The lower-than-expected October inflation data gave the markets a much-awaited boost. With softening employment growth to add to the tempering inflation rate, there is optimism among investors that the Federal Reserve may limit next month’s interest rate hike to 50 basis points.
The lower-than-expected inflation numbers also provided investors a glimmer of hope that rates may not need to rise significantly above 5%, and a pivot may not be as distant as initially expected.
Goldman Sachs’ top economist, Jan Hatzius, weighed in by saying there is only a 35% chance that the US will suffer a recession next year. He also outlined “a very plausible non-recessionary four-step path from the high-inflation economy of the present to a low-inflation economy of the future.”
Given this backdrop, shares of fundamentally sound and profitable businesses, CSX Corporation (CSX), Teva Pharmaceutical Industries Limited (TEVA), Celestica Inc. (CLS), and DLH Holdings Corp. (DLHC), might be good additions to your portfolio now for amplifying your returns.
CSX Corporation (CSX)
CSX offers rail-based freight and other transportation services, such as intermodal and bulk commodity operations. The company categorizes its offerings into primary lines of business, such as merchandise, intermodal, and coal.
On October 6, CSX announced its quarterly dividend of $0.10 per share, payable on December 15, 2022, to shareholders of record at the close of business on November 30, 2022. The company pays $0.40 annually as dividends. This translates to a yield of 1.25% at the current price. It has been able to increase its dividend payouts for 17 consecutive years.
During the third quarter of the fiscal year 2022 ended September 30, CSX’s revenue increased 18.2% year-over-year to $3.89 billion, driven by higher fuel surcharge, pricing gains, a 2% increase in volumes, and an increase in storage and other revenues. The company’s operating income increased 10% year-over-year to $1.58 billion.
In addition, the company’s net earnings for the quarter came in at $1.11 billion and $0.52 per share, up 14.8% and 20.9% year-over-year, respectively.
Analysts expect CSX’s revenue and EPS for fiscal 2022 to increase 19% and 21.9% year-over-year to $14.90 billion and $1.90, respectively. The company has also impressed by surpassing the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 20.4% over the past month to close the last trading session at $31.94.
CSX’s POWR Ratings reflect its fundamental strength. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CSX also has a grade B for Sentiment, Quality, and Momentum. It is ranked #6 of 16 stocks in the B-rated Railroads industry.
In addition to the POWR Rating grades stated above, CSX’s additional ratings for Growth, Value, and Stability can be found here.
Teva Pharmaceutical Industries Limited (TEVA)
TEVA is a pharmaceutical company based in Israel. The company operates through three segments: North America; Europe; and International Markets.
On October 7, TEVA announced that it had reached an agreement with the Attorney General of Arkansas under which the state would dismiss all of its claims against the company after payment of a settlement of $931,000.
For the third quarter of fiscal 2022 ended September 30, TEVA’s revenue came in at $3.60 million, while its operating income came in at $419 million. The company’s non-GAAP net income attributable to Teva increased 1.1% year-over-year to $658 million.
TEVA’s revenue and EPS for the fiscal ending December 2023 are expected to increase 1.9% and 0.1% year-over-year to $15.30 billion and $2.53, respectively. The stock has gained 19% over the past month and 28.5% over the past six months to close the last trading session at $9.48.
TEVA’s solid prospects are reflected in its overall rating of B, which equates to a Buy in our POWR Ratings system. It has a grade A for Growth and Value.
TEVA is ranked #28 of 162 stocks in the Medical – Pharmaceuticals industry.
Click here to see the additional ratings for TEVA’s Momentum, Stability, Sentiment, and Quality.
Celestica Inc. (CLS)
As an electronics company headquartered in Toronto, Canada, CLS is involved in designing and manufacturing hardware platforms and supply chain solutions. It operates through two segments: Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS).
On October 18, CLS launched its DS1000 high-performance Gigabit Ethernet Layer 3 switch. This compact, resilient, cost-effective, open network switch is the newest addition to CLS’ Hardware Platform Solutions (HPS) portfolio of cutting-edge storage, computing, networking, and web scale solutions.
On August 2, CLS launched three new storage arrays: the Athena G2 next-generation 2U rackmount NVMe storage array, the Nebula G2 all-flash storage expansion with PCIe 4.0 NVMe SSDs, and the Titan G2 next-generation 4U dense storage array.
These new additions to the company’s product portfolio are expected to offer flexibility and bespoke options for today’s most demanding applications, broadening the company’s consumer base with customized solutions.
During the third quarter of fiscal 2022 ended September 30, CLS’s revenue increased by 31.1% year-over-year to $1.92 billion, while its adjusted gross profit increased by 33.5% year-over-year to $171.5 million. During the same period, the company’s adjusted net earnings came in at $63.6 million and $0.52 per share, up 46.5% and 48.6% year-over-year, respectively.
CLS’ revenue for fiscal 2022 is expected to increase 27.2% year-over-year to $7.17 billion, while its EPS is expected to increase 44.5% year-over-year to $1.88 during the same period. The company has also impressed by surpassing EPS estimates in each of the trailing four quarters.
The stock has gained 32.2% over the past month to close the last trading session at $11.45.
CLS has an overall rating of A, which equates to a Strong Buy in our POWR Ratings system. It has a grade of A for Growth and Sentiment and B for Value.
CLS tops the list of 76 stocks in the Technology – Services industry.
Get additional ratings for Momentum, Stability, and Quality for CLS here.
DLH Holdings Corp. (DLHC)
DLHC operates as a full-service provider of technology-enabled health and human services. The company has segmented its offerings into three categories: Defense and Veterans Health Solutions; Human Solutions and Services; and Public Health and Life Sciences.
On October 6, DLHC announced that it had been awarded an Indefinite Delivery/Indefinite Quantity (ID/IQ) multiple award contract to augment the Department of Veteran Affairs’ efforts to design, develop, and test innovations in healthcare. This contract is expected to impact the company’s topline positively.
DLHC’s revenue for its fiscal 2022 third quarter ended June 30, 2022, increased 7.8% year-over-year to $66.4 million, driven by organic growth. During the same period, the company’s income from operations came in at $7.11 million, indicating a 44% year-over-year increase.
Furthermore, DLHC’s adjusted net income for the quarter came in at $4.41 million, up 53.3% from the year-ago period, while its adjusted EPS increased 47.6% year-over-year to $0.31.
Analysts expect DLHC’s revenue and EPS for fiscal 2022 (ended September 30) to increase 60.5% and 102.5% year-over-year to $394.90 million and $1.64, respectively. Moreover, it has surpassed consensus EPS estimates in each of the four trailing quarters.
DLHC’s POWR Ratings reflect its strong performance. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It also has a grade of A for Growth, Value, and Sentiment and B for Quality.
DLHC is ranked #4 of 84 stocks in the A-rated Industrial – Services industry.
Click here to see the additional ratings for DLHC’s Stability and Momentum.
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CSX shares were trading at $32.20 per share on Monday afternoon, up $0.26 (+0.81%). Year-to-date, CSX has declined -13.57%, versus a -15.02% 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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