Despite high inflation and supply chain disruptions, fourth-quarter corporate earnings have been impressive. However, escalating economic sanctions on Russia and rising oil prices due to a ban on Russian oil imports into the U.S. might keep the stock market under pressure.

While inflation is expected to remain high, analysts expect past stimulus spending to drive economic growth this year and beyond. Therefore, growth-focused companies are expected to benefit. Investors’ interest in growth stocks is evident in the iShares Russell Top 200 Growth ETF’s (IWY) 2.6% returns over the past nine months versus the SPDR S&P 500 Trust ETF’s (SPY) 1.4% gains.

Wide market reach and growing demand for their products make the shares of fundamentally sound companies Microsoft Corporation (MSFT), Alphabet Inc. (GOOGL), Danaher Corporation (DHR), The Estée Lauder Companies Inc. (EL), and KLA Corporation (KLAC) solid bets now. We think their strong growth attributes and higher profit margins position these stocks well to withstand the market’s fluctuations and deliver stable returns in the near term.

Microsoft Corporation (MSFT)

MSFT develops, supports, licenses, and sells various software products, services, and solutions worldwide. The Redmond, Wash.-based company also manufactures and sells PCs, tablets, gaming and entertainment consoles, other intelligent devices, and related accessories through OEMs, distributors, resellers, digital marketplaces, and retail stores.

On March 4, 2022, MSFT completed the acquisition of Nuance Communications Inc. (NUAN), a leader in conversational AI and ambient intelligence across healthcare, financial services, retail, and telecommunications industries. Combining NUAN’s best-in-class conversational AI and ambient intelligence with MSFT’s secure and trusted industry cloud offerings should enable organizations to accelerate their business goals and provide an enhanced customer experience.

For its fiscal year 2022 second quarter, ended Dec.31, 2021, MSFT’s total revenue increased 20.1% year-over-year to $51.73 billion. The company’s gross profit came in at $34.77 billion, representing a 20.4% rise from the prior-year period. MSFT’s operating income came in at $22.25 billion, up 24.3% from the year-ago period. While its net income increased 21.4% year-over-year to $18.77 billion, its EPS increased 22.2% to $2.48. As of Dec. 31, 2021, the company had $20.60 billion in cash and cash equivalents.

Analysts expect MSFT’s EPS to improve 9.6% year-over-year to $9.35 for its fiscal 2022, ending June 30, 2022. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The $152.84 billion consensus revenue estimate for the same fiscal year represents an 11.6% rise from the prior-year period. The company’s EPS is expected to grow at a 12.9% rate per annum over the next five years.

Over the past year, the stock has gained 23.4% in price and closed yesterday’s trading session at $288.50. MSFT’s trailing-12-month gross profit margin, ROE, and ROTC are 68.8%, 49.1%, and 21.7%, respectively.

And MSFT’s EBITDA, total assets, and levered free cash flow have grown at CAGRs of 22.4%, 9.6%, and 18.8%, respectively, over the past three years.

MSFT’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a B grade for Stability, Sentiment, and Quality. Click here to see the additional ratings for MSFT’s Growth, Value, and Momentum. MSFT is ranked #19 of 155 stocks in the Software – Application industry.

Click here to check out our Software Industry Report for 2022

Alphabet Inc. (GOOGL)

GOOGL in Mountain View, Calif., provides web-based search, maps, software applications, mobile OS, consumer content, enterprise solutions, commerce, and hardware products worldwide. GOOGL operates through Google Services; Google Cloud; and Other Bets. It also provides performance and brand advertising services.

On March 8, 2022, GOOGL’s Google LLC technology company agreed to acquire Mandiant, Inc. (MNDT), a dynamic cyber defense and response leader, in a $5.4 billion all-cash transaction. As the need for advanced cybersecurity rises, MNDT’s acquisition should complement Google Cloud’s existing strengths in security and help organizations combat cybersecurity challenges.

