After enduring a challenging 2022, the stock market is facing concerns of a recession despite inflation easing for the sixth consecutive month in December, with the consumer price index (CPI) rising 6.5% year-over-year and declining 0.1% sequentially. Moreover, the gross domestic product grew by 2.9% in the fourth quarter, beating analysts’ expectations between 2.6% and 2.8%.
Although inflation is showing, minutes from the Fed’s December policy meeting indicate that interest rate hikes will continue until more progress is made on bringing inflation down. The Fed’s stance was backed up by the U.S. jobless claims for the week ended January 21, 2023. Jobless claims dropped to their lowest level since April 2022, indicating continued tightness in the labor market.
The Fed’s hard stance is expected to push the economy into a recession, piling further misery on the stock market. However, the International Monetary Fund (IMF) has updated its outlook for global growth this year, reaching 2.9%, 0.2% higher than the previous forecast.
IMF Chief Economist Pierre-Olivier Gourinchas said, “Around the world, you see labor markets that have been quite resilient; household consumption that has been stronger than expected, and business investment. You put all this together, and you have a slightly more resilient global economy. We’re expecting things to bottom out.”
Investors who are unsure about the direction of the markets should look to buy shares of large-cap companies, as they can add stability to their portfolios. Large-cap companies generally enjoy stable demand irrespective of the economic cycles.
Visa Inc. (V)
V is a global payments technology company that enables digital payments between customers, merchants, financial institutions, enterprises, strategic partners, and government agencies. It also administers VisaNet, a transaction processing network that allows for the authorization, clearing, and settlement of payment transactions. It has a market capitalization of $485.15 billion.
On December 14, 2022, V announced a pledge to invest $1 billion in Africa over the next five years to advance resilient, innovative, and inclusive economies across the continent. V’s entry into Africa will help capitalize on the rise in digital payments.
V’s 50.28% trailing-12-month net income margin is significantly higher than the 3.22% industry average. Likewise, its 67.14% trailing-12-month EBIT margin is significantly higher than the 5.88% industry average. Furthermore, the stock’s 50.02% trailing-12-month levered FCF margin is 571.5% higher than the 7.45% industry average.
V’s net revenues for the first quarter ended December 31, 2022, increased 12% year-over-year to $7.94 billion. The company’s operating income rose 6.6% year-over-year to $5.09 billion. Its non-GAAP net income increased 17% from the prior-year period to $4.58 billion. In addition, its non-GAAP EPS came in at $2.18, representing an increase of 21% year-over-year.
Analysts expect V’s EPS and revenue for the quarter ending March 31, 2023, to increase 10.4% and 8% year-over-year to $1.98 and $7.76 billion, respectively. It surpassed Street EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 10.3% to close the last trading session at $229.10.
V’s POWR Ratings reflect its solid prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.
Within the Consumer Financial Services industry, it is ranked #5 out of 48 stocks. It has an A grade for Quality and a B for Stability and Sentiment. Click here to see the Growth, Value, and Momentum ratings.
UnitedHealth Group Incorporated (UNH)
UNH operates as a diversified healthcare company in the United States. It operates through four segments: UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx. It has a market capitalization of $453.89 billion.
UNH’s trailing-12-month net income margin came in at 6.21%, compared to the negative 5.61% industry average. Likewise, its 9.82% trailing-12-month EBITDA margin is 163.6% higher than the 3.73% industry average. Furthermore, the stock’s 1.42x trailing-12-month asset turnover ratio is 314% higher than the 0.34x industry average.
For the fiscal fourth quarter ended December 31, 2022, UNH’s total revenues increased 12.3% year-over-year to $82.78 billion. The company’s net earnings attributable to UNH’s common shareholders rose 16.9% from the prior-year quarter to $4.76 billion. In addition, its adjusted EPS came in at $5.34, representing an increase of 19.2% year-over-year. Its cash flows from operating activities for the fiscal year ended December 31, 2022, increased 17.3% year-over-year to $26.21 billion.
UNH’s EPS and revenue for the quarter ending March 31, 2022, are expected to increase 10.7% and 12% year-over-year to $6.07 and $89.76 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 4.2% to close the last trading session at $485.79.
UNH’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.
Within the A-rated Medical – Health Insurance industry, it is ranked #5 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.
Novo Nordisk A/S (NVO)
Denmark-based NVO is a global healthcare company engaged in diabetes care. It is the world’s biggest producer of diabetes drugs and operates in diabetes and obesity care and biopharmaceutical segments. Also, it is engaged in the discovery, development, manufacturing, and marketing of pharmaceutical products. It has a market capitalization of $312.76 billion.
On October 14, 2022, NVO announced the completion of Forma Therapeutics Holdings, Inc. (Forma). The acquisition is expected to help add a portfolio in sickle cell disease. NVO’s executive VP and head of rare disease, Ludovic Helfgott, said, “We have an ambition to build a leading portfolio with standalone and combination treatments to tackle the complications and underlying causes of sickle cell disease.”
NVO’s 84.19% trailing-12-month gross profit margin is 51.8% higher than the 55.48% industry average. Likewise, its 46.44% trailing-12-month EBITDA margin is significantly higher than the 3.73% industry average. Furthermore, the stock’s 0.80x trailing-12-month levered asset turnover ratio is 134.5% higher than the 0.34x industry average.
NVO’s net sales increased 27.9% year-over-year to Kr.45.57 billion ($6.66 billion) for the third quarter ended September 30, 2022. The company’s operating profit rose 32.4% from the prior-year period to Kr.20.18 billion ($2.95 billion). Its net profit increased 18.9% year-over-year to Kr. 14.41 billion ($2.10 billion). In addition, its EPS came in at Kr.6.34, representing an increase of 20.3% year-over-year.
Analysts expect NVO’s EPS and revenue for the quarter ending December 31, 2022, to increase 26.7% and 17.9% year-over-year to $0.92 and $6.87 billion, respectively. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 43.7% to close the last trading session at $139.06.
NVO’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Quality and a B for Value, Stability, and Sentiment. It is ranked first out of 170 stocks in the Medical – Pharmaceuticals industry. Click here to see the other ratings of NVO for Growth and Momentum.
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V shares fell $1.09 (-0.48%) in premarket trading Tuesday. Year-to-date, V has gained 10.27%, versus a 4.75% 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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