The economy expanded 2.9% on an annualized basis in the fourth quarter of 2022, following an increase of 3.2% during the third quarter. While there were increases in inventory investment and consumer spending, residential and non-residential investments softened due to high-interest rates.
The Federal Reserve recently raised its benchmark interest rate by 25 basis points, taking the target range to 4.5%-4.75%, the highest since October 2027. Despite inflation showing signs of moderating, the Fed signaled more rate hikes ahead to bring down inflation to its 2% target.
Higher borrowing costs would continue to affect consumers and businesses, keeping the economy under pressure. According to the latest economic outlook by the International Monetary Fund (IMF), US growth is projected to slow to 1.4% in 2023 and 1% in 2024 from 2.1% growth in 2022.
According to a recent poll of economists by the Wall Street Journal, the likelihood of a recession in the next 12 months is 61%.
Eli Lilly and Company (LLY)
LLY is engaged in a drug manufacturing business. The company discovers, develops, and markets human pharmaceuticals for diabetes, oncology, and neuroscience.
On January 28, 2023, Loxo@Lilly, the oncology unit of LLY, announced that the U.S. Food and Drug Administration (FDA) approved Jaypirca™ (pirtobrutinib, 100 mg & 50 mg tablets) for the treatment of adult patients with relapsed or refractory mantle cell lymphoma (MCL) after at least two lines of systemic therapy, including a Bruton’s tyrosine kinase (BTK) inhibitor.
On December 22, 2022, LLY and ProQR Therapeutics N.V. (PRQR) announced the expansion of their licensing and collaboration agreement to discover, develop, and commercialize new genetic medicines. The new agreement supports the discovery and development of additional assets directed toward high-conviction targets utilizing PRQR’s Axiomer technology.
Also, on December 12, LLY announced a dividend of $1.13 per share, representing a 15% increase in its quarterly dividend. The dividend is payable on March 10, 2023, to shareholders of record at the close of business on February 15. The company has raised its dividends for eight consecutive years.
LLY pays $4.52 annually as dividends. This translates to a yield of 1.32% at the current price, comparable to the 4-year average dividend yield of 1.64%. The company’s dividend payouts have grown at CAGRs of 15% and 13.5% over the past three and five years, respectively.
Excluding COVID-19 antibodies, LLY’s revenue increased 5% year-over-year, and total worldwide volume grew 13% for the fourth quarter that ended December 31, 2022. The company’s net income increased 12.3% year-over-year to $1.94 billion, and its EPS came in at $2.09, up 12.6% year-over-year.
The consensus revenue and EPS estimate of $30.69 billion and $8.48 for the current fiscal year, ending December 2023, represents an improvement of 7.5% and 6.8% year-over-year, respectively. Furthermore, Analysts expect the company’s revenue and EPS for fiscal 2024 to grow 17% and 37.8% from the prior year to $35.91 billion and $11.68, respectively.
The stock has gained 31.8% over the past year to close the last trading session at $330.70.
LLY has an overall rating of B, which translates to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
LLY has a B grade for Stability and Quality. It is ranked #33 of 171 stocks in the Medical – Pharmaceuticals industry. Click here to access additional ratings for LLY’s Growth, Value, Momentum, and Sentiment.
Cigna Corporation (CI)
CI provides insurance and related products and services in the United States. It sells its offerings through insurance brokers and consultants. The company operates through the Evernorth; and Cigna Healthcare segments.
On February 2, 2023, CI announced that its Board of Directors declared a 10% increase in the quarterly cash dividend to $1.23 per share to be paid on March 23, 2023. CI pays a $4.92 per share dividend annually. Its four-year average dividend yield is 0.64%. Its dividend payouts have grown at a 382% CAGR over the past three years and a 157% CAGR over the past five years.
On October 28, 2022, CI announced the expansion of its Medicare Advantage (MA) plans to western Pennsylvania for the first time, offering $0 premium plans available in 11 counties, including the Pittsburg area. This is expected to expand LLY’s customer reach and boost its revenue streams.
For the fourth quarter ended December 31, 2022, CI’s adjusted revenues excluding Divested Medicaid Business increased 1.3% year-over-year to $11.13 billion. The growth reflects increased specialty contributions and U.S. Commercial and International Health customer growth, partially offset by lower U.S. Government medical customers and lower net investment income.
In addition, Evernorth’s adjusted income from operations, pre-tax, came in at $1.73 billion, up 5.6% year-over-year.
Analysts expect CI’s revenue to increase 5.2% year-over-year to $190.20 billion in fiscal 2023. The company’s EPS for the ongoing year is estimated to grow 7.1% year-over-year to $24.80. Moreover, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
Shares of CI have gained 11.1% over the past six months and 31.1% over the past year to close the last trading session at $301.53.
CI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
CI has a B grade for Growth, Value, Sentiment, and Quality. Within the A-rated Medical – Health Insurance industry, it is ranked #3 out of 11 stocks.
In addition to the POWR Ratings I’ve just highlighted, you can access CI’s ratings for Momentum and Stability here.
Waste Management, Inc. (WM)
WM provides waste management environmental services in North America. The company offers collection services; owns, develops, and operates landfill gas-to-energy facilities; and operates transfer stations. In addition, it provides materials processing services, commodities recycling services, and construction remediation services. It serves residential, commercial, industrial, and municipal customers.
On December 8, WM’s Board of Directors approved a 7.7% increase in the quarterly dividend rate for 2023, from $0.65 to $0.70 per share. The company’s annual dividend rate increase from $2.60 to $2.80 per share marks its 20th consecutive year of dividend rate increases. Its annual dividend translates to 1.68% at the current share price.
WM’s dividend payouts have increased at CAGRs of 8.2% over the past three years and 8.9% over the past five years. The company’s exceptional cash generation positioned it to fund its capital allocation priority of returning cash to shareholders through dividends.
On November 15, 2022, WM and Dow Inc. (DOW) launched a bold new collaboration to improve residential recycling for hard-to-recycle plastic firms by allowing consumers in select markets to recycle materials directly to their curbside recycling. Once operating at full capacity, this recycling program might help the company divert more than 120,000 metric tons (MT) of plastic film from landfills annually.
For the fourth quarter of fiscal 2022 ended December 31, WM’s revenue increased 5.5% year-over-year to $4.94 billion. The company’s adjusted income from operations was $814 million, up 10.2% year-over-year. Its operating EBITDA grew 8.8% from the year-ago value to $1.36 billion.
Furthermore, the company’s adjusted net income rose 1.7% year-over-year to $537 million, while its adjusted EPS was $1.30, up 3.2% year-over-year.
Analysts expect WM’s revenue and EPS for the current fiscal year (ending December 2022) to increase 5.2% and 7.9% year-over-year to $20.72 billion and $6.03, respectively. Moreover, the company has topped its consensus revenue and EPS estimates in three of the trailing four quarters.
In addition, the company’s revenue and EPS for fiscal 2024 are expected to grow 5.3% and 13% from the previous year to $21.82 billion and $6.82, respectively.
The stock has gained 1.5% over the past year to close the last trading session at $150.34.
WM’s financial strength and strong growth outlook are reflected in its POWR Ratings. The stock’s overall rating of B translates to a Buy in our proprietary rating system.
WM also has a grade B for Quality and Stability. It is ranked #6 among 15 stocks in the A-rated Waste Disposal industry.
Beyond what we stated above, we also have WM’s ratings for Growth, Value, Momentum, and Sentiment. Get all WM ratings here.
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LLY shares rose $1.30 (+0.39%) in premarket trading Friday. Year-to-date, LLY has declined -9.25%, versus a 7.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...
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