With inflation still above the Fed’s comfort level and a tight labor market, Fed Chairman Jerome Powell has warned that interest rates will likely rise higher than previously expected. Benchmark interest rates are expected to remain elevated for a while.
Although the market is expected to remain volatile, new investors looking to build their portfolio could look to buy fundamentally strong stocks, The Coca-Cola Company (KO), Albertsons Companies, Inc. (ACI), Juniper Networks, Inc. (JNPR) and Universal Logistics Holdings, Inc. (ULH).
Before evaluating the fundamentals of these stocks, let’s discuss the reasons why the market is expected to be volatile this year.
Although annual inflation marked the seventh straight month of decline in January, a 0.5% sequential rise in prices was observed. Moreover, the Personal Consumption Expenditure (PCE) increased by 0.6% for the month and 4.7% year-over-year.
In addition, the jobs market is expected to remain tight. According to payroll services firm ADP, private payrolls increased by 242,000 in February versus the estimate of 205,000.
Bank of America CEO Brian Moynihan sees the economy reaching a technical recession starting in the third quarter.
Amid this backdrop, investors looking to build their portfolios could buy fundamentally strong stocks KO, ACI, JNPR, and ULH.
The Coca-Cola Company (KO)
Popular beverage company KO manufactures, markets, and sells various non-alcoholic beverages. The company provides sparkling soft drinks; flavored and enhanced water and sports drinks; juice, dairy, and plant-based beverages; tea and coffee; and energy drinks.
In terms of the trailing-12-month EBIT margin, KO’s 28.49% is 255.6% higher than the 8.01% industry average. Likewise, its 18.17% trailing-12-month levered FCF margin is 619.2% higher than the industry average of 2.53%.
KO’s net operating revenues increased 7% year-over-year to $10.13 billion for the fourth quarter ended December 31, 2022. Its non-GAAP gross profit increased 6% year-over-year to $5.76 billion. The company’s non-GAAP operating income increased 10.9% year-over-year to $2.32 billion. Its non-GAAP net income and non-GAAP EPS came in at $1.94 billion and $0.45, respectively.
KO’s EPS and revenue for the quarter ending March 31, 2023, are expected to increase 1% and 2.9% year-over-year to $0.65 and $10.81 billion, respectively. The company has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 0.9% to close the last trading session at $59.46.
KO’s POWR Ratings reflect its solid prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the B-rated Beverages industry, it is ranked #17 out of 37 stocks. The company has a B grade for Stability, Sentiment, and Quality. Click here to see the additional POWR Ratings of KO for Growth, Value, and Momentum.
Albertsons Companies, Inc. (ACI)
ACI engages in the operation of food and drug stores. The company offers grocery products, general merchandise, health and beauty care products, pharmacy, fuel, and other items and services. It also manufactures and processes food products for sale in stores.
In terms of the trailing-12-month asset turnover ratio, ACI’s 2.64x is 220% higher than the 0.83x industry average. Likewise, its 81.65% trailing-12-month Return on Common Equity is 728.7% higher than the industry average of 9.85%.
On January 12, 2023, fresh food technology company Afresh Technologies and ACI announced the completion of an enterprise rollout of the Afresh predictive ordering and inventory management platform.
ACI’s Chief Sustainability and Transformation Officer, Suzanne Long, believes that the partnership with Afresh helps better manage the company’s inventory in support of its environmental sustainability goals by reducing food waste. In addition, it ensures its customers’ access to fresher products.
ACI’s net sales and other revenue for the third quarter ended December 3, 2022, increased 8.5% year-over-year to $18.15 billion. The company’s adjusted net income increased 10.5% year-over-year to $505.10 million.
Moreover, its adjusted EBITDA increased 10.2% year-over-year to $1.16 billion, while its adjusted net EPS came in at $0.87, representing a 10.1% increase from the prior-year quarter.
