After hovering around 40-year highs through the last year, inflation has eased substantially as the Federal Reserve aggressively raised interest rates and the economy showed signs of cooling. Consumer prices rose at an annual rate of 6.5% in December, down from a peak of 9.1% in June.
At the FOMC’s first meeting of 2023, the Federal Reserve raised interest rates by a quarter point, marking the smallest rate hike since March 2022. With several positive developments in recent weeks, Fed Chair Jerome Powell acknowledged that the ‘disinflationary process’ has started.
Given the optimism, investors now believe the Fed will soon stop raising interest rates and even cut them later this year. Where most forecasters still anticipate a recession as soon as this spring, IMF believes that policymakers might be able to steer the overheated economy to a ‘soft landing’ without plunging into a downturn.
The fund now expects global growth of 2.9% this year, slower than last year’s pace but up 0.2% from its October assessment. Moreover, the U.S. job market crushed expectations by adding 517,000 jobs in January, reflecting the economy’s underlying strength, while the unemployment rate dropped to a 53-year low.
Given this backdrop, the outlook for the global economy has unexpectedly brightened in the past few weeks. To that end, fundamentally strong stocks Visa Inc. (V) and Evercore Inc. (EVR) might be solid buys on growing optimism.
Visa Inc. (V)
V is a leading payments technology company that facilitates digital payments among consumers, merchants, financial institutions, strategic partners, businesses, and government entities. In addition, it provides card products, platforms, and value-added services. The company offers its products and services under Visa, Visa Electron, Interlink, VPAY, and PLUS brands.
V’s four-year average dividend yield is 0.62%, and its current dividend of $1.80 translates to a 0.78% yield on the current price level. Its dividends have grown at a 14.5% CAGR over the past three years and a 17.9% CAGR over the past five years. The company has been paying dividends for 14 consecutive years.
On December 14, 2022, V pledged to invest $1 billion in Africa by 2027 to scale operations, deploy new innovative technologies and deepen collaboration with partners. Such investments should help accelerate digital payments for individuals and merchants.
On November 29, 2022, the company announced a seven-year global partnership with GoHenry, the prepaid card and financial education app for 6-to 18-year-olds. Through this partnership, V intends to accelerate financial education for children and teens.
During the fiscal first quarter (ended December 31, 2022), V’s net revenues increased 12.4% year-over-year to $7.94 billion. Its operating income rose 6.6% from the year-ago value to $5.09 billion. The company’s non-GAAP net income grew 17.4% from the same period the prior year to $4.58 billion, while its non-GAAP EPS came in at $2.18, representing a 20.4% increase year-over-year.
Analysts expect V’s revenues to increase 8% year-over-year to $7.76 billion for the fiscal second quarter (ending March 31, 2023). Its EPS is expected to increase 10.3% year-over-year to $1.97 in the current quarter. The company surpassed the consensus EPS estimates in each of the trailing four quarters, which is excellent.
The stock has gained 16.5% over the past three months to close the last trading session at $229.44.
V’s POWR Ratings reflect this promising outlook. It has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Quality and a B for Stability and Sentiment. The stock is ranked #5 of 48 stocks in the Consumer Financial Services industry. Click here to see the other ratings of V for Growth, Value, and Momentum.
Evercore Inc. (EVR)
EVR is a premier global independent investment banking advisory company that operates through two segments: Investment Banking and Investment Management. It delivers strategic corporate advisory, capital markets advisory, and institutional equities services and provides wealth and investment management services to high-net-worth and institutional investors.
On February 1, 2023, the company announced a quarterly dividend of $0.72 per share. EVR’s four-year average dividend yield is 2.65%, and its forward annual dividend of $2.88 translates to a 2.15% yield on current prices. Its dividends have grown at 8.2% and 14.9% CAGRs over the past three and five years, respectively. It has a record of 15 consecutive years of dividend growth.
In October 2022, Evercore ISI was recognized as the top-ranked firm in Institutional Investor’s All-America Equity Research survey. In addition, for the ninth consecutive year, Evercore ISI was recognized as the top-ranked independent research franchise. This reflects its strong performance over its peers.
For the fourth quarter that ended December 31, 2022, EVR’s net revenues came in at $831.34 million. Its total expenses decreased 5.8% year-over-year to $621.243 million. The company’s adjusted operating income and adjusted attributable net income amounted to $218 million and $152.40 million, respectively, for the same period. Also, its EPS stood at $3.50.
Analysts expect EVR’s EPS and revenue for the fiscal year 2024 (ending December 31, 2024) to increase 17.6% and 7.7% year-over-year to $12.76 and $2.87 billion, respectively. The stock surpassed the consensus EPS estimates in each of the trailing four quarters, which is excellent.
Shares of EVR have gained 32.6% over the past six months to close the last trading session at $133.95.
It is no surprise that EVR has an overall rating of B, which translates to Buy in our POWR Ratings system. It has an A grade for Quality and a B for Momentum. Out of 22 stocks in the B-rated Investment Brokerage industry, it is ranked #4.
Beyond what we’ve stated above, we’ve also rated EVR for Growth, Value, Stability, and Sentiment. Get all EVR ratings here.
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V shares were unchanged in premarket trading Tuesday. Year-to-date, V has gained 10.44%, versus a 7.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More...
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