The Fed has admitted to the possibility of a recession as it tries to bring down inflation with its monetary policy tools. However, Fed Chairman Jerome Powell continues to bank on favorable economic conditions like a strong labor market and robust demand.
Furthermore, Jack Ablin, chief investment officer at Cresset Capital, said, “We’re calling for a small ‘r’ recession. It means it’s not going to be protracted, and things aren’t going to fall apart.”
So, we think fundamentally sound stocks Vertex Pharmaceuticals Incorporated (VRTX), McKesson Corporation (MCK), and APA Corporation (APA), which are rated ‘Strong Buy’ in our POWR Ratings system, could be ideal additions to your portfolio.
Vertex Pharmaceuticals Incorporated (VRTX)
Biotechnology company, VRTX, develops and commercializes therapies for treating cystic fibrosis. VRTX also works with investigational small molecule, cell, and genetic therapies, for other serious diseases like sickle cell disease, beta-thalassemia, type 1 diabetes, and others.
On June 8, 2022, the U.S. Food and Drug Administration awarded VRTX’s inaxaplin with Breakthrough Therapy Designation for APOL1-mediated focal segmental glomerulosclerosis. Upon commercialization, this product should garner significant returns for the company.
For the first quarter ended March 31, 2022, VRTX’s net product revenues increased 21.7% year-over-year to $2.10 billion. Its non-GAAP net income came in at $907 million, up 16.1% year-over-year, while its non-GAAP EPS came in at $3.52, up 18.1% year-over-year. Also, its non-GAAP operating income came in at $1.17 billion, up 16.5% year-over-year.
Analysts expect VRTX’s revenue to be $8.58 billion in 2022, representing a 13.3% year-over-year increase. The company’s EPS is expected to grow 10.9% per annum for the next five years. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 44.2% to close the last trading session at $272.31.
VRTX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
VRTX has an A grade for Quality and a B grade for Growth and Value. It is ranked first among 397 stocks in the Biotech industry. Click here for the additional POWR Ratings for Momentum, Stability, and Sentiment for VRTX.
McKesson Corporation (MCK)
MCK provides healthcare services in the United States and internationally. It operates through four segments- U.S. Pharmaceutical; International; Medical-Surgical Solutions; and Prescription Technology Solutions (RxTS).
On May 5, 2022, Brian Tyler, CEO, said, “Our results reflect the unwavering commitment of our employees and their resilience to deliver for our customers, patients, our communities, and our shareholders. We are excited about the opportunities ahead of us to advance healthcare outcomes for all in fiscal 2023 and beyond.”
MCK’s revenues increased 11.8% year-over-year to $66.10 billion for its fourth quarter ended March 31, 2022. Its adjusted non-GAAP earnings came in at $870 million, up 7.4% year-over-year, while its adjusted non-GAAP EPS came in at $5.83, up 15.4% year-over-year. Moreover, its gross profit increased marginally year-over-year to $3.32 billion.
MCK’s revenue is expected to increase marginally year-over-year to $268.07 billion in 2023. Its EPS is estimated to grow 13% per annum for the next five years. Also, it surpassed EPS estimates in three of the four trailing quarters. Over the past year, the stock has gained 63.6% to close the last trading session at $311.05.
MCK’s overall A rating translates to a Strong Buy in our proprietary rating system. It has a B grade for Growth, Value, Stability, Sentiment, and Quality.
APA Corporation (APA)
APA and its subsidiaries explore for, develop, and produce oil and gas properties. It has operations in the United States, Egypt, and the United Kingdom and exploration activities offshore Suriname.
On May 4, 2022, John J. Christmann IV, APA’s CEO and president, said, “We had a number of important achievements during the first quarter including a $1.3 billion reduction in bonds outstanding, the return of more than $300 million of capital to shareholders through dividends and share repurchases, and the completion of the Altus Midstream transaction and its resulting deconsolidation.”
APA’s natural gas liquids revenues for its first quarter ended March 31, 2022, came in at $223 million, up 74.2% year-over-year, while its total revenues came in at $2.67 billion, up 42.7% year-over-year. The company’s net income came in at $1.88 billion, up 385.3% year-over-year. In addition, its EPS came in at $5.43, up 432.4% year-over-year.
For fiscal 2022, analysts expect APA’s revenue to increase 30.1% year-over-year to $10.32 billion. Its EPS is estimated to grow 155.1% year-over-year to $9.95 in 2022. Over the past year, APA has gained 70.8% to close the last trading session at $37.50.
APA’s overall A rating equates to a Strong Buy in our proprietary rating system. It has an A grade for Momentum and Quality and a B grade for Value.
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VRTX shares were trading at $280.16 per share on Thursday afternoon, up $7.85 (+2.88%). Year-to-date, VRTX has gained 27.58%, versus a -20.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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