Analysts expect ACI’s EPS for fiscal 2023 to increase 4.9% year-over-year to $3.22. Its revenue for the quarter ending February 28, 2023, is expected to increase 4.5% year-over-year to $18.17 billion. Over the past month, the stock has fallen 5.7% to close the last trading session at $19.93.
It is no surprise that ACI has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It is ranked #6 out of 39 stocks in the A-rated Grocery/Big Box Retailers industry. It has a B grade for Value, Sentiment, and Quality.
In total, we rate ACI on eight different levels. Beyond what we stated above, we have also given ACI grades for Growth, Momentum, and Stability. Get all ACI ratings here.
Juniper Networks, Inc. (JNPR)
JNPR designs, develops, and sells network products and services worldwide. The company offers routing products, such as ACX series universal access routers; MX series Ethernet routers; PTX series packet transport routers; wide-area network SDN controllers; and session smart routers.
In terms of the trailing-12-month EBIT margin, JNPR’s 10.17% is 73% higher than the 5.88% industry average. Its 8.88% trailing-12-month net income margin is 204.6% higher than the 2.92% industry average. Likewise, its 10.71% trailing-12-month Return on Common Equity is 125.4% higher than the industry average of 4.75%.
On March 8, 2023, JNPR announced that Shaare Zedek Medical Center, has embarked on total digital transformation of operations to provide superior experiences and exceptional care to its patients using Juniper’s data center solutions.
JNPR’s Vice President, Enterprise, EMEA, Gos Hein van de Wouw, believes that the company will provide high-performance technologies for Shaare Zedek Medical Center to ensure that it is fully prepared for continued digital acceleration.
JNPR’s total net revenues increased 11.5% year-over-year to $1.45 billion for the fourth quarter that ended December 31, 2022. Its non-GAAP operating income increased 13.5% year-over-year to $276.50 million.
Its non-GAAP net income increased 12.1% year-over-year to $213.80 million. Additionally, its non-GAAP EPS came in at $0.65, representing a 12.1% increase from the prior-year quarter.
JNPR’s EPS and revenue for the quarter ending March 31, 2023, are expected to increase 38.9% and 14.6% year-over-year to $0.43 and $1.34 billion, respectively. Over the past six months, the stock has gained 7% to close the last trading session at $31.06.
JNPR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. In addition, it has a B grade for Growth and Quality. Within the B-rated Technology – Communication/Networking industry, it is ranked #7 of 49 stocks.
Click here to see the additional POWR Ratings of JNPR for Value, Momentum, Stability, and Sentiment.
Universal Logistics Holdings, Inc. (ULH)
ULH provides transportation and logistics solutions in the United States, Mexico, Canada, and Colombia. It offers truckload services; domestic and international freight forwarding, customs brokerage services; and final mile and ground expedite services.
In terms of the trailing-12-month EBIT margin, ULH’s 11.93% is 24% higher than the 9.62% industry average. Likewise, its 1.72x trailing-12-month asset turnover ratio is 116.8% higher than the industry average of 0.79x.
For the fiscal fourth quarter ended December 31, 2022, ULH’s income from operations increased 102.6% year-over-year to $48.17 million. The company’s net income increased 106.5% year-over-year to $33.45 million. In addition, its EBITDA increased 71.3% year-over-year to $67.96 million, while its EPS came in at $1.27, representing a 111.7% increase from the prior-year quarter.
For fiscal 2024, ULH’s EPS and revenue are expected to increase 31.2% and 3.8% year-over-year to $5.55 and $1.92 billion, respectively. ULH has a commendable earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 53% to close the last trading session at $30.17.
ULH’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system. It is ranked #3 out of 16 stocks in the B-rated Air Freight & Shipping Services industry. In addition, it has an A grade for Value.
To see ULH’s ratings for Growth, Momentum, Stability, Sentiment, and Quality, click here.
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KO shares were trading at $59.36 per share on Friday morning, down $0.10 (-0.17%). Year-to-date, KO has declined -6.68%, versus a 2.18% 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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