The Consumer Price Index came in at 9.1% for June, marking an increase from 8.6% in May. On a monthly basis, prices rose 1.3%, higher than the 1% increase seen in April. The decades-high inflation is weighing in on investor sentiments.
The stock market plunged on Wednesday after the inflation report came in. The Dow Jones Industrial Average slipped 0.7%, the S&P 500 dropped 0.5%, and the Nasdaq Composite slipped 0.2%.
Traders are now expecting the Federal Reserve to be more aggressive as they attached an 83% probability that the central bank will hike benchmark borrowing rates a full point at its July meeting. This increases the risk of the economy tipping into a recession.
Given this volatile backdrop, we think the fundamentally strong stocks H&R Block, Inc. (HRB), Occidental Petroleum Corporation (OXY), and Continental Resources, Inc. (CLR) might be ideal investments to survive an economic downturn. These stocks have gained substantially this year, while the S&P 500 plummeted 20.2% over the same period.
H&R Block, Inc. (HRB)
HRB offers assisted income tax return preparation and do-it-yourself (DIY) tax return preparation services and products to the general public. The company also provides Refund Transfers and the H&R Block Emerald Prepaid Mastercard.
On May 20, HRB and Nextdoor Holdings, Inc. (KIND) announced their partnership to bring community-nominated projects to life. The companies announced 11 winning projects from the submissions collected this year. Jeff Jones, president and CEO of HRB, said, “I look forward to the third year of our partnership with Nextdoor and to our next wave of community projects.”
On May 2, HRB declared a quarterly dividend of $0.27 per share, which was payable to shareholders on July 1. This reflects upon the company’s cash generation ability. Since 2016, the company has a record of returning over $2.60 billion to shareholders through dividends and share repurchases.
For the fiscal third quarter that ended March 31, HRB’s total revenues increased 3.9% year-over-year to $2.06 billion. EBITDA rose 3.5% from the prior-year quarter to $921.72 million. For the nine months ended March 31, cash, cash equivalents, and restricted cash balance improved 34.5% from the same period the prior year to $1.18 billion.
The consensus EPS estimate of $3.68 for the fiscal year 2023 indicates a 6.4% year-over-year increase. Likewise, the consensus revenue estimate for the same year of $3.50 billion reflects an improvement of 2.6% from the prior year. Moreover, HRB has an impressive surprise earnings history, as it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 56.9% over the past year and 57.3% year-to-date to close its last trading session at $37.07.
HRB has a Quality grade of B in our proprietary POWR Ratings system. In the 46-stock Consumer Financial Services industry, it is ranked #18. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. Click here to see the additional POWR Ratings for HRB.
Occidental Petroleum Corporation (OXY)
OXY is an oil and gas exploration company primarily operating in the United States, the Middle East, Africa, and Latin America. The company operates through three segments: Oil and Gas; Chemical; and Midstream and Marketing.
On May 6, OXY declared a regular quarterly dividend of $0.13 per share on the common stock, payable to shareholders on July 15. This reflects upon the company’s ability to pay back its shareholders.
On May 3, EnLink Midstream Operating, LP, a subsidiary of EnLink Midstream, LLC (ENLC) and OXY subsidiary Oxy Low Carbon Ventures, LLC (OLCV), announced that they had signed a letter of intent for a Transportation Services Agreement (TSA), under which EnLink is expected to provide OCLV with CO2 transportation services along the Mississippi River corridor.
Richard Jackson, President, U.S. Onshore Resources and Carbon Management, Operations, Oxy, said, “This collaboration aligns with our strategy to accelerate the path to net zero not only for ourselves but for other organizations along the Mississippi River corridor looking to do the same.”
For the fiscal first quarter of 2022, OXY’s total revenues and other income increased 55.7% year-over-year to $8.53 billion. Adjusted income attributable to common stockholders and adjusted EPS came in at $2.13 billion and $2.12, up substantially from their negative year-ago values.
Street EPS estimate of $2.93 for the quarter that ended June 2022 indicates an increase of 815.6% from the prior-year quarter. Likewise, Street revenue estimate for the same quarter of $9.89 billion reflects a 64.6% year-over-year improvement. Additionally, OXY has beaten consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 92.9% over the past year and 100.1% year-to-date to close its last trading session at $58.01.
It’s no surprise that OXY has an overall B rating, which translates to Buy in our proprietary rating system.
OXY has a Momentum grade of A and a Growth and Quality grade of B. In the 97-stock Energy – Oil & Gas industry, it is ranked #34. The industry is rated B.
Click here to see the additional POWR Ratings for Value, Stability, and Sentiment for OXY.
Continental Resources, Inc. (CLR)
CLR operates as an explorer, developer, and producer of crude oil and natural gas, primarily in the northern, southern, and eastern regions of the United States. The company sells its offerings to energy marketing companies, crude oil refining companies, and natural gas gathering and processing companies.
On June 14, CLR announced the receipt of a non-binding proposal letter, dated June 13, 2022, from Harold G. Hamm, on behalf of himself, the Harold G. Hamm Trust, and certain trusts established for the benefit of Mr. Hamm’s family members to acquire for cash all the outstanding shares of CLR.
On April 27, the company announced an increase in its quarterly dividend to $0.28 per share, which was payable on May 23. This marks an approximate 22% increase to the $0.23 per share quarterly dividend paid in the first quarter of 2022. CLR has a target of 2.0% or greater annualized dividend yield in the long term.
For the fiscal first quarter that ended March 31, CLR’s total revenues increased 49.4% year-over-year to $1.82 billion. Adjusted net income improved 244.2% from the prior-year period to $959.99 million, and adjusted net income per share rose 244.2% from the same period the prior year to $2.65.
Analysts expect CLR’s EPS to increase 245.1% year-over-year to $3.14 for the quarter that ended June 2022. Likewise, Street expects revenue for the same quarter to improve 130.7% from the prior-year quarter to $2.58 billion. In addition, CLR has beaten consensus EPS estimates in three out of the trailing four quarters.
CLR’s shares have gained 65.6% over the past year and 41.4% year-to-date to close its last trading session at $63.30.
CLR has an A grade for Momentum and a B for Sentiment and Quality. It is ranked #47 in the Energy – Oil & Gas industry.
In addition to the POWR Rating grades we’ve stated above, one can see CLR’s ratings for Growth, Value, and Stability here.
HRB shares were trading at $36.50 per share on Thursday morning, down $0.57 (-1.54%). Year-to-date, HRB has gained 57.76%, versus a -20.82% 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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