Following lower-than-expected data for October and November, inflation declined further in December 2022. The consumer price index hit 6.5% in December, marking the lowest annual rate of increase since October 2021. Consequently, the rate hikes are expected to slow down in the upcoming terms.
On the other hand, the U.S. job market remains strong, adding 223,000 jobs in December, above the Dow Jones estimate of 200,000. Moreover, the unemployment rate came in better than the estimate. Amid this, the nation’s odds of avoiding a deep recession have expanded.
According to Alan Blinder, a Princeton University economist who formerly served as vice chair of the Fed, “All the signs are pointing to a higher, not a lower, probability of a soft landing.”
Microsoft Corporation (MSFT)
MSFT develops, licenses, and supports software, services, devices, and solutions worldwide. The company operates in three segments: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing.
On December 7, 2022, a new Industry Data for Society Partnership was co-launched by MSFT, GitHub, Hewlett Packard Enterprise (HPE), LinkedIn, Northumbrian Water Group, R2 Factory, and U.K. Power Networks, which is a first-of-its-kind cross-industry partnership to enhance accessible private-sector data for social benefits.
All companies are expected to be sound beneficiaries of this agreement.
For its fiscal 2023 first quarter that ended September 30, 2022, MSFT’s total revenue came in at $50.12 billion, up 10.6% year-over-year. Its adjusted net income came in at $17.56 billion, up 2% year-over-year, while its adjusted EPS came in at $2.35, up 3.5% year-over-year. Also, its operating income came in at $21.52 billion, up 6.3% year-over-year.
Analysts expect MSFT’s revenue to be $212.35 billion in 2023, representing a 7.1% year-over-year rise. The company’s EPS is expected to increase 3.8% year-over-year to $9.56 in 2023. It surpassed EPS estimates in three of four trailing quarters. Over the past three months, the stock has gained 4.6% to close the last trading session at $234.48.
MSFT’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, equating to a Buy in our POWR Rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has a B grade for Stability, Sentiment, and Quality. It is ranked #9 out of 52 stocks in the Software – Business industry. Click here for MSFT’s additional POWR Ratings for Growth, Value, and Momentum.
The Kroger Co. (KR)
KR operates as a retailer in the United States. The company operates combination food and drug stores, multi-department stores, marketplace stores, and price-impact warehouses.
On December 16, 2022, KR and its Family of Pharmacies and Prime Therapeutics LLC (Prime), a diversified pharmacy benefit manager collectively owned by Blue Cross and Blue Shield Plans, announced a direct agreement for the KR Family of Pharmacies. The collaboration aims to improve health access at an affordable price.
KR’s sales came in at $34.20 billion for the third quarter that ended November 5, 2022, up 7.3% year-over-year. Its current assets came in at $13.40 billion, up marginally year-over-year.
Street expects KR’s revenue to increase 7.6% year-over-year to $148.33 billion in 2023. Its EPS is expected to be 12.5% year-over-year to $4.14 in 2023. It surpassed EPS estimates in all four trailing quarters. The stock has declined marginally over the past three months to close the trading session at $45.61.
It’s no surprise that KR has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has a B grade for Growth, Value, and Quality.
International Paper Company (IP)
IP operates as a packaging company primarily in the United States, the Middle East, Europe, Africa, the Pacific Rim, Asia, and the rest of the Americas. It operates through two segments: Industrial Packaging and Global Cellulose Fibers.
On October 27, 2022, Mark Sutton, Chairman and Chief Executive Officer, said, “As we enter the fourth quarter, we see packaging demand stabilizing at these lower levels and input costs providing some relief; however, we also expect seasonally higher operating costs. And for the year, we expect to exceed our $225 million target related to our Building a Better IP initiatives.”
IP’s net sales came in at $5.40 billion for the third quarter that ended September 30, 2022, up 9.9% year-over-year. Its net earnings came in at $951 million, up 10.1% year-over-year, while its EPS came in at $2.64, up 20% year-over-year.
IP’s revenue is expected to increase 9.9% year-over-year to $21.29 billion for the yet-to-be-reported fiscal year 2022. Its EPS is expected to increase 17.2% year-over-year to $3.75 for the same period. The stock has gained 19.1% over the past three months to close the last trading session at $37.68.
IP has an overall B grade, equating to a Buy in our POWR Ratings system. It also has a B grade for Growth, Value, Momentum, and Quality.
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MSFT shares were trading at $238.87 per share on Thursday afternoon, up $3.10 (+1.31%). Year-to-date, MSFT has declined -0.40%, versus a 3.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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