Sky-high inflation and restrictive monetary policy have led to widespread recessionary concerns. The World Bank slashed its 2023 growth forecast for the U.S. economy to 0.5% from an earlier projection of 2.4%. It further stated, “Global growth has slowed to the extent that the global economy is perilously close to falling into recession.”
However, inflation is finally coming down. The Consumer Price Index (CPI) for December increased 6.5% year-over-year, lower than November’s 7.1% increase. Consequently, a slowdown in the pace of monetary policy tightening is also expected.
Gregory Daco, EY Parthenon chief economist, commented, “Since we expect inflation will cool faster than consensus and Fed expectations, we continue to anticipate a 25bps hike in early February and another 25bps increase in mid-March – at which point we anticipate the Fed will pause its tightening cycle at 4.75-5.00%.”
Moreover, despite the economic volatilities, investors remain upbeat. Amid this backdrop, fundamentally strong stocks The Coca-Cola Company (KO), Extreme Networks, Inc. (EXTR), and Myers Industries, Inc. (MYE) might be solid buys for first-time investors.
The Coca-Cola Company (KO)
KO, a famous beverage company, manufactures, markets, and sells various non-alcoholic beverages worldwide. The company provides sparkling soft drinks, flavored and enhanced water, sports drinks, juice, dairy, plant-based beverages, tea and coffee, and energy drinks.
On October 20, 2022, a dividend of 44 cents per common share was declared by KO, which was payable to shareholders on December 15, 2022. The company’s solid cash-generation ability is reflected here.
In September, KO and Molson Coors Beverage Company (TAP) expanded its exclusive agreement to develop and commercialize Topo Chico Spirited, a line of spirit-based, ready-to-drink cocktails. It is set to be launched in more than 20 markets across the country in 2023, which should be beneficial for the company.
KO’s trailing-12-month net income margin of 23.44% is 469.2% higher than the industry average of 4.12%. Also, its trailing-12-month ROCE of 44.13% is 316.9% higher than the industry average of 10.59%.
For the fiscal third quarter that ended September 30, KO’s non-GAAP net operating revenue came in at $11.05 billion, up 10% year-over-year. Its non-GAAP gross profit increased 6.5% year-over-year to $6.54 billion. Furthermore, its non-GAAP net income per share increased 6.2% year-over-year to $0.69.
For the fiscal year ending December 2023, analysts expect KO’s EPS and revenue to increase 2.1% and 3% year-over-year to $2.54 and $44.05 billion, respectively. Moreover, KO topped consensus EPS and revenue estimates in all four trailing quarters.
The stock has gained 10.8% over the past three months to close its last trading session at $61.68. It has gained marginally intraday.
KO’s POWR Ratings reflect a promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
KO is also rated a B in Stability, Sentiment, and Quality. Within the A-rated Beverages industry, it is ranked #17 of 36 stocks. To see additional POWR Ratings for Value, Growth, and Momentum for KO, click here.
Extreme Networks, Inc. (EXTR)
EXTR is a software-driven networking solutions company that designs, develops, and manufactures wired and wireless network infrastructure equipment and software for network management and others.
On October 6, 2022, EXTR announced that it had partnered with Verizon Business, a division of Verizon Communications Inc. (VZ), to deploy wireless connectivity service at Liverpool FC’s Anfield Stadium to enhance the in-stadium experience. The deployment should benefit the company.
EXTR’s trailing-12-month ROCE of 48.28% is 915.7% higher than the industry average of 4.75%. Also, its trailing-12-month ROTA of 4.17% is 174.7% higher than the industry average of 1.52%.
EXTR’s net revenue increased 11.2% year-over-year to $297.69 million in the fiscal first quarter (ended September 30, 2022). Its total gross profit grew 7.1% from the year-ago value to $166.71 million. Non-GAAP net income and non-GAAP net income per share came in at $27.09 million and $0.20.
The company’s cash flow provided by operations improved 23.6% year-over-year to $49.73 million, while its total free cash flow rose 26.5% year-over-year to $46.60 million.
The company expects a non-GAAP net income between $27.9 million and $35 million and a non-GAAP net income per share between $0.21 and $0.26 for the fiscal second quarter of 2023.
For the fiscal third quarter ending March 2023, analysts expect EXTR’s EPS and revenue to be $0.26 and $313.88 million, indicating a 23.8% and 9.9% year-over-year growth, respectively. In addition, EXTR topped consensus EPS and revenue estimates in all four trailing quarters, which is impressive.
The stock has gained 41.6% over the past three months and 3.1% intraday to close its last trading session at $19.77.
EXTR’s POWR Ratings reflect its solid fundamentals. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It is rated an A for Quality and B for Growth. In the B-rated Technology - Communication/Networking industry, EXTR is ranked #2 out of 49.
In addition to the above, to see EXTR’s POWR Ratings for Value, Momentum, Stability, and Sentiment, click here.
Myers Industries, Inc. (MYE)
MYE is a manufacturing and distribution company engaged in the distribution of tire service supplies. It operates through The Material Handling and Distribution segments and sells its products under the Akro-Mils, Jamco, Ameri-Kart, and Trilogy Plastics brands, among others.
On October 17, 2022, the company introduced a broad portfolio of reusable packaging solutions at Pack Expo 2022. The new set of solutions is expected to be highly demanded by various industries, such as industrial manufacturing, food processing, retail/wholesale distribution, agriculture, and automotive, which should boost the company’s revenues.
On October 20, MYE declared a quarterly dividend of $0.135 per share, paid to shareholders on January 4, 2023. This reflects the company’s shareholder return ability.
MYE’s trailing-12-month ROCE of 24.01% is 79.3% higher than the industry average of 13.39%. Also, its trailing-12-month ROTA of 9.84% is 83.1% higher than the industry average of 5.37%.
In the third quarter that ended September 30, 2022, MYE’s net sales increased 14% year-over-year to $228.07 million. The company’s adjusted net income increased 76.9% year-over-year to $15.02 million. In addition, its adjusted earnings per share came in at $0.41, representing an increase of 78.3% year-over-year.
Analysts expect MYE’s revenue and EPS for the fiscal year ending December 2023 to increase 7.7% and 15.5% year-over-year to $977.09 million and $1.91, respectively. In addition, MYE shows an impressive earnings surprise history, surpassing the consensus EPS and revenue estimates in each of the trailing four quarters.
MYE has gained 38.7% over the past three months to close the last trading session at $24.45. It has gained 8.8% over the past month.
It’s no surprise that MYE has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system. It has a B grade for Growth, Stability, Sentiment, and Quality. It is ranked #4 out of 36 stocks in the A-rated Industrial – Manufacturing industry.
We have also given MYE grades for Momentum and Value. Get all MYE ratings here.
KO shares rose $0.03 (+0.05%) in premarket trading Wednesday. Year-to-date, KO has declined -3.03%, versus a 4.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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