For its fiscal 2021 fourth quarter, ended Dec. 31, 2021, GOOGL’s revenues increased 32.4% year-over-year to $75.33 billion. The company’s income from operations came in at $21.89 billion, representing a 39.8% rise from its year-ago period. Its net income came in at $20.64 billion for the quarter, indicating a 35.6% rise from the prior-year period. GOOGL’s EPS was $30.69, up 37.6% from the year-ago period. The company had $20.95 billion in cash and cash equivalents as of Dec. 31, 2021.

The $116.10 consensus EPS estimate for its fiscal year 2022, ending Dec.31, 2022, represents a 3.5% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Its revenue is estimated to be $303.82 billion for the same fiscal year, indicating a 17.9% year-over-year improvement. Analysts expect the company’s EPS to grow at a 14.1% rate per annum over the next five years.

Over the past year, the stock has gained 30.8% in price to close yesterday’s trading session at $2668.40. GOOGL’s trailing-12-month gross profit margin, ROE, and ROTC are 56.9%, 32.1%, and 18.6%, respectively.

Over the past three years, the company’s EBITDA, total assets, and levered free cash flow have increased at CAGRs of 29.9%, 15.6%, and 34.1%, respectively.

GOOGL’s POWR Ratings reflect its solid prospects. The stock has an A grade for Sentiment and a B grade for Quality. In addition to the POWR Ratings grades we have just highlighted, one  can see the ratings for GOOGL’s Growth, Value, Stability, and Momentum here. GOOGL is ranked #5 of 73 stocks in the Internet industry.

Danaher Corporation (DHR)

DHR designs, manufactures, and markets professional, medical, industrial, and commercial products and services in test and measurement, environmental, life sciences, dental, and industrial technologies. The Washington, D.C., company operates through three segments: Life Sciences; Diagnostics; and Environmental & Applied Solutions.

On Aug. 30, 2021, DHR completed the acquisition of Aldevron, a manufacturer of high-quality plasmid DNA, mRNA, and proteins, that serves  biotechnology and pharmaceutical customers across research, clinical and commercial applications, for $9.60 billion in cash. Aldevron will operate as a standalone company and brand within DHR’s Life Sciences segment. The acquisition will expand DHR’s capabilities into the important field of genomic medicine and bring more life-saving therapies and vaccines to market faster.

DHR’s sales for its fiscal 2021 fourth quarter, ended Dec. 31, 2021, increased 20.5% year-over-year to $8.15 billion. The company’s gross profit came in at $4.94 billion, representing a 25% year-over-year improvement. Its operating profit was  $2.15 billion, indicating a 34.5% rise from the prior-year period. DHR’s net income came in at $1.75 billion for the quarter, representing a 45.6% rise from the year-ago period. And its adjusted EPS was $2.69, up 29.3% from the prior-year period. As of Dec. 31, 2021, the company had $2.59 billion in cash and equivalents.

The $10.44 consensus EPS estimate for its fiscal year 2022, ending Dec. 31, 2022, represents a 3.9% year-over-year improvement. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect the company’s revenue to be $30.98 billion for the same quarter, indicating a 5.2% rise from the prior-year period. And DHR’s EPS is expected to grow at a 16.9% rate per annum over the next five years.

DHR stock has gained 22.4% in price over the past year and ended yesterday’s trading session at $264.82. Its trailing-12-month gross profit margin, ROE, and ROTC are 61.3%, 14.9%, and 7.8%, respectively.

Over the past three years, the company’s EBITDA, total assets, and levered free cash flow have increased at CAGRs of 34.3%, 20.3%, and 26.8%, respectively.

DHR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.

It has a B grade for Growth, Stability, and Sentiment. Click here to see the additional ratings for DHR’s Momentum, Value, and Quality. DHR is ranked #33 of 168 stocks in the Medical – Devices & Equipment industry.

Click here to checkout our Healthcare Sector Report for 2022

The Estée Lauder Companies Inc. (EL)

New York City’s EL manufactures, markets, and sells a wide range of skincare, makeup, fragrance, and hair care products. The company also provides ancillary products and services. Its products are sold through department stores, specialty-multi retailers, upscale perfumeries and pharmacies, salons and spas, retailer websites, and in-flight and duty-free shops.

