While many economists and the Federal Reserve thought that the initial price rises in the middle of 2021 were “transitory,” inflation is still high more than a year later. On top of it, the U.S. labor market has remained persistently tight over recent months, putting upward pressure on wages.

As the persistently high inflation pressures the Federal Reserve to combat it aggressively, former Boston Federal Reserve President Eric Rosengren believes a recession in the U.S. is “quite likely” next year. Rosengren told CNBC that the U.S. central bank now looked likely to increase its terminal policy rate to more than the 5% forecast by investors, pushing the economy into a mild downturn in 2023.

In global news, The Bank of England warned recently that the U.K. is facing its longest recession since records began, with the economic downturn expected to extend well into 2024.

Amid the rising recession fears worldwide, investors have been skeptical about their investment decisions. However, we think Archer-Daniels-Midland Company (ADM) and Stellantis N.V.(STLA) can be bought without hesitation, given their fundamental strength.

Archer-Daniels-Midland Company (ADM)

ADM procures, transports, stores, processes, and merchandises agricultural commodities, products, and ingredients worldwide. The company has three operational segments, Ag Services and Oilseeds; Carbohydrate Solutions; and Nutrition. It acquires, stores, cleans and transports agricultural raw materials, such as oilseeds, corn, wheat, milo, oats, and barley.

On September 14, ADM and PepsiCo, Inc. (PEP) announced a groundbreaking 7.5-year strategic commercial agreement to collaborate closely on projects that aim to significantly expand regenerative agriculture across their shared North American supply chains.

The companies’ capabilities span the food and agriculture value chains, creating a unique, large-scale platform to support farmers’ transition to regenerative agriculture while building their resilience to climate change.

On November 2, ADM declared a cash dividend of 40.0 cents per share on the company’s common stock, payable on Dec. 7, 2022.

For the third quarter ending September 30, 2022, ADM’s revenues increased 21.4% year-over-year to $24.68 billion. Its gross profit grew 36.6% from its year-ago value to $1.81 billion, while its adjusted net earnings per share improved 91.8% from its prior-year quarter to $1.86.

Analysts expect ADM’s revenue to increase 18.5% year-over-year to $101.04 billion for the current fiscal year ending December 2022. The consensus EPS estimate of $7.54 for the current year represents a 45.4% improvement year-over-year. Moreover, it has an impressive earnings history as it surpassed the consensus EPS estimate in all of the trailing four quarters.

The company’s shares have surged 51.1% over the past year to close its last trading session at $96.39.

ADM’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

ADM has a B grade for Growth and Sentiment. Among the 31 stocks in the Agriculture industry, it is ranked #3.

Click here to see the additional POWR Ratings for ADM (Stability, Value, Quality, and Momentum).

Stellantis N.V. (STLA)

STLA designs, engineers, manufactures, distributes, and sells automobiles and light commercial vehicles, engines, transmission systems, metallurgical products, and production systems. It is headquartered in Hoofddorp, the Netherlands.

On October 27, STLA announced that its new investment at Hordain is scaling up production of the Peugeot Expert, Citroën Jumpy, and Opel Vivaro fuel cell light commercial vehicles to an industrial level.

Moreover, STLA inaugurated a new software center in Bengaluru, India. The new center will focus on developing software and technological innovations crucial to the advancement of automobiles and mobility.

The facility, spread across 50,000 square feet, is the company’s second global innovation center in the country, in line with CEO Carlos Tavares’ vision of marking a new era for STLA in India and the long-term Dare Forward 2030 strategic plan. The company is growing rapidly in the low-carbon mobility space.

STLA’s net revenues rose 21.2% year-over-year to €88 billion ($87.81 billion) for the first half-yearly period ended June 30, 2022. The company’s adjusted operating income increased 46.6% year-over-year to €12.37 billion ($12.34 billion), while its net profit increased 37.2% year-over-year to €7.96 billion ($7.94 billion). 

STLA’s revenue is expected to increase 2.7% year-over-year to $176.60 billion in the current fiscal year ending December 2022. Additionally, it has surpassed its consensus revenue estimate in each of its trailing four quarters, which is excellent.

The stock has gained 15.7% over the past month to close the last trading session at $13.80.  

It’s no surprise that STLA has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It has an A grade in Value and a B in Stability, Sentiment, and Quality. It is ranked #2 out of 63 stocks in the Auto & Vehicle Manufacturers industry.  

In addition to the POWR Ratings stated above, we have also given STLA grades for Growth and Momentum. Get all STLA ratings here.

ADM shares were trading at $95.88 per share on Wednesday morning, down $0.51 (-0.53%). Year-to-date, ADM has gained 43.93%, versus a -18.98% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...

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