Despite worries surrounding rising inflation, the Fed’s signal that it will tighten monetary policy, and surging COVID-19 cases, investor optimism is evident in the recent performances of the major stock market indexes. The Dow Jones Industrial Average rose to a new record on October 20, touching its 35,669.69 all-time high. And the S&P 500 delivered a six-day winning streak, approaching a record on Oct 20. The index gained 16.56 points to hit 4,536.19, which was less than 0.2% short of its record high. Chief investment strategist at CFRA, Sam Stovall, expects the S&P 500 to hit a new record high.
One of the prime factors driving the market’s rally is impressive third-quarter earnings reports from S&P 500 companies. According to a FactSet report, the net profit margin for the S&P 500 member companies for the third quarter of 2021 is 12.3% (combining the numbers reported so far and the estimates), which compares to a 10.9% five-year average net profit margin. Analysts expect third-quarter earnings to jump 35% year-over-year.
Given the market’s uptrend, we think that quality stocks Telefónica, S.A. (TEF), and Crescent Point Energy Corp. (CPG), which are currently trading at less than $10, could be good additions to one’s portfolio now.
Telefónica, S.A. (TEF)
TEF provides diversified telecommunications services in Europe and Latin America. Its services and products include a mobile business, a fixed-line telephony business, and digital services. TEF operates in 13 countries and has a presence in 24. It is headquartered in Madrid, Spain.
On October 19, TEF announced the launch of a global Innovation and Talent Hub at the company’s headquarters, with a planned €100 million ($116.53 million) investment. The company expects this initiative to position TEF as a leader in digitalization, while allowing it to project its reach beyond technology to occupy the talent space.
Also this month, TEF and Fortinet® (FTNT), a global leader in cybersecurity solutions, announced their alliance to launch a new global managed service centered around a security-driven networking approach to SD-WAN, which converges networking and security functionality into a single integrated offering. The service seeks to empower hybrid work structures and increase efficiency. Given the growing popularity of remote working and hybrid work structures of late, this collaborative initiative should support TEF’s growth in this space.
For the second quarter, ended June 30, TEF’s operating income increased 999% year-over-year to €11.35 billion ($13.23 billion). Its OIBDA margin improved 103.10 percentage points from its year-ago value to 135.2%. TEF’s profit before taxes came in at €10.98 billion ($12.80 billion), indicating a 1,433.1% rise year-over-year. The company’s EPS increased 1,857.1% year-over-year to €1.37.
TEF’s EPS is expected to increase 10.8% per annum over the next five years. Over the past year, the stock has gained 24.7% in price to close yesterday’s trading session at $4.54. It also gained 3.2% intraday.
It’s no surprise that TEF has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
TEF has a grade of A for Value, and a B grade for Growth and Stability. Among the 48 stocks in the A-rated Telecom – Foreign industry, TEF is ranked #11. Click here to view additional TEF ratings for Momentum, Quality, and Sentiments.
Crescent Point Energy Corp. (CPG)
Based in Canada, CPG explores, develops, and produces light and medium crude oil and natural gas reserves in Western Canada and the United States. The company operates mainly in Saskatchewan, Alberta, British Columbia, Manitoba, North Dakota, and Montana.
CPG declared a fourth-quarter dividend increase to CAD0.03 per share, an increase of CAD0.11 per share from the current level to be paid on January 4, 2022, to shareholders of record on December 15, 2021. Its CAD0.0025 per share third-quarter dividend is scheduled to be paid on October 1, 2021. Furthermore, the company expects excess cash flow generation of CAD 625 – CAD875 million ($507.08 – $709.91 million) in 2022, after dividends, at US$65/bbl – US$75/bbl WTI.
CPG’s total oil and gas sales increased 228% year-over-year to CAD849.20 million ($690.22 million) in the second quarter, ended June 30. Its adjusted net earnings from operations grew 522% from its year-ago value to CAD117.60 million ($95.58 million), while adjusted net earnings from operations per share improved 500% year-over-year to $0.20. In addition, the company’s cash flow from operating activities increased 329% year-over-year to CAD285.50 million ($232.05 million).
Analysts expect CPG’s revenues to increase 65.6% year-over-year to $2.24 billion in its fiscal period ending December 2021. A $3.48 consensus EPS estimate for the current year indicates a 699.4% rise from the last year.
Shares of CPG have gained 289.3% in price over the past year and 118% year-to-date to close yesterday’s trading session at $5.10.
CPG’s strong fundamentals are reflected in its POWR Ratings. CPG has an overall B rating, which equates to Buy in our proprietary POWR Ratings system.
The stock has an A grade for Momentum and Sentiment, and a B grade for Growth, Value, and Quality. It is ranked #11 out of the 49 stocks in the A-rated Foreign Oil & Gas industry. Get CPG’s rating for Stability and other details here.
Want More Great Investing Ideas?
TEF shares fell $0.04 (-0.88%) in premarket trading Thursday. Year-to-date, TEF has gained 15.22%, versus a 21.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|TEF||Get Rating||Get Rating||Get Rating|
|CPG||Get Rating||Get Rating||Get Rating|