The Consumer Price Index (CPI) increased 9.1% year-over-year in June, exceeding the 8.8% Dow Jones estimate. The hotter-than-expected inflation data raises the odds of the Federal Reserve’s steep interest rate hikes. And a supersized 100 basis points rate hike is anticipated this month.
Furthermore, Goldman Sachs economists recently sliced its GDP forecast to 0.7%, down from the prior guidance of a 1.9% increase. Moreover, Wells Fargo economists expect a more aggressive Fed policy tightening, which will step up the timeline for a moderate recession starting soon and lasting a year. Overall, the odds of the economy tipping into a recession is increasing.
TotalEnergies SE (TTE), Verizon Communications Inc. (VZ), and Crescent Capital BDC, Inc. (CCAP) are highly profitable and could help hedge your portfolio against a recession. So, these stocks could be great investments now.
TotalEnergies SE (TTE)
Headquartered in Courbevoie, France, TTE operates as an integrated oil and gas company worldwide. The company operates through four segments: Integrated Gas, Renewables & Power; Exploration & Production; Refining & Chemicals; and Marketing & Services. It has more than 12,062 Mboe of combined reserves of oil and gas.
On June 14, TTE signed an agreement with Adani Enterprises Limited (AEL) to acquire a 25% interest in Adani New Industries Limited (ANIL).
“TotalEnergies’ entry into ANIL is a major milestone in implementing our low carbon hydrogen strategy. We are also very pleased with this agreement, which further strengthens our alliance with the Adani Group in India and contributes to the valorization of India’s abundant low-cost renewable power potential,” said Patrick Pouyanné, TTE’s Chairman and CEO.
On May 25, TTE acquired 50% of Clearway Energy Group, the 5th U.S. renewable energy player. CEG is a developer of renewable projects and owns 42% of the economic interest of its subsidiary, Clearway Energy Inc. (CWEN). It brings TTE’s renewable portfolio in the United States to more than 25 GW. With this acquisition, TTE is expected to accelerate its growth in the renewable energy sector.
In the fiscal 2022 first quarter ended March 31, 2022, TTE's adjusted net operating income from Exploration & Production segment and Integrated Gas, Renewables & Power segment amounted to $5.02 billion and $3.05 billion, up 153.9% and 209.8%, respectively, year-over-year. Its adjusted EBITDA grew 113.3% from the year-ago value to $17.42 billion.
The company's adjusted net income and adjusted earnings per share came in at $8.98 billion and $3.40, registering increases of 198.9% and 209.1%, respectively, from the prior-year period.
TTE's trailing-12-months EBIT margin of 15.61% is 43.8% higher than the industry average of 10.86%. Its trailing-12-month net income margin of 8.40% is 712.8% higher than the industry average of 4.86%.
The $59.98 billion consensus revenue estimate for the fiscal 2022 second quarter (ended June 2022) represents a 44.1% improvement from the same period in 2021. Analysts expect TTE’s EPS for the to-be-reported quarter to increase 172.1% year-over-year to $3.46.
Also, the company has topped the consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 11.9% over the past year to close the last trading session at $48.98.
TTE’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.
TTE has a grade of A for Momentum and Sentiment and B for Growth. Within the B-rated Energy - Oil & Gas industry, it is ranked #2 of 97 stocks. To see additional POWR Ratings (Value, Stability, and Quality) for TTE, click here.
Verizon Communications Inc. (VZ)
VZ provides worldwide communications, technology, information, and entertainment products and services. The company operates through two segments: Consumer; and Business. It offers postpaid and prepaid service plans, wireless equipment, wireless-enabled internet devices, and residential fixed connectivity solutions. Also, it provides network connectivity products, data security services, and more.
Last month, VZ partnered with Mastercard Inc. (MA) and First National Bank of Omaha (FNBO) to launch a credit card designed to bring value to small business owners. The Verizon Business Mastercard, issued by FNBO, will allow small business owners to earn and redeem Verizon Business Dollars toward devices or accessories for their business. It is expected to accelerate the company’s growth and profitability.
In May, VZ collaborated with AWS to offer 5G mobile edge computing in more U.S. metro areas, including Nashville, TN, and Tampa, FL. Using Version 5G Edge with AWS Wavelength, developers and businesses can build and deploy latency-sensitive applications for use cases such as immersive VR gaming, video distribution, and autonomous vehicles. This collaboration might boost the company’s market reach and revenues.
VZ's consolidated operating revenues increased 2.1% year-over-year to $33.55 billion in the fiscal 2022 first quarter ended March 31, 2022. Its consolidated adjusted EBITDA amounted to $12.03 billion. In addition, the company’s current assets and total assets came in at $35.58 billion and $365.72 billion, respectively, as of March 31, 2022.
VZ's trailing-12-months EBIT margin of 21.45% is 128.3% higher than the industry average of 9.39%. Its trailing-12-month net income margin of 15.93% is 225.8% higher than the industry average of 4.89%.
Analysts expect VZ’s EPS to grow 2.6% year-over-year to $1.37 for the fiscal 2022 fourth quarter, ending December 31, 2022. The $35.10 billion consensus revenue estimate for the same quarter represents a 4.5% rise from the prior-year period. Furthermore, the company has surpassed the consensus EPS estimates in each of the trailing four quarters.
VZ’s shares have gained 1.9% over the past month to close the last trading session at $50.51.
VZ's POWR Ratings reflect this promising outlook. It has an overall grade of B, equating to Buy in our proprietary rating system.
VZ has a grade of B for Stability. Within the Telecom - Domestic industry, it is ranked #4 of 21 stocks. Click here to see additional POWR Ratings (Value, Quality, Momentum, Growth, and Sentiment) for VZ.
Crescent Capital BDC, Inc. (CCAP)
CCAP is a business development company. The fund focuses on below-investment-grade credit through strategies that invest in marketable and privately originated debt securities, including senior bank loans, high-yield bonds, and junior debt securities. It primarily focuses on investing in the debt of middle-market companies based in the United States.
In the fiscal 2022 first quarter ended March 31, 2022, CCAP's total investment income grew 28.2% year-over-year to $26.38 million. Its net realized gains, net of taxes, improved 366.7% from the year-ago value to $8.40 million, while its net realized gains per share, net of taxes, rose 350% year-over-year to $0.27. As of March 31, 2022, the company’s total assets came in at $1.32 billion.
CCAP's trailing-12-months EBIT margin of 72.16% is 190.8% higher than the industry average of 24.81%. Its trailing-12-months net income margin of 78.88% is 171.9% higher than the industry average of 29%. Furthermore, its trailing-12-months ROTA of 5.94% compared with the industry average of 1.25%.
Analysts expect CCAP's revenue for the fiscal 2022 second quarter (ended June 2022) to come in at $25.97 million, representing a 9.1% rise from the same period in 2021.
Also, Street expects the company's EPS for the to-be-reported quarter to come in at $0.42, representing a growth of 6.4% year-over-year. It’s no surprise that CCAP has surpassed the consensus revenue estimates in three of the trailing four quarters.
The stock has declined 4.7% over the past month to close the last trading session at $15.84.
CCAP’s strong fundamentals are reflected in its POWR Ratings. It has a grade of B for Momentum and Sentiment. Within the Asset Management industry, it is ranked #28 of 60 stocks.
To see additional POWR Ratings (Stability, Growth, Value, and Quality) for CCAP, click here.
TTE shares fell $2.39 (-4.88%) in premarket trading Thursday. Year-to-date, TTE has declined -3.58%, versus a -20.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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