Elevated inflation, monetary policy tightening, geopolitical instability, and concerns over a slowing economy have acted in concurrence to keep investors on edge and the stock markets volatile of late. Moreover, Powell’s speech at Jackson Hole has deemed the Fed’s hawkish stance on monetary policy and short-term pain in the markets all but certain.
However, despite the macroeconomic turbulence, focus on domestic production and legislative support through recently passed acts are expected to benefit growth-focused businesses. Despite significant headwinds and uncertain economic outlooks, these businesses have demonstrated considerable growth and are poised to keep growing in the foreseeable future.
Irrespective of the present noise in the market and the inevitable volatility, it would be wise to buy and hold fundamentally sound growth stocks Broadcom Inc. (AVGO), CVS Health Corporation (CVS), McKesson Corporation (MCK), Clean Harbors, Inc. (CLH).
Broadcom Inc. (AVGO)
AVGO develops and supplies various semiconductor devices worldwide. The company operates in two segments: Semiconductor Solutions; and Infrastructure Software.
The company’s offerings include set-top box system-on-chips (SoCs), ethernet switching and routing merchant silicon products, fiber optic transmitter and receiver components, internet protocol (IP) licensing, radio frequency (RF) semiconductor devices, custom touch controllers, and connectivity solutions.
On August 22, 2022, AVGO and Tencent Holdings Ltd. (TCEHY) announced a strategic partnership to accelerate the adoption of high bandwidth co-packaged optics (CPO) network switches for cloud infrastructure. This collaboration is expected to help AVGO extend its market leadership.
On August 16, AVGO announced the shipment of Tomahawk 5, the highest bandwidth switch chip in the industry, to accelerate AI/ML workloads. This has helped the company achieve a reduction of 95% in power requirement while extending its run of doubling the bandwidth every two years.
On May 26, AVGO announced that it would acquire VMware Inc. (VMW), a leading innovator in enterprise software, in a cash-and-stock transaction for nearly $61 billion. Following the transaction closing, the Broadcom Software Group would be rebranded and operated as VMware.
The company is expected to expand its offerings and add approximately $8.5 billion of pro forma EBITDA from the acquisition within three years.
AVGO’s net revenue increased 22.6% year-over-year to $8.10 billion in the fiscal 2022 second quarter ended May 1, 2022. Its operating income grew 71.9% year-over-year to $3.39 billion. The company’s adjusted EBITDA rose 29.1% year-over-year to $5.11 billion. Its non-GAAP net income improved 34.2% year-over-year to $4 billion.
Furthermore, the company’s non-GAAP EPS increased 37% from its year-ago value to $9.07.
AVGO has grown its revenue at 11.2% CAGR over the last three years. During the same period, the company’s net income and EPS have grown at 37% and 39% CAGRs, respectively.
The consensus revenue estimate of $32.93 billion for the same fiscal year represents a 19.9% year-over-year improvement. AVGO’s EPS for the current year is expected to come in at $36.90, up 31.8% over the previous year. Both revenue and EPS are expected to grow 5.5% and 8.7% year-over-year to $34.73 billion and $40.11, respectively.
Furthermore, the company has an enviable history of beating its EPS estimates in all the previous five fiscals.
The stock has gained 3.7% over the past year to close the last trading session at $514.18.
AVGO’s POWR Ratings reflect this promising outlook. It has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Growth and Quality and a B for Sentiment. AVGO is ranked #6 of 95 stocks in the B-rated Semiconductor & Wireless Chip industry.
Click here to access the additional ratings for AVGO’s Stability, Value, and Momentum.
CVS Health Corporation (CVS)
CVS provides health services in the United States. The company operates through four segments: Pharmacy Services; Retail/LTC; Health Care Benefits; and Corporate/Other.
On August 16, 2022, CVS declared its preparedness for the upcoming by announcing the availability of Flu shots at all CVS Pharmacy and MinuteClinic locations for people of all ages seven days a week. The company expects to benefit from the convenience, insurance coverage, availability, and trust valued by customers willing to visit the retail pharmacy to get their flu shots this year.
On August 3, Aetna, a subsidiary of CVS, announced its entry into the individual insurance exchange marketplace in California with Aetna CVS Health’s co-branded insurance product. The new insurance product, featuring quality and affordable care using virtual technology and in-person care, is expected to boost the company’s growth and profitability.
On May 26, CVS announced the launch of CVS Health Virtual Primary Care, a virtual care solution accessible through a single digital platform. The solution integrates the company’s services, clinical expertise, and data for a more collective and consumer-centric healthcare experience.
Revenues of CVS increased 11% year-over-year to $80.64 billion in the second quarter ended June 30, 2022. The company’s operating income during the same period came in at $4.57 billion, up 5.6% year-over-year. Furthermore, net income and EPS for the quarter increased 6.1% and 6.2% from the prior-year period to $2.96 billion and $2.23, respectively.
The company’s revenue and EBITDA have grown at CAGRs of 11.2% and 8.2%, respectively, over the last five years. Over the same period, the company has grown its net income at a 9% CAGR.