On Sept. 15, 2021, EL announced that it would be working with the leading heat and cool surface technology provider, Roctool, to help implement innovative practices across its brand portfolio. Roctool’s unique molding technology will support the company’s ongoing efforts to advance luxury, sustainable packaging.

For its fiscal year 2022 second quarter, ended Dec. 31, 2021, EL’s net sales increased 14.1% year-over-year to $5.53 billion. The company’s gross profit came in at $403.04 million, representing a 14.3% gain over the prior-year period. Its non-GAAP operating income came in at $1.43 billion, representing a 21.1% year-over-year improvement. EL’s non-GAAP net earnings were $1.10 billion, up 14.2% from the prior-year period. And its non-GAAP EPS increased 14.6% year-over-year to $2.99. The company had cash and cash equivalents of $4.60 billion as of Dec. 31, 2021.

The 7.61 consensus EPS estimate for its fiscal 2022, ending June 30, 2022, indicates an 18% year-over-year improvement. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect the company’s revenue to reach $18.72 billion for the same quarter, representing a 15.4% improvement from the year-ago period. And EL’s EPS is expected to grow at a 14.9% rate per annum over the next five years.

Over the past year, the stock has retreated in price marginally and ended yesterday’s trading session at $277.68. EL’s trailing-12-month gross profit margin, ROE, and ROTC are 76.4%, 51.9%, and 15.5%, respectively.

The company’s EBITDA, total assets, and levered free cash flow have increased at CAGRs of 12.9%, 20.3%, and 9%, respectively, over the past three years.

EL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.

It has an A grade for Quality and a B grade for Growth and Sentiment. Click here to see the additional ratings for EL (Value, Stability, and Momentum). EL is ranked #33 of 66 stocks in the A-rated Fashion & Luxury industry.

KLA Corporation (KLAC)

KLAC in Milpitas, Calif., designs, manufactures, and markets process control and yield management solutions for the semiconductor and related nanoelectronics industries worldwide. The company offers compound semiconductor, power device, LED, microelectromechanical system manufacturing, data storage media/head manufacturing products, general-purpose/lab applications, and previous-generation KLA systems.

On Nov. 5, 2021, KLAC opened its second U.S. headquarters, a $200 million facility in Ann Arbor, Michigan. The new headquarters are  home to KLAC’s AI Center of Excellence, where machine learning applications help advance semiconductor manufacturing.

For its fiscal year 2021 fourth quarter, ended Dec. 31, 2021, KLAC’s total revenues increased 42.5% year-over-year to $2.35 billion. The company’s pre-tax income came in at $926.91 million, up 75.7% from the prior-year period. While its non-GAAP net income increased 68.8% year-over-year to $851.04 million, its non-GAAP EPS grew 72.5% to $5.59. As of Dec. 31, 2021, the company had $1.66 billion in cash and cash equivalents.

The $20.62 consensus EPS estimate for its fiscal year 2022, ending June 30, 2022, represents a 41.7% year-over-year improvement. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect the company’s revenue to be $9.02 billion for the same fiscal year, indicating a 30.4% rise from the prior-year period. And KLAC’s EPS is expected to grow at a 20.7% rate per annum over the next five years.

KLAC stock has gained 15.5% in price over the past year and ended yesterday’s trading session at $339.56. Its trailing-12-month gross profit margin, ROE, and ROTC are 60.8%, 85.4%, and 28.1%, respectively.

Over the past three years, the company’s EBITDA, total assets, and levered free cash flow have increased at CAGRs of 26.2%, 27.7%, and 27.8%, respectively.

KLAC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.

It has an A grade for Quality and a B grade for Momentum and Sentiment. Click here to see the additional ratings for KLAC (Growth, Value, and Stability).

KLAC is ranked #32 of 97 stocks in the B-rated Semiconductor & Wireless Chip industry.

Click here to checkout our Semiconductor Industry Report for 2022

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MSFT shares were trading at $285.60 per share on Thursday afternoon, down $2.90 (-1.01%). Year-to-date, MSFT has declined -14.91%, versus a -10.56% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...

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