Inflation is showing signs of easing, with the Consumer Price Index (CPI) dropping for the sixth consecutive month in December. CPI increased 6.5% year-over-year in the month, down from its peak of 9.1% in June last year.
Despite a significant moderation in inflation, the central bank might keep raising interest rates this year since inflation is much higher than its 2% target. Fed’s James Bullard favors raising interest rates above 5% ‘as soon as possible’ to ensure that price pressures are subdued. Continued rate hikes could trigger an economic downturn, potentially pushing the economy into a recession.
The World Bank cut its 2023 global economic growth outlook to 1.7%, compared to its earlier projection of 3%. The World Bank said, “Global growth has slowed to the extent that the global economy is perilously close to falling into recession.” It believes that rapid global monetary policy tightening is behind the sluggish growth.
Furthermore, a slowdown in global economic growth dims hope for a labor turnaround this year. According to the International Labor Organization, employment levels are expected to rise just 1% in 2023, down from 2.3% in 2022.
Amid uncertain macroeconomic conditions, it could be wise to buy fundamentally sound stocks Microsoft Corporation (MSFT), Pfizer Inc. (PFE), and AT&T Inc. (T), which are extremely popular among investors on Wall Street.
Microsoft Corporation (MSFT)
Tech giant MSFT develops, licenses, and supports software, services, solutions, and devices worldwide. The company’s segments include More Personal Computing; Intelligent Cloud; and Productivity and Business Processes.
On December 14, 2022, MSFT and ViaSat, Inc. (VSAT) announced a new partnership to help deliver internet access to 10 million people around the globe, including 5 million across Africa.
Teresa Hutson, Microsoft’s vice president of Technology and Corporate Responsibility, said, “Working with VSAT, we will use satellite to reach remote areas, and rapidly scale and expand Airband’s reach, exploring a wider pipeline of projects and new countries where we haven’t yet worked.”
On November 3, MSFT and Raytheon Technologies Corporation (RTX), a leading aerospace and defense company, deepened their collaboration to co-develop capabilities. MSFT might stand to benefit from helping RTX execute its digital transformation.
For the fiscal 2023 first quarter ended September 30, 2022, MSFT’s revenue increased 10.6% year-over-year to $50.12 billion. Its operating income grew 6.3% year-over-year to $21.52 billion. The company’s adjusted net income rose 2% from the year-ago value to $17.56 billion, while its adjusted EPS came in at $2.35, up 3.5% year-over-year.
MSFT has a record of increasing its dividend for 18 consecutive years. It pays a $2.72 per share dividend annually, which translates to a 1.14% yield on the current share price. Its four-year average dividend yield is 1.04%. The company’s dividend payouts have grown at a 10.4% CAGR over the past three years.
Analysts expect MSFT’s revenue and EPS for the current fiscal year (ending June 2023) to come in at $212.67 billion and $9.55, indicating increases of 7.3% and 3.7% year-over-year, respectively. Moreover, the company has surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.
In addition, the company’s revenue and EPS for the next fiscal year are expected to grow 13% and 16.4% from the previous year to $240.16 billion and $11.10, respectively.
Shares of MSFT have gained 1.6% over the past five days to close the last trading session at $240.35.
MSFT’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Stability, Quality, and Sentiment. Within the Software – Business industry, it is ranked #9 of 52 stocks.
Beyond what we stated above, we also have MSFT’s ratings for Growth, Value, and Momentum. Get all MSFT ratings here.
Pfizer Inc. (PFE)
PFE discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. The company serves wholesalers, retailers, hospitals, clinics, government agencies, pharmacies, individual provider offices, and disease control and prevention centers.
On January 10, 2023, PFE is reportedly working with Chinese authorities to send its COVID-19 pill, Paxlovid, to the country dealing with a surge in COVID-19 cases currently. Pfizer has agreed to export Paxlovid to China through a local company to make the medicine more widely available.
China has also been in talks with the drugmaker to secure a license that will allow domestic drugmakers to manufacture and distribute a generic version of Paxlovid in China.
On November 3, PFE’s investigational cancer immunotherapy, elranatamab, received Breakthrough Therapy Designation from the U.S. Food and Drug Administration (FDA) for treating people with relapsed or refractory multiple myeloma. This is yet another remarkable milestone in the company’s oncology field.
PFE’s United States segment revenues increased 97.3% year-over-year to $13.85 billion in the third quarter that ended October 2, 2022. Its income from continuing operations grew 5.8% from the year-ago value to $8.65 billion. The company’s non-GAAP net income increased 39.7% year-over-year to $10.17 billion, while its non-GAAP EPS grew 40.2% year-over-year to $1.78.
PFE has raised its dividends for 12 consecutive years. Its dividend payouts have increased at a 5.7% CAGR over the past five years. Its current dividend yield is 3.43%, and its four-year average dividend yield is 3.63%.
Analysts expect PFE’s revenue for the fiscal year (ended December 2022) to increase 23.5% year-over-year to $100.39 billion. The company’s EPS for the same year is estimated to grow 46.6% year-over-year to $6.48. Moreover, the company has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has declined 9.4% over the past month to close the last trading session at $46.08.
PFE’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
PFE has an A grade for Value and a B for Growth and Quality. Within the Medical – Pharmaceuticals industry, it is ranked #4 out of 168 stocks.
Click here for the additional POWR Ratings for Momentum, Stability, and Sentiment for PFE.
AT&T Inc. (T)
T offers telecommunications, media, and technology services. The company operates through Communications and Latin America segments. It provides wireless voice and video services; and sells handsets, wireless computing devices, and hands-free devices through company-owned stores, agents, and third-party retail stores.
On December 23, 2022, T and BlackRock Alternatives entered a definitive agreement to form a joint venture that will operate a commercial fiber platform. The newly formed joint venture, Gigapower, LLC, is expected to offer a best-in-class fiber network to internet service providers (ISPs) and other businesses across the United States.
With this joint venture, more customers and communities outside T’s traditional 21-state wireline service footprint will benefit from fiber access technologies.
In the third quarter of fiscal 2022, T’s consumer wireline revenues were $3.20 billion, up 1.4% year-over-year due to gains in broadband. Revenues from the Latin America segment increased 8.4% year-over-year to $785 million, primarily driven by growth in service revenues. Service revenues were $559 million, up 20.7% year-over-year.
Furthermore, the company’s adjusted operating margin came in at 35.7%, compared to 34.5% in the year-ago period. Its adjusted EBITDA increased 4.7% year-over-year to $10.71 billion. Also, its adjusted EPS rose 3% year-over-year to $0.68.
T’s forward annual dividend of $1.11 per share yields an attractive 5.68% at the current share price. Its four-year average yield is 8.79%. The company will pay a dividend of $0.2775 per share on February 1, 2023.
Analysts expect T’s EPS for the second quarter (ending June 2023) to increase 1.1% year-over-year to $0.66. The company’s revenue for the next quarter is expected to grow 1.3% year-over-year to $30.04 billion. The stock has gained 5.9% over the past month and 24.1% over the past year to close its last trading session at $19.33.
T’s solid fundamentals and bright outlook is reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
T has a grade of B for Quality and Value. In the 19-stock Telecom-Domestic industry, it is ranked #4.
Click here to access the additional POWR Ratings for T (Growth, Stability, Momentum, and Sentiment).
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MSFT shares rose $0.49 (+0.20%) in premarket trading Wednesday. Year-to-date, MSFT has gained 0.22%, versus a 4.01% 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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