Just as the revived consumer confidence was helping a bear market catch a break, robust employment data and a faster-than-expected expansion of industrial output have reignited concerns of further interest rate hikes by the Federal Reserve and the ever-increasing probability of an economic downturn.

While market volatility is unlikely to ease anytime soon, Susannah Streeter, senior investment and markets analyst at U.K. brokerage Hargreaves Lansdown, expressed her optimism by saying, “Once central banks hit pause, as they will do at some point next year as inflation falls back, that will put some more vigor back into markets.”

In such a scenario, it would be wise to load up on shares of fundamentally strong businesses which are well-entrenched not just to weather an economic slowdown but also to emerge stronger.

To that end, AT & T Inc. (T), STMicroelectronics N.V. (STM), and KT Corporation (KT) appear to be appropriate investments for a stabler and more profitable year ahead.

AT&T Inc. (T)

T is a global provider of telecommunications, media, and technical services worldwide. The company operates through two segments: Communications; and Latin America. Its offerings include wireless communications, data/broadband, Internet services, video services, local exchange services, long-distance services, telecommunications equipment, managed networking, and wholesale services.

On December 15, T announced its quarterly dividend of $0.28 per share on the company’s common shares; Series A dividend of $312.50 per preferred share, or $0.3125 per depositary share; and Series C dividend of $296.875 per preferred share, or $0.296875 per depositary share.

The dividends are payable on February 1, 2023, to stockholders of record of the respective shares at the close of business on January 10, 2023. T pays $1.11 as dividends annually, which translates to a yield of 6.08% at the current price, comparable to the four-year average dividend yield of 6.80%.

On December 6, T’s COO Jeff McElfresh indicated that the company expects full-year capital investment in the $24 billion range to meet the growing demand for core connectivity while meeting full-year 2022 guidance for free cash flow in the $14 billion range.

For its fiscal 2022 third quarter ended September 30, 2022, T’s revenues came in at $30 billion. Excluding the impact of U.S. Video separation in July 2021, standalone operating revenues for T were up 3.1% from $29.1 billion in the year-ago quarter. Its income from continuing operations increased 26% year-over-year to $6.3 billion. As a result, the company’s adjusted EPS grew 3% year-over-year to $0.68.

The stock has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive. It has gained 26% year-to-date to close the last trading session at $18.27.

T has an overall rating of B, which equates to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

T also has a B grade for Value and Quality. T is ranked #5 of 19 stocks in the Telecom – Domestic industry. 

Click here to access the additional ratings for T’s Stability, Growth, Sentiment, and Momentum.

STMicroelectronics N.V. (STM)

STM is a semiconductor company headquartered in Geneva, Switzerland. The company develops, manufactures, and markets a range of semiconductor products. It has three segments: Automotive and Discrete Group (ADG); Analog, MEMS, and Sensors Group (AMS); and Microcontrollers and Digital ICs Group (MDG).

On December 19, STM updated the details of the share repurchase program approved by a shareholder resolution dated May 27, 2021, and by the supervisory board. A total of 109,335 ordinary shares (equal to 0.01% of its issued share capital) at the weighted average purchase price per share of €36.49 ($38.73) were acquired between December 12 and December 16, 2022.

This program demonstrates the company’s confidence in its prospects, and it is expected to increase the intrinsic value of the holdings of existing shareholders.

For the fiscal 2022 third quarter ended October 1, 2022, STM’s net revenues increased 35.2% year-over-year to $4.32 billion, while its operating income increased 110.2% to $1.27 billion. During the same period, the company’s net income increased 131.3% year-over-year to $1.10 billion or $1.16 per share, up 127.5% year-over-year.

STM’s revenue and EPS for the fiscal year 2022 are expected to increase 25.2% and 84.5% year-over-year to $15.98 billion and $3.99, respectively. Additionally, it has an impressive feat of surpassing EPS estimates in each of the trailing four quarters.

The stock has gained 8.8% over the past six months to close the last trading session at $36.05.

It is no surprise that STM has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has a B grade for Growth, Value, Sentiment, and Quality.

STM is ranked #3 of 92 stocks in the B-rated Semiconductor & Wireless Chip industry. 

Click here to access the additional POWR Ratings for Momentum and Stability for STM.

KT Corporation (KT)

Headquartered in Korea, KT is a leading telecommunications service provider. The company operates through four segments: Information and Communications Technologies; Finance; Satellite Broadcasting; and Other.

On October 7, KT announced that it would strengthen its strategic alliance with Hyundai Motor Company (HYMTF). KT will expand the Connected Car business, for which the company has been collaborating with HYMTF for many years, and further plans to provide communication modules and connectivity to HYMTF’s domestic and overseas OEM vehicles.

Both companies decided to acquire shares of each company mutually through a treasury stock exchange on September 7 to strengthen and enhance the momentum and continuity of their long-term partnership.

For the third quarter of the fiscal year 2022, KT’s operating revenue increased 4.2% year-over-year to ₩6.48 trillion ($5.05 billion). During the same period, the company’s EBITDA increased 6.4% year-over-year to ₩1.36 trillion ($1.06 billion), while its operating income increased 18.4% year-over-year to ₩452.9 billion ($353.06 million). The company’s net assets at the end of fiscal 2022 third quarter stood at ₩40.65 trillion ($31.69 billion), compared to ₩35.83 trillion ($27.93 billion) a year ago.

Analysts expect KT’s revenue for the fiscal year ending December 2023 to increase 3.3% year-over-year to $20.40 billion, while its EPS is expected to increase 4.2% year-over-year to $1.96. The stock has gained 2.8% over the past month and 11.7% year-to-date to close the last trading session at $14.06.

In line with its positive outlook, KT’s overall rating of A translates to a Strong Buy in our POWR Ratings system. It also has an A grade for Value and Stability.

KT is ranked #3 of 47 stocks in the A-rated Telecom – Foreign industry.

In addition to the above, additional ratings for KT’s Momentum, Sentiment, Quality, and Growth are available here.

T shares were trading at $18.28 per share on Friday afternoon, up $0.01 (+0.05%). Year-to-date, T has gained 5.10%, versus a -18.36% rise in the benchmark S&P 500 index during the same period.

About the Author: Santanu Roy

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities. More...

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