After a solid run amid the economic recovery, the broader market has pulled back due to the spread of the hyper-contagious Delta variant of the COVID-19 virus and investors’ concerns over high inflation. The consumer price index increased an annualized 5.4% in June, representing its largest jump since August 2008.
The three major benchmark indexes ended last week with losses. While concerns about high inflation and declining consumer sentiment might maintain pressure on the market in the near term, a few stocks with strong fundamentals should keep rallying.
Shares of PepsiCo, Inc. (PEP), Novo Nordisk A/S (NVO), Humana Inc. (HUM), and Nokia Corporation (NOK) have been rallying amid the broader market slump on their solid financials and consistent product and service innovations. So, we think it could be wise to bet on them now.
PepsiCo, Inc. (PEP)
Operating for more than a century, PEP in Harrison, N.Y. is one of the top players in the food and beverage space. The company’s segments include Frito-Lay North America, Quaker Foods North America, and PepsiCo Beverages North America. Its offerings include branded dips, cheese-flavored snacks, tortillas, and dairy products.
On July 1, PEP Europe announced an ambitious new plan to add more choices to its food and beverage portfolio in the European Union’s member states. The plan involves a series of commitments based on rigorous science-based nutrition guidelines and could increase the company’s sales in the coming months.
PEP’s net revenue increased 20.5% year-over-year to $19.22 billion for its fiscal second quarter ended June 12, 2021. Its non-GAAP operating profit grew 25.9% year-over-year to $3.17 billion, while its non-GAAP net income increased 30.1% year-over-year to $2.39 billion. Also, its non-GAAP EPS came in at $1.72, up 30.3% year-over-year.
Analysts expect PEP’s EPS and revenue to increase 10.3% and 7.2%, respectively, year-over-year to $6.09 and $75.46 billion in its fiscal year 2021. It surpassed consensus EPS estimates in each of the trailing four quarters. The stock has rallied 8.1% over the past three months and 4.3% over the last week to close Friday’s trading session at $155.82.
PEP’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. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Novo Nordisk A/S (NVO)
Headquartered in Bagsvaerd, Denmark, NVO is a healthcare company that researches, develops, manufactures, and markets pharmaceutical products worldwide. It operates in two segments: Diabetes and Obesity care; and Biopharm. The company has collaboration agreements with Lund University, bluebird bio, Inc. (BLUE), and Lumen Bioscience, Inc.
NVO and Prothena Corporation plc (PRTA) agreed in July to NVO’s acquisition of PRTA’s clinical-stage antibody PRX004 and broader ATTR amyloidosis program. The acquisition could help NVO in advancing new disease-modifying therapies.
The company’s total assets increased 12% year-over-year to DKK 141.39 billion ($22.43 billion) for the first quarter ended March 31, 2021. Its China region sales grew 14% year-over-year to DKK 4.33 billion ($687.10 million). Its net income increased 6% year-over-year to DKK 12.62 billion ($2 billion). And its EPS came in at DKK 5.45 ($0.86), up 8% year-over-year.
For its fiscal year 2022, analysts expect NVO’s EPS and revenue to increase 8.2% and 7.1% year-over-year to $3.3 and $22.99 billion, respectively. The stock’s price has soared 22.8% over the past three months and 1.9% over the last week to close Friday’s trading session at $88.66.
NVO’s POWR Ratings reflect solid prospects. The company has an overall A rating, which translates to Strong Buy in our proprietary ratings system. In addition, it has an A grade for Stability and Quality, and a B grade for Value.
Humana Inc. (HUM)
HUM, together with its subsidiaries, operates as a health and well-being company in the United States. It operates through Retail, Group and Specialty, and Healthcare Services segments. The company offers medical and supplemental benefit plans to individuals and has a contract with Centers for Medicare and Medicaid Services to administer its Limited Income Newly Eligible Transition prescription drug plan program. HUM is based in Louisville, Ky.
On June 14, HUM signed a definitive agreement to acquire One Homecare Solutions from WayPoint Capital Partners. The acquisition could accelerate the development of the company’s value-based home health offering.
The company’s adjusted revenue has increased 9.6% year-over-year to $20.75 billion for the first quarter, ended March 31, 2021. Its adjusted pretax income grew 21.2% year-over-year to $1.25 billion. Its healthcare services segment’s adjusted EBITDA increased 3.1% year-over-year to $329 million. And its adjusted EPS came in at $7.67, up 42% year-over-year.
HUM’s EPS is expected to increase 61.4% year-over-year to $4.97 for the quarter ending September 30, 2021. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 9.9% year-over-year to $90 billion in its fiscal year 2022. The stock has gained nearly 10% over the past month and 4% over the last week to close Friday’s trading session at $470.90.
It’s no surprise that HUM has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Value and Quality.
Nokia Corporation (NOK)
Headquartered in Espoo, Finland, NOK provides mobile and fixed-network solutions worldwide. It operates through four segments: Mobile Networks; Network Infrastructure; Cloud and Network Services; and Nokia Technologies.
NOK opened its first Open RAN (O-RAN) Collaboration and Testing Center at its offices in Dallas, Texas, on June 16, 2021. Pasi Toivanen, the company’s Head of Edge Cloud, said, “Our new O-RAN Collaboration and Testing Center highlights our continued commitment towards O-RAN and the development of new solutions.”
NOK’s comparable net sales increased 3% year-over-year to €5.08 billion ($6.15 billion) for the first quarter, ended March 31, 2021. Its comparable operating profit grew 375% year-over-year to €551 million ($668.01 million), while its comparable profit for the period increased 1,036% year-over-year to €375 million ($454.64 million). Also, its comparable EPS came in at €0.07 ($0.08), up 600% year-over-year.
The company’s EPS is expected to be $0.31 in fiscal 2022, representing a 6.9% year-over-year rise. It surpassed consensus EPS estimates in three of the trailing four quarters. NOK’s revenue is expected to increase 3.5% year-over-year to $25.81 billion in its fiscal year 2021. The stock has surged 35.9% over the past three months and 6.4% over the past week to close Friday’s trading session at $5.68.
NOK’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system.
The stock has an A grade for Growth and Sentiment, and a B grade for Value. Within the B-rated Technology – Communication/Networking industry, NOK is ranked #10 of 55 stocks.
Click here to see the additional POWR Ratings for NOK (Quality, Momentum, and Stability).
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PEP shares were trading at $155.20 per share on Monday afternoon, down $0.62 (-0.40%). Year-to-date, PEP has gained 6.26%, versus a 14.03% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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