Last month, the Fed increased its benchmark interest rate by 75 basis points, the most aggressive hike since 1994, to bring down the inflationary pressures. Moreover, the Fed is expected to lift interest rates by 75 basis points this month, followed by 50 basis points in September. The anticipated interest rate hikes are adding fuel to recessionary concerns.
With rising macroeconomic headwinds intensifying the market sell-off over the past couple of months, the S&P 500 lost 19.9% year-to-date. The NASDAQ Composite and Dow Jones Industrial Average have tumbled 28% and 14.7%, respectively, over this period.
As the stock market has been experiencing relentless selling pressure, several buy-the-dip opportunities have been created for long-term investors. Twitter Inc. (TWTR), Caesars Entertainment, Inc. (CZR), and A. O. Smith Corporation (AOS) are among the major losers this year, but their solid growth prospects make them good investments at their current price levels.
Twitter Inc. (TWTR)
TWTR operates as a platform for public self-expression and conversation in real-time. The company’s main product is Twitter, a platform that allows users to consume, create, and discover content.
Additionally, it provides promoted products that enable advertisers to promote brands, products, and services. Its products comprise promoted ads and Twitter Amplify, Follower Ads, and Twitter takeover.
On February 24, TWTR priced the $1 billion aggregate principal amount of its 5% senior notes due in 2030. The company intends to use the net proceeds from the note offering for general corporate purposes, including capital expenditures, investments, repurchases of TWTR’s common stock, working capital, and potential acquisitions and strategic transactions.
In the same month, TWTR’s Board of Directors authorized a share repurchase of up to $4 billion of its common stock, replacing its previously approved $2 billion share repurchase program from 2020. The share repurchases are expected to boost the company’s shareholder returns.
In the fiscal 2022 first quarter ended March 31, 2022, TWTR’s revenue increased 15.9% year-over-year to $1.20 billion. Its non-GAAP income before income taxes grew 501% from the year-ago value to $1.02 billion. Its adjusted EBITDA amounted to $1.18 billion, up 301.3% year-over-year.
Also, the company’s non-GAAP net income and non-GAAP net income per share came in at $755.57 million and $0.90, registering increases of 435.1% and 462.5%, respectively, from the prior-year period.
Analysts expect TWTR’s EPS to grow 735.2% year-over-year to $1.67 for its fiscal year 2022, ending December 2022. The $5.87 billion consensus revenue estimate for the ongoing year represents a 15.6% rise from the last year.
The stock has declined 20.2% year-to-date to close the last trading session at $34.06. It is currently trading 53.6% below its 52-week high of $73.34, which it hit on July 23, 2021.
Caesars Entertainment, Inc. (CZR)
CZR operates as a gaming and hospitality company in the United States. The company operates casinos, dining venues, bars, nightclubs, hotels, and entertainment venues. It provides staffing and management services and online sports betting and iGaming services. It owns, leases, and manages more than 52 domestic properties in 16 states.
On July 11, CZR announced that the new Caesars Sportsbook and World Series of Poker Room at Harrah’s New Orleans are scheduled to open this Fall. The new openings are part of the ongoing $325 million transformation of Harrah’s New Orleans into Caesars New Orleans. It might boost the company’s revenue streams.
On June 9, CZR formed a multi-year strategic partnership with Peyton Manning’s Omaha Productions. The two companies will launch the Omaha Audio Network, a full-service audio production network, a variety of new digital series developed especially for CZR and Omaha’s social media channels, and a live event series later this year. The partnership is expected to boost the company’s growth and profitability.
CZR’s net revenues increased 27.9% year-over-year to $2.29 billion in the fiscal 2022 first quarter ended March 31, 2022. Its other income amounted to $4 million for the first quarter. As of March 31, 2022, the company’s cash and cash equivalents came in at $814 million.
Analysts expect CZR’s revenue for the fiscal year 2022 (ending December 2022) to come in at $10.80 billion, representing a 12.8% rise from the same period in 2021. Also, Street expects the company’s EPS for the current year to grow 37.4% year-over-year. The company has surpassed the consensus revenue estimates in three of the trailing four quarters, which is impressive.
CZR has slumped 58.6% year-to-date and 60.6% over the past year to close the last trading session at $38.72. It is currently trading 67.7% below its 52-week high of $119.81, which it hit on October 1, 2021.
A. O. Smith Corporation (AOS)
AOS manufactures and markets residential and commercial gas, heat pumps, electric water heaters, tanks, and other water treatment products in North America, China, Europe, and India. The company distributes its products through independent wholesale plumbing distributors, retail channels, and manufacturer representative firms.
Last month, AOS acquired Atlantic Filter Corporation, a Florida-based water treatment company. “The acquisition of Atlantic Filter further expands our capabilities in Florida and beyond.
AOS is committed to growing our water treatment business as part of our strategy to deliver innovative, differentiated solutions that heat and treat water,” said Kevin J. Wheeler, AOS’s President and CEO.
In the fiscal 2022 first quarter ended March 31, 2022, AOS’s net sales grew 27.1% year-over-year to $977.70 million, and its gross profit improved 18.4% from the year-ago value to $341.60 million. In addition, the company’s adjusted earnings and adjusted earnings per share came in at $122 million and $0.77, up 28% and 30.5%, respectively, from the prior-year period.
The consensus revenue estimate of $971.07 million for the fiscal 2022 second quarter (ended June 2022) represents an increase of 12.9% from the prior-year period. The $0.82 consensus EPS estimate for the to-be-reported quarter indicates a 12.3% year-over-year rise. The company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has dropped 33.2% over the past six months and 32.8% year-to-date to close the last trading session at $56.14. It is currently trading 35.3% below its 52-week high of $86.74, which it hit on December 30, 2021.
AOS’s POWR Ratings reflect this strong outlook. It has an overall grade of B, equating to a Buy in our proprietary rating system.
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TWTR shares were unchanged in premarket trading Wednesday. Year-to-date, TWTR has declined -21.19%, versus a -19.22% 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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