According to consensus estimates, CVS is expected to report revenue and EPS of $312.16 billion and $8.54 for fiscal 2022, registering 6.9% and 1.7% year-over-year increases, respectively. The company’s revenue and earnings for the next year are expected to grow 4.3% and 6.1% year-over-year to $325.69 billion and $9.06, respectively.
Furthermore, EPS has been beating Street expectations for the last five fiscal years.
The stock has gained 19.9% over the past year to end the last trading session at $100.33.
CVS’ solid growth prospects are reflected in its overall A rating, equating to a Strong Buy in our POWR Ratings system.
CVS also has a grade of A for Growth and B for Value, Stability, and Sentiment. The company tops the five stocks in the B-rated Medical-Drug Stores industry.
Beyond what has been stated above, we have also given CVS grades for Quality and Momentum. Get all CVS ratings here.
McKesson Corporation (MCK)
MCK is a diversified healthcare service provider focusing on advancing patients’ health outcomes globally. The company operates through four segments: U.S. Pharmaceutical; Prescription Technology Solutions (RxTS); Medical-Surgical Solutions; and International.
On July 22, MCK’s Board of Directors raised the regular dividend to $0.54 per share, payable on October 3. This represents an increase of 15% from $0.47 per share in the previous quarter.
“This dividend increase demonstrates our continued commitment to returning capital to shareholders as part of our disciplined capital allocation framework. It exemplifies the strength of our consistent cash flow generation and reflects our confidence in the long-term trajectory of the business,” said Brian Tyler, MCK’s CEO.
On June 23, 2022, MCK partnered with HCA Healthcare, Inc. (HCA) to form an oncology research joint venture to advance cancer care and increase access to oncology clinical research. The company believes this venture aligns with the strategic growth priority and expects it to help expand its differentiated oncology ecosystem.
In the fiscal 2023 first quarter ended June 30, 2022, MCK’s total revenues increased 7.2% year-over-year to $67.15 billion. Income from continuing operations attributable to MCK during the quarter increased 56.6% year-over-year to $766 million, while the net income attributable to MCK increased 58% from the year-ago value to $768 million.
This has helped the company report an adjusted EPS of $5.83 for the quarter, registering an increase of 4.9% year-over-year.
MCK has grown its revenue at a 7.3% CAGR over the last three years. During the same period, the company’s net income and EPS have increased at 32.9% and 43.8% CAGRs, respectively.
Analysts expect MCK to report revenue and EPS of $276.42 billion and $24.25 for the fiscal year ending March 2023, registering a rise of 4.7% and 2.3% year-over-year, respectively. Both metrics are expected to keep growing by 3.3% and 6.9% during the next year to come in at $276.24 and $24.25, respectively.
Over the past year, the stock has gained 80.5% to close the last trading session at $363.02.
MCK’s POWR Ratings reflect its impressive growth prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It also has an A grade for Growth and a B for Value, Stability, and Sentiment. Within the Medical – Services industry, it is ranked first out of 82 stocks.
To see the ratings of MCK for Momentum and Quality, click here.
Clean Harbors, Inc. (CLH)
CLH provides industrial and environmental services across North America. The company operates through two segments: Environmental Services; and Safety-Kleen Sustainable Solutions (SKSS).
On June 3, 2022, Safety-Kleen, North America’s largest refiner of used oil and a subsidiary of CLH, unveiled a new brand of base oils with a lower carbon footprint. This new offering is expected to support the sustainability initiatives of the growing segment of environmentally conscious customers.
For the fiscal 2022 second quarter ended June 30, 2022, CLH’s revenue increased 46.4% year-over-year to $1.36 billion. During the same period, the company’s adjusted EBITDA grew 64.6% year-over-year to $309.07 million.
Adjusted net income came in at $133.08 million, which translates to a 103.4% increase over the previous-year quarter. As a result, CLH’s adjusted EPS has grown 105% year-over-year to $2.44.
CLH’s revenue has grown at 11.1% CAGR over the last three years. Over the same period, the company’s net income and EPS have grown at CAGRs of 53.7% and 55.4%, respectively.
Analysts expect CLH to keep advancing on its growth trajectory. Its annual revenue is expected to grow 33.3% this year to $5.07 billion and a further 2.8% to $5.22 billion in fiscal 2023.
The company’s revenue and EPS for 2022 are expected to come in at $5.07 billion and $6.82, registering a growth of 33.3% and 87.4% year-over-year, respectively. Also, Street expects revenue and EPS to grow significantly for the next year to $5.22 billion and $6.84.
Furthermore, CLH has a stellar earnings surprise history of exceeding EPS estimates in each of the trailing four quarters.
The stock has gained 24.7% over the past six months and 15.6% over the past year to close the last trading session at $119.03.
CLH’s promising outlook is reflected in its POWR Ratings. It has an overall rating of A, which equates to Strong Buy in our proprietary rating system. It also has an A grade for Growth and Sentiment and a B for Value. It is ranked #3 among 15 stocks in the A-rated Waste Disposal industry.
Click here to view CLH’s Momentum, Stability, and Quality ratings.
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AVGO shares were unchanged in after-hours trading Tuesday. Year-to-date, AVGO has declined -22.75%, versus a -15.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities. More...
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