Although inflation has eased considerably from the highs of 9.1% reached in June, it remains well above the Fed’s 2% target. Despite the recent bank failure that rattled the financial sector, the Fed is likely to keep increasing interest rates as it is determined to fight inflation.
With the markets expected to remain volatile, I believe investors should not miss out on the opportunity to invest in AstraZeneca PLC (AZN) and General Motors Company (GM). Before discussing how these stocks’ fundamentals could keep your portfolio insulated against volatility, let’s explore what’s hampering investor sentiments currently.
According to February’s inflation report, the consumer price index (CPI) rose 0.4% for the month and 6% year-over-year, in line with market expectations. However, the monthly core inflation came higher than estimates at 0.5% and rose 5.5% year-over-year in February.
Along with the high inflation, the jobs market continues to remain strong. Nonfarm payrolls rose by 311,000 in February, coming in higher than the 225,000 analysts’ estimates.
Last week’s Silicon Valley Bank (SVB) collapse shook the banking sector. The central bank, which looked set to hike rates by half a percentage point before the SVB crisis, is now expected to opt for smaller or no hikes at its next meeting.
Chief U.S. economist at LPL Financial, Jeffrey Roach, said, “Even amid current banking scares, the Fed will still prioritize price stability over growth and likely hike rates by 0.25% at the upcoming meeting.”
With the Fed expected to opt for a rate hike next week, albeit a smaller one, it might not be long before the Fed reassesses its monetary policy. Amid concerns of the economy heading into a recession, it could be wise for investors to buy fundamentally strong stocks AZN and GM.
AstraZeneca PLC (AZN)
Headquartered in Cambridge, the United Kingdom, AZN, a biopharmaceutical company, focuses on the discovery, development, manufacturing, and commercialization of prescription medicines. It markets products for cardiovascular, renal, and metabolism diseases, oncology, respiratory, and immunology, as well as rare diseases.
In terms of the trailing-12-month gross profit margin, AZN’s 80.57% is 45.1% higher than the 55.54% industry average. Its 31.33% trailing-12-month EBITDA margin is significantly higher than the 3.39% industry average. Likewise, its 0.44x trailing-12-month asset turnover ratio is 29.5% higher than the industry average of 0.34x.
On February 24, 2023, AZN announced the acquisition of CinCor Pharma, Inc. (CINC), a clinical-stage biopharmaceutical company focused on developing novel treatments for resistant and uncontrolled hypertension as well as chronic kidney disease.
The acquisition bolsters AZN’s cardiorenal pipeline by adding baxdrostat (CIN-107), an aldosterone synthase inhibitor (ASI) for blood pressure lowering in treatment-resistant hypertension, to its cardiorenal portfolio.
AZN’s gross profit for the fourth quarter ended December 31, 2022, increased 12.5% year-over-year to $8.31 billion. The company’s operating profit came in at $1.09 billion, compared to a loss of $292 million in the year-ago period.
Its profit after tax came in at $902 million, compared to a loss after tax of $346 million. Additionally, its EPS came in at $0.58, compared to a loss per share of $0.22 in the year-ago period.
Analysts expect AZN’s EPS and revenue for the quarter ending June 30, 2023, to increase 0.5% and 3.1% year-over-year to $0.86 and $11.11 billion. Over the past six months, the stock has gained 10.9% to close the last trading session at $65.09.
AZN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Medical – Pharmaceuticals industry, it is ranked #9 out of 168 stocks. It has a B grade for Growth, Stability, and Quality.
In total, we rate AZN on eight different levels. Beyond what we stated above, we have also given AZN grades for Value, Momentum, and Sentiment. Get all AZN ratings here.
General Motors Company (GM)
GM designs, builds, and sells trucks, crossovers, cars, and automobile parts and accessories worldwide. The company operates through GM North America; GM International; Cruise; and GM Financial segments.
In terms of the trailing-12-month net income margin, GM’s 6.34% is 38.5% higher than the 4.58% industry average. Its 13.98% trailing-12-month Return on Common Equity is 24.2% higher than the 11.26% industry average. Likewise, its 13.52% trailing-12-month Capex/Sales is 318.8% higher than the industry average of 3.23%.
On February 9, 2023, GM and GlobalFoundries Inc. (GFS) announced a strategic, long-term agreement to establish a dedicated capacity corridor exclusively for GM’s chip supply. This agreement will help GM reduce the number of unique chips required to power its complex, tech-heavy vehicles.
For the fiscal fourth quarter that ended December 31, 2022, GM’s revenue increased 28.4% year-over-year to $43.11 billion. Its net income attributable to stockholders increased 14.8% year-over-year to $2 billion. In addition, its adjusted EPS came in at $2.12, representing a 57% increase from the year-ago quarter.
GM’s revenue for the quarter ending March 31, 2023, is expected to increase 9.1% year-over-year to $39.24 billion. Its EPS for the quarter ending June 30, 2023, is expected to increase 41.4% year-over-year to $1.61. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters.
Over the past nine months, the stock has gained 7.2% to close the last trading session at $35.60.
GM’s POWR Ratings reflect its solid prospects. The stock has an overall rating of B, equating to Buy in our proprietary rating system. It is ranked #20 out of 58 stocks in the Auto & Vehicle Manufacturers industry.
Additionally, it has a B grade for Growth, Value, Momentum, and Sentiment. Click here to see the additional POWR Ratings of GM for Stability and Quality.
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AZN shares were trading at $64.25 per share on Wednesday morning, down $0.84 (-1.29%). Year-to-date, AZN has declined -3.89%, versus a 0.88% 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. More...
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