The U.S. economy grew at an annual rate of 2.9% in the third quarter of fiscal 2022, despite high borrowing costs and chronic inflation. Moreover, the November jobs report also exceeded expectations, with nonfarm payrolls rising by 263,000 against Dow Jones’ estimate of 200,000. Plentiful job openings and low unemployment show that the economy is slow-moving but resilient.
“At this point, the stock market is assuming that we won’t go into recession or, if we do, that it will be mild and that the Fed will likely cut interest rates in the second half of 2023,” Sam Stovall, the chief investment strategist for CFRA Research, said.
However, recession fears are still looming. According to a recent poll by YouGovAmerica and The Economist, about 56% of Americans believe the country is already in a recession.
Amid this, it could be wise to scoop up shares of fundamentally sound stocks Lockheed Martin Corporation (LMT), Cigna Corporation (CI), and Albertsons Companies, Inc. (ACI), which are trading at discounts.
Lockheed Martin Corporation (LMT)
LMT is a security and aerospace company engaged in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide. It operates through four segments Aeronautics; Missiles and Fire Control; Rotary and Mission Systems; and Space.
On November 16, LMT and Microsoft Corp. (MSFT) announced a landmark expansion of their strategic relationship to help power the next generation of technology for the Department of Defense (DOD) by blazing a new path in the classified cloud, artificial intelligence, and 5G.MIL® capabilities. This partnership should help the company strengthen its position in the industry.
On September 30, LMT declared a quarterly dividend of $3, payable to stockholders on December 30, 2022. The company pays a $12 annual dividend, translating to a yield of 2.48% at its current price. It has increased its dividend for 20 consecutive years. Additionally, LMT’s dividend payouts have grown at an 8.2% CAGR over the last three years and an 8.9% CAGR over the past five years.
LMT’s total assets for the fiscal third quarter ended September 25, 2022, increased 2.3% to $52.03 billion, compared to $50.87 billion for the fiscal year ended December 31, 2021. The company’s net sales increased 3.5% year-over-year to $16.58 billion for the quarter ended September 25, while its net earnings increased 189.6% year-over-year to $1.78 billion. In addition, its non-GAAP EPS came in at $6.87, representing a 4.1% from the prior-year quarter.
Street expects LMT’s EPS and revenue for the quarter ending December 31, 2022, to increase marginally and 3% year-over-year to $7.26 and $18.27 billion, respectively. It has a commendable earnings surprise history as it surpassed the consensus EPS estimates in three of the trailing four quarters.
LMT’s forward Price/Book multiple of 14.35 is 63.3% lower than its five-year average of 39.14. In terms of its trailing-12-month Price/Cash Flow, the stock is trading at 12.51x, 24.6% lower than its five-year average of 16.58x.
The stock has gained 42.4% over the past year and 36.2% year-to-date to close the last trading session at $484.
LMT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It also has a B grade for Quality. Out of the 73 stocks in the Air/Defense Services industry, LMT is ranked #6.
Click here to see the other ratings of LMT for Growth, Momentum, Value, Stability, and Sentiment.
Cigna Corporation (CI)
CI provides insurance and related products and services in the United States. It operates through two segments, Evernorth and Cigna Healthcare. The company distributes its products and services through insurance brokers and consultants.
On October 28, CI announced the availability of Cigna Health plans on the individual marketplace for Indiana residents in eight counties, giving more people and communities access to affordable, predictable, and simple health care coverage in 2023 as well as to attract more customers.
On October 12, the company also announced the availability of comprehensive and cost-effective health plans for Texas residents. These developments should expand the company’s revenue streams.
On October 26, CI declared a dividend of $1.12 per share on its common stock, payable to shareholders on December 21. Its annual dividend of $4.48 yields 1.36% on prevailing prices. The company’s dividend payouts have increased at a 382% CAGR over the past three years and a 157% CAGR over the past five years.
CI’s total sales increased 2.2% year-over-year to $45.28 billion for the third quarter that ended September 30, 2022. Its pharmacy revenues came in at $32.76 billion, up 5.6% year-over-year. Additionally, its adjusted EPS grew 5.4% year-over-year to $6.04.
Analysts expect CI’s EPS to increase 13.2% year-over-year to $23.16 in the current fiscal year ending December 2022. Its revenue is expected to increase 3.7% year-over-year to $180.58 billion for the same period. It also surpassed EPS estimates in each of the trailing four quarters.
In terms of its forward EV/Sales, CI is currently trading at 0.69x, 82.7% lower than the industry average of 4x. Its forward EV/EBIT multiple of 14.76 is 15.2% lower than the industry average of 17.40.
Over the past year, the stock has gained 59.6% to close its last trading session at $329.64. It has gained 43.6% year-to-date.
It is no surprise that CI has an overall A rating, which equates to a Strong Buy in our proprietary POWR Ratings system.
The company has a B grade for Value, Sentiment, and Quality. Within the A-rated Medical – Health Insurance industry, it is ranked #5 of 11 stocks.
To access additional POWR Ratings for Growth, Momentum, and Stability for CI, click here.
Albertsons Companies, Inc. (ACI)
ACI engages in the operation of food and drug stores. The company offers grocery, 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.
On November 10, ACI launched its new, premium Vinaforé Collection of wines. The private label collection features five distinctively crafted varieties originating from some of the best wine regions in the world. It is now available at Albertsons Cos. banner stores, including Albertsons, Safeway, Shaw’s, Vons, Jewel-Osco, Acme, Tom Thumb, and United Supermarkets. This should contribute to the company’s revenues.
The company’s $0.48 annual dividend yields 2.28% on prevailing prices. It has a four-year average dividend yield of 3.3%.
ACI’s net sales and other revenue for the fiscal second quarter of 2022 increased 8.6% year-over-year to $17.92 billion. The company’s adjusted net income increased 13.2% year-over-year to $418.30 million. Moreover, its adjusted EBITDA increased 8.6% year-over-year to $1.05 billion, while its adjusted net EPS came in at $0.72, representing a 12.5% increase from the prior-year quarter.
ACI’s revenue for the quarter ended November 30, 2022, is expected to increase 4.4% year-over-year to $17.46 billion. Its EPS for the quarter ending May 31, 2023, is expected to increase 1.2% year-over-year to $0.85.
ACI’s forward P/E multiple of 8.07 is 62.7% lower than the industry average of 21.62. In terms of its forward EV/Sales, the stock is trading at 0.29x, 82.8% lower than the industry average of 1.70x.
The stock has gained marginally intraday to close the last trading session at $21.07.
This promising prospect is reflected in ACI’s POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It also has an A grade for Value and a B for Quality. ACI is ranked #6 out of 39 stocks in the A-rated Grocery/Big Box Retailers industry.
Beyond what we stated above, we have also given ACI grades for Growth, Momentum, Stability, and Sentiment. Get all ACI ratings here.
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LMT shares were trading at $483.93 per share on Wednesday morning, down $0.07 (-0.01%). Year-to-date, LMT has gained 39.74%, versus a -16.24% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...
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