Despite continuing tech layoffs, with recent contributions from Amazon (AMZN) and Salesforce (CRM) signaling a treacherous macroeconomic terrain in the year ahead, jobless claims during the holiday week fell to a three-month low after a decline of 19,000 in initial claims for state unemployment benefits.

While signaling record labor market tightness, the recent data has also strengthened the case for the Federal Reserve to continue with its aggressive stance. In the minutes of its December meeting, released yesterday, the Central Bank expressed its resolve to disregard market sentiments and keep increasing interest rates until inflation can be brought back around the desired 2% level.

With the rate-obsessed market unlikely to calm down and make up its mind anytime soon, it would be wise to load up on shares of fundamentally strong businesses, UnitedHealth Group Incorporated (UNH), Altria Group, Inc. (MO), STMicroelectronics N.V. (STM), and Adams Resources & Energy, Inc. (AE).

UnitedHealth Group Incorporated (UNH)

UNH is a diversified healthcare company. The company operates through four segments: Optum Health; OptumInsight; OptumRx; and UnitedHealthcare. It offers consumer-oriented health benefit plans and services, software and information products, health care coverage, and well-being services. Additionally, UNH provides access to networks of care provider specialists, consumer engagement, and financial services.

On December 13, UNH paid its quarterly cash dividend of $1.65 per share. The company pays $6.60 annually as dividends, translating to a yield of 1.31% at the current price. Its 4-year average dividend yield is 1.36%. Moreover, dividend payouts have increased for 13 consecutive years and at a 17.4% CAGR over the past five years.

On November 16, UNH and Life Time Group Holdings, Inc. (LTH) announced an expansion of their relationship to include access to all Life Time locations, helping even more people stay active and improve their physical and mental well-being.

This will help UNH deliver additional value to its customers, thereby driving appreciation of brand equity and expansion of market share.

On September 21, UNH and Peloton Interactive Inc. (PTON) renewed and expanded their relationship to extend subscription and preferred pricing benefits to the commercial member. This engagement is set to provide additional value to UNH’s customers, further securing its client base.

On September 7, UNH and Walmart Inc. (WMT) announced the beginning of a 10-year wide-ranging collaboration. Optum, a UNH subsidiary, would provide proven clinical abilities to assist select Walmart Health locations and improve people’s health outcomes by advancing value-based care. The collaboration is expected to expand further to include additional products and services over time.

For the fiscal 2022 third quarter ended September 30, 2022, UNH’s revenues increased 11.8% year-over-year to $80.89 billion. The company’s earnings from operations rose 30.6% from the year-ago value to $7.46 billion. In addition, its adjusted earnings attributable to UNH common shareholders came in at $5.49 billion and $5.79, up 27.2% and 32.1% year-over-year, respectively.

Analysts expect UNH’s revenue for the fiscal year 2023 (ending December 2023) to come in at $355.83 billion, indicating a 9.9% rise from the previous fiscal. Street expects the company’s EPS for the same period to grow 13.2% year-over-year to $24.95. The company has also impressed by surpassing the consensus EPS estimates in each of the trailing four quarters.

UNH’s stock has gained 2.8% over the past year to close the last trading session at $504.50.

UNH’s POWR Ratings reflect its fundamental strength. The stock 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.

UNH also has an A grade for Sentiment and a B for Quality, Growth, and Stability. Unsurprisingly, it tops the list of 11 stocks in the A-rated Medical – Health Insurance industry.

Beyond what we’ve stated above, we have also given UNH grades for Value and Momentum. Get all UNH ratings here.

Altria Group, Inc. (MO)

MO operates as a manufacturer and seller of smokable and oral tobacco products in the United States. The company offers cigarettes primarily under the Marlboro brand; cigars and pipe tobacco principally under the Black & Mild brand; and moist smokeless tobacco products under the Copenhagen, Skoal, Red Seal, and Husky brands. In addition, it also sells oral nicotine pouches under on! brand.

On December 7, MO announced its regular quarterly dividend of $0.94 per share, payable on January 10, 2023. The company pays $3.76 annually as dividends, translating to a yield of 8.28% at the current price, better than the four-year average dividend yield of 7.40%. It currently pays a substantial 76.63% of its earnings as dividends.

MO has increased its dividends for 53 consecutive years and at a 7.7% CAGR over the past five years.

