Concerns over high inflation, growing tensions regarding Ukraine, and the Federal Reserve’s decision to start raising interest rates in March 2022 have led the major benchmark indexes into correction territory. Although a rise in U.S. fourth-quarter GDP has helped the indexes rebound this week, experts expect the market correction to continue for some time.
Amid these conditions, it could be wise to bet on stocks that are trading at discounts to their peers despite outperforming the border market over the past few months. Investors’ preference for value stocks over growth stocks is evidenced by the Vanguard Value ETF’s (VTV) 2.8% returns over the past six months, versus the SPDR S&P 500 Trust ETF’s (SPY) 1.8% loss.
Bristol-Myers Squibb Company (BMY), Lockheed Martin Corporation (LMT), Cigna Corporation (CI), and Walgreens Boots Alliance, Inc. (WBA) look undervalued at their current price levels considering their growth prospects. These stocks have also outperformed the broader market over the past few months. So, we think it could be wise to bet on them now.
Bristol-Myers Squibb Company (BMY)
BMY develops, licenses, manufactures, and markets biopharmaceutical products worldwide. The New York City-based company offers products in hematology, oncology, cardiovascular, and therapeutic immunology classes and sells products to wholesalers, distributors, pharmacies, retailers, hospitals, clinics, and government agencies.
On Jan. 20, 2022, Japan’s Ministry of Health, Labour, and Welfare has approved BMY’s Abecma, a B-cell maturation antigen (BCMA)-directed chimeric antigen receptor (CAR) T cell immunotherapy for the treatment of adult patients with relapsed or refractory (R/R) multiple myeloma, who have received at least three prior therapies. Multiple myeloma remains an incurable disease, and many patients suffer through periods of remission and relapse. As the first CAR T cell therapy approved for its treatment in Japan, BMY is looking forward to seeing great demand for Abecma going forward.
BMY’s total revenues for its fiscal 2021 third quarter, ended Sept. 30, 2021, increased 10.3% year-over-year to $11.62 billion. The company’s non-GAAP gross profit came in at $9.43 billion, indicating an 11% rise from the prior-year period. Its non-GAAP EBIT was $5.29 billion, representing a 17.2% year-over-year improvement. While its non-GAAP net income increased 20.4% year-over-year to $4.50 billion, its non-GAAP EPS increased 22.7% to $2. It had $13.54 billion in cash and cash equivalents as of Sept. 30, 2021.
The $7.48 consensus EPS estimate for its fiscal 2021, ended Dec. 31, 2021, represents a 16.1% rise from the prior-year period. Analysts expect the company’s revenue to increase 9.3% year-over-year to $46.49 billion. It surpassed the consensus EPS estimates in three of the trailing four quarters. BMY’s EPS is expected to grow at a 5.7% rate per annum over the next five years.
The stock has gained 6.9% in price over the past three months. It closed yesterday’s trading session at $63.86. In terms of non-GAAP forward P/E, BMY is currently trading at 8.32x, which is 58.7% lower than the 20.15x industry average. The stock’s 8.50x forward Price/Cash Flow is 50.2% lower than the 17.08x industry average.
BMY’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
BMY has an A grade for Value and a B grade for Growth and Quality. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for BMY’s Sentiment, Stability, and Momentum here. BMY is ranked #13 of 182 stocks in the Medical – Pharmaceuticals industry.
Click here to checkout our Healthcare Sector Report for 2022
Lockheed Martin Corporation (LMT)
LMT is a security and aerospace company that researches, designs, develops, manufactures, and integrates and sustains technology systems, products, and services worldwide. The company operates through four segments: Aeronautics; Missiles and Fire Control; Rotary and Mission Systems; and Space. It also provides management, engineering, technical, scientific, logistics, and information services. LMT is headquartered in North Bethesda, Md.
On Jan. 27, 2022, LMT demonstrated the integration of the AN/SPY-7(v)1 radar into the Aegis Weapon System, which will help detect, track, and discriminate ballistic missile threats and guide interceptors to them. Utilizing proven production technology scaled from the Long-Range Discrimination Radar, LMT’s SPY-7 radar brings a superior capability to sea or land-based platforms. It is currently modifying its production test center facility to test Japan’s Aegis System Equipped Vessel (ASEV) program. LMT is looking forward to deepening its relationship with Japan’s Ministry of Defense.
LMT’s net sales for its fiscal 2021 fourth quarter, ended Dec. 31, 2021, increased 4.1% year-over-year to $17.73 billion. The company’s gross profit was $2.42 billion, representing a 9.4% rise from the year-ago period. Its operating profit came in at $2.46 billion, indicating a 7.3% year-over-year improvement. LMT’s net earnings were $2.05 billion, up 14.3% from their year-ago period. And its EPS increased 17.1% year-over-year to $7.47. The company had $3.60 billion in cash and cash equivalents as of December 31, 2021.
The $26.52 consensus EPS estimate for its fiscal 2022, ending Dec. 31, 2022, represents a 16.5% rise from the prior-year period. It surpassed the consensus EPS estimates in three of the trailing four quarters. LMT’s EPS is expected to grow at a 4.8% per annum rate over the next five years.
