High inflation and the subsequent aggressive interest rate hikes by the Fed to tame it have affected growth stocks significantly this year. However, the latest data shows signs of inflation cooling down. Therefore, the Fed is expected to raise interest rates at a slower pace.
The Conference Board CEO, Steve Odland, believes that while the interest rate hikes could spur a recession, any potential downturn is expected to be mild. Therefore, growth stocks might rebound in the upcoming months. Investors’ interest in growth stocks is evident from the Vanguard Growth ETF’s (VUG) 4.5% gain over the past month.
Therefore, quality stocks CVS Health Corporation (CVS), Archer-Daniels-Midland Company (ADM), The Mosaic Company (MOS), and MaxLinear, Inc. (MXL) could be wise investments now, given their solid growth attributes.
CVS Health Corporation (CVS)
CVS provides health services in the United States. It operates through three segments: Health Care Benefits, Pharmacy Services, and Retail/LTC.
Over the last three years, CVS’ dividend payouts have grown at a 3.2% CAGR. Its four-year average dividend yield is 2.78%, and its forward annual dividend of $2.20 per share translates to a 2.21% yield. It paid a quarterly dividend of $0.55 per share on November 1, 2022.
On September 5, 2022, CVS entered a definitive agreement with Signify Health (SGFY) to acquire Signify Health. CVS Health President and CEO Karen S. Lynch said, "This acquisition will enhance our connection to consumers in the home and enables providers to better address patient needs as we execute our vision to redefine the healthcare experience. In addition, this combination will strengthen our ability to expand and develop new product offerings in a multi-payor approach."
For the fiscal third quarter ended September 30, 2022, CVS’ total revenues increased 10% year-over-year to $81.16 billion. Its adjusted operating income increased 3.9% year-over-year to $4.23 billion. The company’s adjusted income increased 5.3% year-over-year to $2.76 billion. Moreover, its adjusted EPS came in at $2.09, representing an increase of 6.1% from the prior-year period.
Analysts expect CVS’ EPS for the quarter ending June 30, 2023, to increase 2.1% year-over-year to $2.45. Its revenue for the quarter ending March 31, 2023, is expected to increase 2.6% year-over-year to $78.85 billion.
It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 7.9% to close the last trading session at $100.06.
CVS’ strong fundamentals are reflected in its POWR Ratings. The stock 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.
It is ranked first out of 4 stocks in the B-rated Medical - Drug Stores industry. It has an A grade for Growth and a B for Stability and Sentiment.
We have also given CVS grades for Value, Momentum, and Quality. Get all the CVS ratings here.
Archer-Daniels-Midland Company (ADM)
ADM procures, transports, stores, processes, and merchandises agricultural commodities, products, and ingredients worldwide. The company operates through three segments: Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition.
Over the last three years, ADM’s dividend payouts have grown at a 4.6% CAGR. Its four-year average dividend yield is 2.78%, and its forward annual dividend of $1.60 per share translates to a 1.64% yield. It is expected to pay a quarterly dividend of $0.40 per share on December 7, 2022.
On August 17, 2022, ADM and New Culture, a pioneering animal-free dairy company, formed a strategic partnership to accelerate the development and commercialization of alternative dairy products.
The partnership highlights both companies’ deep commitments to enabling a more sustainable food future. The partnership is believed to enable joint product development and will also include collaborations to advance the commercial scale-up of New Culture’s animal-free casein and dairy products.
For the fiscal third quarter ended September 30, 2022, ADM’s revenues increased 21.4% year-over-year to $24.68 billion. Its adjusted net earnings increased 91.2% year-over-year to $1.05 billion. Additionally, its adjusted EBITDA increased 58.5% year-over-year to $1.64 billion, while its adjusted EPS came in at $1.86, representing a 91.8% increase from the prior-year quarter.
ADM’s EPS and revenue for the quarter ending December 31, 2022, are expected to increase 9.5% and 8.8% year-over-year to $1.64 and $25.12 billion, respectively. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. The stock has gained 43.2% year-to-date to close the last trading session at $96.78.
It is no surprise that ADM has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It is ranked #3 out of 28 stocks in the Agriculture industry. It has an A grade for Growth and a B for Sentiment.
Click here to see the additional ADM ratings for Value, Momentum, Stability, and Quality.
The Mosaic Company (MOS)
MOS produces and markets concentrated phosphate and potash crop nutrients in North America and internationally. The company operates through three segments: Phosphates, Potash, and Mosaic Fertilizantes.
Over the last three years, MOS’ dividend payouts have grown at a 48.1% CAGR. Its four-year average dividend yield is 0.81%, and its forward annual dividend of $0.60 per share translates to a 1.19% yield. It is expected to pay a quarterly dividend of $0.15 per share on December 15, 2022.
MOS’ gross margin for the third quarter ended September 30, 2022, increased 73.7% year-over-year to $1.50 billion. The company’s operating earnings increased 64.6% from the year-ago period to $1.15 billion. Its net earnings attributable to MOS increased 126.3% year-over-year to $841.70 million. Additionally, its adjusted EPS attributable to MOS increased 138.5% year-over-year to $3.22. Also, its adjusted EBITDA increased 74% year-over-year to $1.68 billion.
MOS’ EPS and revenue for the quarter ending December 31, 2022, are expected to increase 33.6% and 17.3% year-over-year to $2.60 and $4.50 billion. The stock has gained 28.8% year-to-date to close the last trading session at $50.60.
MOS’ solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. It is ranked #6 in the Agriculture industry. In addition, it has a B grade for Growth, Value, and Quality.
In total, we rate MOS on eight different levels. Beyond what we stated above, we have also given MOS grades for Momentum, Stability, and Sentiment. Get all the MOS ratings here.
MaxLinear, Inc. (MXL)
MXL provides radiofrequency, high-performance analog, and mixed-signal communications systems-on-chip solutions, wired and wireless infrastructure, and industrial and multi-market applications worldwide.
It serves electronics distributors, module makers, original equipment manufacturers (OEMs), and original design manufacturers (ODMs) through a direct sales force, third-party sales representatives, and a network of distributors.
On May 5, 2022, MXL announced that it had entered into a definitive agreement with Silicon Motion (SIMO), under which MaxLinear will acquire Silicon Motion in a cash and stock transaction. The merged company will have a highly diversified technology platform with strong positions across the broadband, connectivity, infrastructure, and storage end markets.
For the fiscal third quarter ended September 30, 2022, MXL’s net revenue increased 24.4% year-over-year to $285.73 million. Its non-GAAP gross profit increased 25.8% year-over-year to $177.14 million. Its non-GAAP net income increased 40.3% year-over-year to $84.07 million. In addition, its adjusted EPS came in at $1.05, representing a 40% increase from the prior-year quarter.
Analysts expect MXL’s EPS and revenue for the quarter ending December 31, 2022, to increase 23.7% and 17% year-over-year to $1.06 and $290.04 million, respectively. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 15.2% to close the last trading session at $36.16.
MXL’s POWR Ratings are consistent with this positive outlook. The stock has an overall rating of B, translating to a Buy in our proprietary rating system. It is ranked #11 out of 93 stocks in the Semiconductor & Wireless Chip industry. In addition, it has an A grade for Growth and a B for Value and Quality.
To see the other ratings of MXL for Momentum, Stability, and Sentiment, click here.
CVS shares were trading at $100.06 per share on Thursday afternoon, up $0.55 (+0.55%). Year-to-date, CVS has declined -0.82%, versus a -14.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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