Investors’ optimism surrounding the decline in inflation in July from the 40-year high level drove the S&P 500 to a three-month high, and the Nasdaq 100 is trading more than 20% above its June low. Investors expect the Federal Reserve to be less hawkish on interest rate hikes in the upcoming months.
However, according to many market strategists, policymakers would need to see evidence of a slowdown in price increases for several months before changing their views. Moreover, a red-hot job market could encourage the Fed to maintain its hawkish stance.
So, given the expected market uncertainty ahead, we think fundamentally-sound small-cap stocks Universal Logistics Holdings Inc. (ULH), Safe Bulkers Inc. (SB), Forrester Research Inc. (FORR), and Powell Industries Inc. (POWL) could be ideal picks for generating solid returns once the market stabilizes.
Universal Logistics Holdings Inc. (ULH)
ULH provides transportation and logistics solutions in the United States, Mexico, Canada, and Colombia. It provides truckload services such as dry van, flatbed, heavy-haul, and refrigerated operations; domestic and international freight forwarding and customs brokerage services; and final mile and ground expedite services. The stock has a market cap of $1.04 billion.
During the second quarter ended July 03, 2022, ULH’s total operating revenue increased 24.7% year-over-year to $527.82 million. The company’s operating income increased 106.5% year-over-year to $64.65 million over this period. Its net income increased 74.6% year-over-year to $44.69 million, while its EPS grew 77.9% from the prior-year quarter to $1.69. The stock has gained 400.3% over the past year and 215.2% year-to-date.
ULH’s revenue is expected to grow 15.8% from the prior-year quarter to $2.03 billion in fiscal 2022. Furthermore, analysts expect its EPS to increase at 3% per annum over the next five years. The stock has gained 80.2% over the past year and 108.6% year-to-date.
ULH’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ULH is also graded A for Growth and Sentiment and a B for Stability. Within the A-rated Air Freight & Shipping Services industry, it is ranked #1 of 17 stocks. To see additional POWR Ratings for Momentum, Value, and Sentiment for ULH, click here.
Safe Bulkers Inc. (SB)
SB is a global provider of marine dry bulk transportation services, transporting bulk cargoes, primarily coal, grain, and iron ore, for some of the world’s largest users of marine dry bulk transportation services. It has a market capitalization of $463.346 million.
In May, SB entered into a contract to purchase two Chinese dry-bulk Kamsarmax class vessels that are 82,500 dwt in weight. The ships are expected to be delivered between August 2024 and January 2025 and are priced competitively.
SB’s net revenues increased 12.3% year-over-year to $91.60 million for the second quarter ended June 30, 2022. Its operating income grew 39.2% from the year-ago value to $54.49 million. The company’s net income surged 55.2% from the prior-year quarter to $50.32 million. Its EPS amounted to $0.40. The stock has gained 10.3% over the past year and 16.7% over the past month.
Analysts expect SB’s revenue to increase 5.9% year-over-year to $348.51 in the current year. In addition, its EPS is expected to grow at the rate of 14% per annum over the next five years.
SB’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. SB also has a B grade for Value, Momentum, and Quality. The stock is ranked #17 of 45 stocks in the A-rated Shipping industry.
Beyond the POWR Ratings grades I have just highlighted, you can see SB ratings for Stability, Growth, and Sentiment.
Forrester Research Inc. (FORR)
With a market capitalization of $824.491 million, FORR is an independent research and advisory services firm. The company is divided into three segments: Research; Consulting; and events. The company sells its products and services through a direct sales force in the United States, Europe, the United Kingdom, Canada, the Asia Pacific, and internationally.
In June, FORR announced Forrester Decisions for Digital Business & Strategy, a new research service designed to assist digital leaders in industries such as banking, insurance, and retail in creating and delivering business-wide digital strategies to increase customer acquisition and profitability in the Asia Pacific (APAC) region.
For the second quarter ended June 30, 2021, FORR’s revenue increased 15.2% year-over-year to $148.25 million. Its operating income grew 58.2% from the year-ago value to $20.70 million. The company’s net income surged 66.3% from the year-ago value to $13.87 million, while its EPS increased 67.5% year-over-year to $0.72.
FORR’s EPS is expected to increase at 16% per annum over the next five years. The stock has lost 6.7% over the past month.
FORR’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. FORR is also rated an A for Growth and Quality and a B for Stability.
Powell Industries Inc. (POWL)
POWL and its subsidiaries design, develop, manufacture, sell, and service custom-engineered equipment and systems to distribute, control, and monitor electrical energy. It operates in the United States, Canada, the Middle East, Africa, Europe, Mexico, and Central and South America. The stock has a market capitalization of $316.111 million.
POWL’s revenue increased 16.9% year-over-year to $135.48 million for the third quarter ended June 30, 2021. Its operating income came in at $849 thousand, compared to an operating loss of $1.36 million in the prior-year quarter. The company reported a net income of $9.06 million, compared to a net loss of $2.04 million in the third quarter of 2021. Its EPS amounted to $0.76.
Analysts expect POWL’s revenue to increase 8.6% year-over-year to $510.9 million in fiscal 2022. Over the past month, the stock has gained 17.9%. In addition, the stock has returned 16.2% over the past six months.
It is no surprise that POWL has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Value and Sentiment. In the B-rated Industrial – Machinery industry, it is ranked #15 of 79 stocks.
In addition to the POWR Ratings grades I have just highlighted, you can see POWL ratings for Growth, Quality, Stability, and Momentum.
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ULH shares were trading at $39.40 per share on Friday afternoon, up $0.06 (+0.15%). Year-to-date, ULH has gained 110.82%, versus a -9.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...
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