The stock has gained 17.9% in price over the past three months and 10.1% year-to-date. It ended yesterday’s trading session at $389.08. LMT’s 14.73x non-GAAP forward P/E is 24.4% lower than the 19.48x industry average. And in terms of forward Price/Cash Flow, the stock is currently trading at 12.35x, which is 16.6% lower than the 14.80x industry average.
LMT’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has a B grade for Value, Stability, and Quality. Click here to see the additional ratings for LMT’s Momentum, Sentiment, and Growth. The stock is ranked #3 of 74 stocks in the Air/Defense Services industry.
Cigna Corporation (CI)
Bloomfield, Conn.-based CI is a health services company that offers medical, dental insurance, and related products and services. The company distributes its products and services through insurance brokers and consultants, directly to employers, and through private and public exchanges.
On Dec. 20, 2021, CI, and Spartanburg Regional Healthcare System, one of South Carolina’s largest healthcare systems, reached a multi-year agreement that enables CI customers to gain access to Spartanburg Regional’s hospitals, facilities, and physician network for quality care, effective Jan. 1, 2022. Both companies are looking forward to delivering affordable and high-quality care to the upstate community.
CI’s adjusted revenues for its fiscal 2021 third quarter, ended Sept.30, 2021, increased 8.6% year-over-year to $44.31 billion. The company’s income from operations came in at $2.29 billion, representing an 8.8% year-over-year improvement. Its adjusted net income was $1.94 billion for the quarter, indicating a 19.7% rise from the year-ago period. And its adjusted EPS came in at $5.73, up 29.9% from the prior-year period. The company had $3.48 billion in cash and equivalents as of September 30, 2021.
The $20.43 consensus EPS estimate for the fiscal year 2021 ended Dec. 31, 2021, indicates a 10.7% year-over-year improvement. Analysts expect the company’s revenue to be $172.62 billion for the same fiscal year, representing a 7.8% rise from the prior-year period. It surpassed the Street’s EPS estimates in three of the trailing four quarters. CI’s EPS is expected to grow at an 11% rate per annum over the next five years.
The stock has gained 8.5% in price over the past three months and 1.9% year-to-date. It closed yesterday’s trading session at $227.43. CI’s 11.46x non-GAAP forward P/E is 43.1% lower than the 20.15x industry average. And in terms of forward Price/Cash Flow, CI is currently trading at 11.26x, which is 34.1% lower than the 17.08x industry average.
CI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has a B grade for Sentiment and Value. Click here to see the additional ratings for CI (Stability, Growth, Quality, and Momentum). CI is ranked #5 of 11 stocks in the B-rated Medical – Health Insurance industry.
Walgreens Boots Alliance, Inc. (WBA)
WBA, which is headquartered in Deerfield, Ill., operates retail drugstores that offer a wide variety of prescription and non-prescription drugs as well as general goods. The company also offers health services, including primary and acute care, wellness, pharmacy and disease management services, and health and fitness.
On Nov.30, 2021, WBA announced that it was acquiring the remaining 30% stake of McKesson Corporation (MCK), a provider of pharmaceuticals, health information technology, medical supplies, and care management tools, in its GEHE Pharma Handel (GEHE) and Alliance Healthcare Deutschland (AHD) joint venture in Germany. The acquisition should enable WBA to strengthen its position as a leading pharmaceutical wholesaler in Germany.
WBA’s sales for its fiscal 2022 first quarter, ended Nov. 30, 2021, increased 7.8% year-over-year to $33.90 billion. The company’s adjusted gross profit came in at $7.60 billion, indicating a 14% year-over-year improvement. Its adjusted operating income was $1.78 billion, up 48.6% from the prior-year period. While its adjusted net income increased 38.3% year-over-year to $1.46 billion, its adjusted EPS increased 37.7% to $1.68. It had $4.14 billion in cash and cash equivalents as of Nov. 30, 2021.
Analysts expect the company’s EPS to increase 2.9% year-over-year to $5.05 for its fiscal year 2022, ending Aug. 31, 2022. It surpassed the consensus EPS estimates in each of the trailing four quarters. The company’s EPS is estimated to grow at a 3,7% rate per annum over the next five years.
The stock has gained 3% in price over the past three months and lost 4.6% year-to-date. It ended yesterday’s trading session at $50. The stock’s 9.84x non-GAAP forward P/E is 48.5% lower than the 19.09x industry average. And in terms of forward Price/Cash Flow, WBA is currently trading at 6.40x, which is 55% lower than the 14.23x industry average.
It is no surprise that WBA has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has a B grade for Value and Sentiment. Click here to see the additional ratings for WBA’s Growth, Momentum, Quality, and Stability. WBA is ranked #2 of 4 stocks in the A-rated Medical – Drug Stores industry.
What To Do Next?
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What makes these stocks great additions to any portfolio?
First, because they are all undervalued companies with exciting upside potential.
But even more important, is that they are all top Buy rated stocks according to our coveted POWR Ratings system. Yes, that same system where top-rated stocks have averaged a +31.10% annual return.
Click below now to see these 7 stellar value stocks with the right stuff to outperform in the coming months.
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REVISED: 2023 Stock Market Outlook (includes top 7 picks)
BMY shares were trading at $64.19 per share on Friday morning, up $0.33 (+0.52%). Year-to-date, BMY has gained 3.85%, versus a -8.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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