The Fed’s aggressive rate hikes finally dragged inflation down slightly in October. The consumer price index increased 7.7% year-over-year last month, lower than analyst estimates. Moreover, wholesale prices rose less than expected in October. The producer price index rose 0.2% for the month, against the Dow Jones estimate of 0.4%.
Easing inflation has boosted investors’ confidence in the market, as evident from the S&P 500’s 6.5% surge over the past five days. Moreover, CNBC’s Jim Cramer believes the stock market’s current rally could last through the middle of next month.
While the Fed’s future actions and a possible recession could keep the market under pressure, quality stocks AT&T Inc. (T), Celestica Inc. (CLS), trivago N.V. (TRVG), and Overseas Shipholding Group, Inc. (OSG), which are currently trading under $20, might be ideal investments for beginners.
AT&T Inc. (T)
T is a telecommunication, media, and telecommunication services provider. The company operates through the Communications and Latin America segments. It operates AT&T, Cricket, AT&T PREPAID, AT&T Fiber, and Unefon brand names.
On September 30, T declared a quarterly dividend of $0.2775 per share on the company’s common shares. The company also declared dividends on its 5.000% Perpetual Preferred Stock, Series A, and the 4.750% Perpetual Preferred Stock, Series C. This reflects on its cash generation ability.
On September 9, it was reported that Lockheed Martin Corporation (LMT) and T had securely and rapidly transferred UH-60M Black Hawk health and usage data through T’s 5G private cellular network and LMT’s 5G.MIL multi-site pilot network in a test conducted in August at LMT’s Sikorsky headquarters. This is expected to benefit the company in the future.
For the fiscal third quarter of 2022, T’s net income increased 2% year-over-year to $6.40 billion. Its free cash flow rose marginally year-over-year to $3.84 billion. Adjusted EPS improved 3% year-over-year to $0.68. Adjusted EBITDA margin came in at 35.7% as compared to 34.5% in the prior-year period.
Analysts expect T’s revenue and EPS for the current year (fiscal 2022) to come in at $128.73 billion and $2.67, respectively. In addition, the company has an impressive surprise earning history, as it has topped consensus EPS estimates in all trailing four quarters.
The stock has gained 3.4% over the past three months and 26.9% over the past month to close its last trading session at $19.02.
T’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
T has a Value, Sentiment, and Quality grade of B. In the 20-stock Telecom – Domestic industry, it is ranked #4.
Click here to see the additional POWR Ratings for T (Growth, Momentum, and Stability).
Celestica Inc. (CLS)
CLS operates as a hardware platform and supply-chain solutions provider. It operates through two segments: Advanced Technology Solutions and Connectivity & Cloud Solutions. The company is headquartered in Toronto, Canada.
On October 18, CLS launched the DS1000 high-performance Gigabit Ethernet Layer 3 switch. This should benefit the company through its contribution to the OCP Enterprise Connectivity Solutions (ECS) group.
On August 2, CLS launched three new storage arrays. The new generation arrays are expected to offer flexibility and widen the company’s consumer base with customized solutions. This should add to the company’s existing revenue stream.
CLS’ IFRS revenue increased 31.1% year-over-year to $1.92 billion for the fiscal third quarter ended September 30. Non-IFRS adjusted net earnings came in at $63.60 million, while its non-IFRS adjusted earnings per share stood at $0.52, up 46.5% and 48.6% from the prior-year period, respectively.
The consensus EPS estimate of $0.54 for the quarter ending December 2022 indicates a 22.7% year-over-year increase. Likewise, the consensus revenue estimate for the same quarter of $1.97 billion reflects an improvement of 30% from the prior-year quarter. CLS has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
Over the past month, the stock has gained 32%. It is up 4.5% over the past five days to close its last trading session at $11.39.
It’s no surprise that CLS has an overall A rating, which translates to a Strong Buy in our POWR Ratings system.
CLS has an A grade for Growth and Sentiment and a B for Value. It is ranked #2 out of the 76 stocks in the Technology – Services industry.
To see the additional POWR Ratings for Momentum, Stability, and Quality for CLS, click here.
trivago N.V. (TRVG)
Headquartered in Düsseldorf, Germany, TRVG operates a hotel and accommodation search platform globally. The company offers an online meta-search for hotels and accommodations through online travel agencies, hotel chains, and independent hotels.
On October 18, TRVG and AXS, a digital ticketing platform for live sports and entertainment, announced a global partnership to allow eventgoers to access affordable stay booking options with event ticket purchases made via AXS. The collaboration also makes TRVG the exclusive accommodation partner of AXS, which should be strategically beneficial.
For the fiscal third quarter ended September 30, TRVG’s total revenue increased 33% year-over-year to €183.70 million ($190.38 million). Cash, cash equivalents, and restricted cash at end of the period improved 19% from the prior-year period to €231.81 million ($240.24 million). Adjusted EBITDA rose 116% year-over-year to €33.50 million ($34.72 million).
Street EPS estimate for the quarter ending March 2023 of $0.05 indicates a 266.7% year-over-year increase. Likewise, Street revenue estimate for the same quarter of $149.40 million reflects a rise of 44.2% from the prior-year period.
It is up 21% over the past month and 15.3% over the past five days to close its last trading session at $1.27.
This promising prospect is reflected in TRVG’s POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
TRVG has a Quality grade of A and a Growth and Value grade of B. In the 58-stock Internet industry, it is ranked #1.
Click here for the additional POWR Ratings for Momentum, Stability, and Sentiment for TRVG.
Overseas Shipholding Group, Inc. (OSG)
OSG is the owner and operator of a fleet of oceangoing vessels engaged in the transportation of crude oil and petroleum products in the United States flag trade. The company serves independent oil traders, refinery operators, and government entities.
On November 15, OSG announced its plans to purchase five million shares of the company’s common stock from Cyrus Capital at $2.86 per share for a total of $14.30 million.
Sam Norton, OSG’s President and CEO, stated, “The price paid in this share purchase equates to an enterprise value of roughly 4.5 times expected 2022 adjusted EBITDA, an implied valuation which we consider to be very attractive.”
OSG’s shipping revenues increased 31% year-over-year to $123.06 million in the fiscal third quarter ended September 30. Net income and its per-share amount came in at $13.25 million and $0.15, respectively, up significantly from their negative year-ago values.
The stock has gained 45.6% over the past year and 58% year-to-date to close its last trading session at $2.97.
OSG has an overall A rating, translating to a Strong Buy in our POWR Ratings system.
The stock has an A grade for Momentum and Quality and a B for Growth, Value, and Sentiment. It is ranked #1 out of the 46 stocks in the Shipping industry. The industry is rated A.
In addition to the POWR Rating grades we’ve stated above, one can see OSG’s rating for Stability here.
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T shares were trading at $18.89 per share on Wednesday afternoon, down $0.13 (-0.68%). Year-to-date, T has gained 8.61%, versus a -15.82% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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