX’s EPS to increase 56.8% year-over-year to $11.13 for its fiscal year ending March 31, 2022, while the Street expects revenue for the same year to improve 445.5% from the prior year to $23.44 billion.
The stock has gained 16.4% in price over the past year to close yesterday’s trading session at $102.36. It has gained 11.6% in price over the past six months.
IX has an overall B rating, which equates to Buy in our proprietary rating system.
IX has a Stability grade of A and a Value and Sentiment grade of B. It is ranked #2 out of the 13 Foreign Consumer Finance industry stocks. The industry is rated B.
In addition to the POWR Rating grades we have stated above, one can see IX ratings for Growth Momentum and Quality here.
MRK shares were trading at $76.05 per share on Friday afternoon, down $0.31 (-0.41%). Year-to-date, MRK has declined -0.77%, versus a -8.88% 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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