The US inflation eased from the peak of 9% in mid-2022, with the headline CPI rate coming in at 6.5% in December, but core prices, excluding energy and food, rose as shelter costs increased. Policymakers closely monitor “core” inflation due to its nuanced look at key inputs.
Last month, the Federal Reserve raised its benchmark interest rate to the highest level in 15 years, indicating the fight against inflation is not over.
Moreover, while the FOMC is highly anticipated to deliver a 25-bps rate hike in its next meeting, economist Mohamed El-Erian recently said that the Federal Reserve should opt for delivering a larger rate hike as inflation might halt its downward trend in the coming months.
Furthermore, amid rising interest rates, persistently high inflation, and widespread recessionary concerns, the S&P 500 earnings are estimated to have declined year-over-year in the fourth quarter, marking the first year-over-year decline in the index’s earnings in two years, as per FactSet research.
Therefore, fundamentally strong and stable stocks Daikin Industries, Ltd. (DKILY), Takeda Pharmaceutical Company Limited (TAK), and Jerónimo Martins, SGPS, S.A. (JRONY) might be solid buys amid the current market uncertainties. These stocks are trading under $50.
Daikin Industries, Ltd. (DKILY)
Headquartered in Osaka, Japan, DKILY designs, manufactures, and sells air-conditioning and refrigeration equipment and chemical products in Japan, the U.S., China, Asia, Europe, and internationally.
In November 2022, DKILY announced that it had decided to establish a new factory for residential air conditioners in the Republic of Indonesia at the Greenland International Industrial Center, which is located near the capital of Jakarta. The new production base is being built in response to the rapidly growing demand in the Indonesian air conditioner market.
The company pays $0.15 annually as dividends, which translates to a yield of 0.86% at the current price, compared to the 4-year average dividend yield of 0.93%.
DKILY’s net sales increased 29.6% year-over-year to ¥2.02 trillion ($15.51 billion) in the first half of the fiscal year 2022. Gross profit rose 23.7% year-over-year to ¥678.50 billion ($5.21 billion), while its operating profit grew 15% from the same period the prior year to ¥221.70 billion ($1.70 billion).
Analysts expect DKILY’s revenue for the current fiscal year ending March 2023 to be $29.47 billion, representing a rise of 463.5% year-over-year. The company has an impressive revenue history, as it has surpassed the consensus revenue estimates in each of the trailing four quarters.
Shares of DKILY have gained 17.7% over the past three months to close the last trading session at $17.32. It has a 24-month beta of 0.86.
DKILY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Stability and a B grade for Quality. Within the B-rated Industrial – Building Materials industry, DKILY is ranked #7 out of 46 stocks.
To see additional POWR Ratings for Value, Momentum, Sentiment, and Growth for DKILY, click here.
Takeda Pharmaceutical Company Limited (TAK)
Headquartered in Japan, TAK researches, develops, manufactures, and sells pharmaceutical products, general medical products, quasi-drugs, and healthcare products globally. Its offerings are concentrated in the areas of gastroenterology, oncology, neuroscience, and rare diseases, as well as plasma-derived therapies and vaccines.
On January 23, TAK and HUTCHMED (China) Limited’s (HCM) subsidiary, HUTCHMED Limited, announced that they have entered into an exclusive license agreement to further the global development, commercialization, and manufacture of fruquintinib outside of mainland China, Hong Kong, and Macau for $1.13 billion.
Fruquintinib is orally administered and has the potential to be used across subtypes of refractory metastatic colorectal cancer (CRC), regardless of biomarker status.
Teresa Bitetti, President of the Global Oncology Business Unit at TAK, said, “We look forward to utilizing our development and commercial capabilities to expand the potential of this innovative medicine to patients beyond China.”
On January 11, TAK announced that EXKIVITY (mobocertinib) had been approved by the National Medical Products Administration (NMPA) of China for the treatment of adult patients with locally advanced or metastatic non-small cell lung cancer (NSCLC) with epidermal growth factor receptor (EGFR) Exon20 insertion mutations, whose disease has progressed on or after platinum-based chemotherapy.
This should significantly benefit the company as lung cancer is the most diagnosed cancer in China.
While it has a four-year average dividend yield of 4.26%, TAK pays a $0.77 dividend annually, which yields 4.09% on the current price. The company has grown its dividend payouts at a CAGR of 17.1% over the past three years.
During the six months ended September 30, 2022, TAK’s net revenue increased 11.1% year-over-year to ¥1.97 trillion ($15.17 billion). Operating profit amounted to ¥254.95 billion ($19.57 billion). The company’s net profit came in at ¥166.75 billion ($1.28 billion), while its EPS came in at ¥106.88.
TAK’s revenue is expected to increase 411.6% year-over-year to $30.09 billion in the current fiscal year ending March 2023. Its EPS is likely to rise 26.7% year-over-year to $0.72. The company has surpassed the consensus revenue estimates in each of the trailing four quarters, which is excellent.
TAK has gained 28.1% over the past three months to close the last trading session at $16.13. It has a 24-month beta of 0.23.
TAK’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which translates to Strong Buy in our proprietary rating system.
It has an A grade for Value and Stability and a B grade for Growth and Sentiment. It is ranked #4 of 169 stocks in the Medical – Pharmaceuticals industry.
In addition to the POWR Ratings grades stated above, one can see the TAK ratings for Momentum and Quality here.
Jerónimo Martins, SGPS, S.A. (JRONY)
JRONY operates in the food distribution and specialized retail sectors in Portugal, Poland, and Colombia. The company operates through Portugal Retail; Portugal Cash & Carry; Poland Retail; Colombia Retail; and Others, Eliminations and Adjustments segments. It is headquartered in Lisbon, Portugal.
The company pays an annual dividend of $1.65 that yields 3.75% on prevailing prices. It has a four-year average dividend yield of 2.46%. The company has raised its dividend payouts at a CAGR of 4.3% over the past three years.
JRONY’s net sales and services came in at €6.50 billion ($7.07 billion) for the third quarter of 2022, representing a 22.7% year-over-year growth. Its EBITDA grew 15.6% from the prior-year quarter to €496 million ($539.40 million).
The company’s net profit attributable to JRONY rose 14.6% year-over-year to €157 million ($170.74 million), while its EPS increased 13.6% from the prior-year quarter to €0.22.
Street expects JRONY’s revenue for the fiscal year ended December 2022 to be $27.23 billion, indicating a 17.8% year-over-year growth. The company’s EPS for the same year is expected to increase 21.9% from the prior-year quarter to $2.08.
It has gained 2.9% over the past three months to close its last trading session at $43.25. The stock has a 24-month beta of 0.28.
It is no surprise that JRONY has an overall B rating, which translates to Buy in our POWR Ratings system.
The stock has an A grade for Stability and Quality. It is ranked #10 out of 39 stocks in the A-rated Grocery/Big Box Retailers industry.
Beyond what we’ve stated above, we have also given JRONY grades for Growth, Value, Momentum, and Sentiment. Get all the JRONY ratings here.
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DKILY shares were unchanged in premarket trading Wednesday. Year-to-date, DKILY has gained 14.63%, versus a 3.58% 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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