This year, the stock market has faced significant challenges because of geopolitical and macroeconomic headwinds. The major market indexes have delivered negative returns year-to-date.

Inflation has flirted near multi-decade high levels over the past few months, and it remains way above the Fed’s long-term target of 2% despite its aggressive interest rate hikes. The Fed has raised the benchmark interest rates six times this year, the most recent being a 75 basis point hike.

While the October inflation numbers show signs of cooling down, Fed Chair Jerome Powell has cautioned that the final level of interest rates would be higher than expected. Therefore, many economists expect the economy to slip into a recession next year, leading to more pain for the stock market.

Therefore, buying stocks with strong fundamentals, solid growth prospects, and resilience to economic downturns could be wise. To that end, one could pick UnitedHealth Group Incorporated (UNH - Get Rating), Merck & Co., Inc. (MRK - Get Rating), and CSX Corporation (CSX - Get Rating), given their strong fundamentals, growth prospects, and reliable dividends.

UnitedHealth Group Incorporated (UNH - Get Rating)

UNH operates as a diversified healthcare company in the United States. It operates through four segments: UnitedHealthcare, OptumHealth, OptumInsight, and OptumRx.

Over the last three years, UNH’s dividend payouts have grown at a 16.1% CAGR. Its four-year average dividend yield is 1.36%, and its current dividend translates to a 1.29% yield.

UNH’s total revenues increased 11.8% year-over-year to $80.89 billion for the third quarter ended September 30, 2022. Its adjusted net earnings attributable to UNH common shareholders increased 27.2% year-over-year to $5.49 billion. In addition, its adjusted EPS came in at $5.79, representing a 28.1% increase from the prior-year quarter. Also, its cash flows from operating activities for nine months ended September 30, 2022, increased 60.7% year-over-year to $30.74 billion.

UNH’s EPS and revenue for the quarter ending December 31, 2022, are expected to increase 16.1% and 11.1% year-over-year to $5.20 and $81.96 billion, respectively. The company has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 13.8% to close the last trading session at $511.52.

UNH’s POWR Ratings reflect its solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

Within the A-rated Medical – Health Insurance industry, it is ranked #2 out of 11 stocks. The company has a B grade for Growth, Stability, Sentiment, and Quality.

Click here to see the other ratings of UNH for Value and Momentum.

Merck & Co., Inc. (MRK - Get Rating)

MRK is a global healthcare company that offers solutions through its prescription medicines, vaccines, biological therapies, and animal health products. The company operates in the Pharmaceutical and Animal Health segments.

On September 22, 2022, Merck Animal Health announced that it had signed a definitive agreement to acquire Vence. Merck Animal Health President Rick DeLuca said, “The acquisition of Vence will broaden our portfolio with complementary products and technologies to advance animal health and well-being as well as outcomes for our customers.”

Over the last three years, MRK’s dividend payouts have grown at a 9.6% CAGR. Its four-year average dividend yield is 2.95%, and its current dividend translates to a 2.76% yield.

MRK’s sales increased 13.7% year-over-year to $14.96 billion for the third quarter that ended September 30, 2022. The company’s non-GAAP net income rose 3.9% year-over-year to $4.70 billion. Its non-GAAP EPS came in at $1.85, representing an increase of 3.9% year-over-year.

Analysts expect MRK’s revenue for the quarter ending December 31, 2022, to increase 0.5% year-over-year to $13.59 billion. Its EPS for fiscal 2022 is expected to increase 22.6% year-over-year to $7.38. It surpassed Street EPS estimates in each of the trailing four quarters. The stock has gained 30.4% year-to-date to close the last trading session at $99.93.

MRK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

It has a B grade for Value, Sentiment, and Quality. It is ranked #10 out of 163 stocks in the Medical – Pharmaceuticals industry. Click here to see other ratings of MRK for Growth, Momentum, and Stability.

CSX Corporation (CSX - Get Rating)

CSX is a transportation company that provides rail-based freight transportation services, including traditional rail service and transport of intermodal containers and trailers and other transportation services, such as rail-to-truck transfers and bulk commodity operations. It categorizes its products into primary lines of business, such as merchandise, intermodal, and coal.

On June 1, 2022, CSX announced the completion of the acquisition of Pan Am Railways, Inc. (Pan Am). CSX’s President and CEO, James M. Foote, said, “This acquisition demonstrates CSX’s growth strategy through efficient and reliable freight service and will provide sustainable and competitive transportation solutions to New England and beyond.”

Over the last three years, CSX’s dividend payouts have grown at a 7.9% CAGR. Its four-year average dividend yield is 1.25%, and its current dividend translates to a 1.28% yield.

For the fiscal third quarter ended September 30, 2022, CSX’s revenue increased 18.3% year-over-year to $3.89 billion. The company’s net earnings increased 14.8% year-over-year to $1.11 billion. In addition, its EPS came in at $0.52, representing an increase of 21% year-over-year.

For the quarter ending December 31, 2022, CSX’s EPS and revenue are expected to increase 14.4% and 10.1% year-over-year to $0.48 and $3.77 billion, respectively. It surpassed consensus EPS estimates in each of the trailing four quarters. The stock has gained 14.4% over the past month to close the last trading session at $31.24.

CSX’s POWR Ratings reflect solid prospects. The stock has an overall B rating, equating to a Buy in our proprietary rating system. It has a B grade for Momentum, Sentiment, and Quality.

Within the B-rated Railroads industry, it is ranked #7 out of 16 stocks. To see the other ratings of CSX for Growth, Value, and Stability, click here.

UNH shares were unchanged in premarket trading Thursday. Year-to-date, UNH has gained 2.86%, versus a -15.78% rise in the benchmark S&P 500 index during the same period.

About the Author: Dipanjan Banchur

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...

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