On October 27, MO announced a strategic alliance with JT Group to pursue a global smoke-free partnership. The companies announced a joint venture for the marketing and commercialization of heated tobacco sticks in the United States. This would help MO tap a broader market segment that prefers smoke-free tobacco products to smokable ones.

On October 19, MO reached an agreement with Philip Morris International Inc. (PM) for the IQOS transition, under which MO is to receive cash payments from PMI totaling approximately $2.70 billion (pre-tax) for assigning exclusive U.S. commercialization rights to the IQOS Tobacco Heating System® effective April 30, 2024.

To further the company’s goal of Moving Beyond Smoking, MO intends to allocate the resources received from this fair compensation share towards repurchases, debt payments, and general corporate requirements.

For the fiscal 2022 third quarter ended September 30, MO’s operating income increased 5.5% year-over-year to $3.11 billion. During the same period, the net earnings attributable to MO came in at $224 million, compared to a loss of $2.72 billion during the previous-year quarter. As a result, the company adjusted quarterly EPS increased by 4.9% year-over-year to $1.28.

Analysts expect MO’s revenue and EPS for fiscal 2023 to increase 1.2% and 3.8% year-over-year to $21.03 billion and $5.00, respectively. Moreover, MO has surpassed consensus EPS estimates in three of four trailing quarters.

The stock has gained 8.8% over the past six months to close the last trading session at $45.41.

MO’s POWR Ratings reflect its strong outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. It has an A grade for Quality.

MO is ranked #4 of 9 stocks within the A-rated Tobacco industry.

To see additional POWR ratings for Growth, Stability, Momentum, Value, and Sentiment for MO, click here.

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 January 3, 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 46,950 ordinary shares (equal to 0.01% of its issued share capital) at the weighted average purchase price per share of €33.39 ($35.37) were acquired between December 27 and December 28, 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 23.5% over the past six months to close the last trading session at $36.50.

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

STM is ranked #3 of 93 stocks in the B-rated Semiconductor & Wireless Chip industry. 

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

Adams Resources & Energy, Inc. (AE)

AE is primarily involved in the marketing, transportation, terminal ling, and storage of the various crude oil and natural gas basins in the United States. The company operates through three segments: Crude Oil Marketing, Transportation, and Storage; Tank truck Transportation of Liquid Chemicals, Pressurized Gasses, Asphalt, and Dry Bulk; and Pipeline Transportation, Terminalling, and Storage of Crude Oil.

On December 16, AE paid its quarterly cash dividend of $0.24 per common share. The company pays $0.96 annually as dividends, which translates to a yield of 2.50% at the current price. Dividend payouts have grown at 1.8% CAGR over the past five years.

On November 1, AE announced the repurchase of all of the shares of AE common stock owned by KSA Industries, Inc., the company’s largest stockholder, and members of the family of the late Kenneth Stanley Adams, Jr., the company’s founder, who are affiliated with KSA.

With this transaction, AE made a significant return of capital to its existing shareholders and increased the intrinsic value of their stake in the company.

For the fiscal 2022 third quarter ended September 30, AE’s total revenues increased 50.1% year-over-year to $852.90 million. The company’s operating earnings rose 30.1% from the year-ago value to $2.99 million. In addition, its adjusted net earnings came in at $4.71 million or $1.06 per share, up 168.6% and 158.5% year-over-year, respectively.

Analysts expect AE’s revenue for the fiscal year 2022 (ending December 2022) to come in at $3.46 billion, representing a 70.4% rise from the last year. Also, Street expects the company’s EPS for the same period to come in at $3.37, representing an increase of 22.6% year-over-year. It is expected to increase by a further 19% to $4.01 during this fiscal.

AE’s stock has gained 3.1% over the past month and 34.3% over the past year to close the last trading session at $38.36.

AE’s POWR Ratings reflect a strong outlook. The stock has an overall rating of A which translates to a Strong Buy in our proprietary rating system. It has a grade of A for Momentum and Sentiment and a B for Quality and Value.

AE is ranked #3 of 93 stocks in B-rated Energy – Oil & Gas same industry. Get additional ratings for AE’s Growth and Stability here.

UNH shares were trading at $493.29 per share on Thursday afternoon, down $11.21 (-2.22%). Year-to-date, UNH has declined -6.96%, versus a -0.53% 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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