The incessant rate hikes have led to significant market volatility and raised recessionary fears. However, with inflation finally cooling and wage growth slowing down, we think fundamentally strong stocks Bristol-Myers Squibb (BMY), Cardinal Health (CAH), and KT Corp (KT), which are rated A (Strong Buy) in our proprietary rating system, could be solid buys in 2023. Read on….
The Federal Reserve has been aggressively increasing the interest rates to curb the multi-decade high inflation. It has indicated continuing the hikes at a slower pace until inflation falls below 2%. Moreover, Morgan Stanley expects monetary policy to remain the primary driver of asset prices.
With investors sitting on much uncertainty, the Fed’s persistence has increased the risks of a U.S. recession. Furthermore, the International Monetary Fund (IMF) expects economic growth to be 2.7% in 2023. In addition, Kristalina Georgieva, IMF chief, warned that one-third of the world economy would likely be in recession in 2023.
However, on the bright side, with a rapidly cooling inflation, the December jobs report shows decelerating wage growth. This has boosted investor confidence, signaling that the Fed’s rate hikes have their intended effect, which might lead to an easing rate-hiking campaign.
Given this backdrop, it would be wise to add quality stocks Bristol-Myers Squibb Company (BMY), Cardinal Health, Inc. (CAH), and KT Corporation (KT), rated A (Strong Buy) in our proprietary POWR Ratings system, to garner significant returns.
Bristol-Myers Squibb Company (BMY)
BMY discovers, develops, manufactures, and markets biopharmaceutical products globally. The company offers solutions for hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and Covid-19 diseases.
On January 3, 2023, BMY announced that it had completed the sale of its manufacturing facility in Syracuse, New York, to LOTTE BIOLOGICS. Additionally, the company entered into a contract manufacturing organization (CMO) relationship with LOTTE, under which LOTTE BIOLOGICS would manufacture products for BMY at the facility. The divestiture should support BMY’s product portfolio.
On December 8, 2022, BMY declared a quarterly dividend of $0.57 per share, payable to stockholders on February 1, 2023. This represents an increase of 5.6% over its previous quarterly dividend rate of $0.54 per share and the fourteenth consecutive fiscal year that the company has increased its dividend. This reflects the company’s solid shareholder return ability.
For the fiscal third quarter that ended September 30, BMY’s total in-line products and new product portfolio revenue increased 7.6% year-over-year to $8.62 billion. Net earnings attributable to BMY stood at $4.26 billion for the same quarter. The non-GAAP earnings per share increased 3.1% year-over-year to $1.99.
Analysts expect BMY’s revenue for the fiscal second quarter ending June 2023 to increase marginally year-over-year to $11.94 billion. The company’s EPS for the same period is expected to grow 7.1% from the prior-year quarter to $2.07. Moreover, BMY has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
BMY’s stock has gained 4.7% over the past three months and 1.5% over the past five days to close the last trading session at $73.
BMY’s POWR Ratings reflect this promising outlook. The company’s overall A rating translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
BMY also has an A grade for Value and a B for Stability, Sentiment, and Quality. It is ranked #3 out of the 163 stocks in the Medical – Pharmaceuticals industry.
To see additional POWR Ratings for Growth and Momentum for BMY, click here.
Cardinal Health, Inc. (CAH)
CAH is a provider of integrated healthcare services and solutions. It offers customized solutions for healthcare organizations like hospitals, pharmacies, clinical laboratories, and patients receiving care at home. The company operates through two segments, Pharmaceutical and Medical.
On November 15, 2022, CAH launched Velocare, a supply chain network and last-mile fulfillment solution for hospital-level care delivery. This is expected to expand the company’s at-Home Solutions supply chain.
On November 8, CAH announced a quarterly dividend of about $0.50 per share from the company’s capital surplus, payable to shareholders on January 15, 2023. This reflects the company’s cash generation abilities.
For the first quarter of fiscal 2023, which ended September 30, 2022, CAH’s revenues increased 12.8% year-over-year to $49.60 billion. Revenue for the pharmaceutical segment rose 15.1% year-over-year to $45.83 billion, while profit for the same segment increased 6.2% from the year-ago value to $431 million. Non-GAAP EPS for the same quarter stood at $1.20.
Analysts expect CAH’s EPS for the fiscal third quarter ending March 2023 to increase 3.1% year-over-year to $1.50. Moreover, the company’s revenue for the same quarter is expected to grow 9.9% from the prior-year period to $49.29 billion. The company surpassed revenue estimates in all four trailing quarters, which is impressive.
The stock has gained 15.3% over the past three months to close the last trading session at $78.64. Moreover, it has gained 2.5% over the past five days.
CAH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has a B grade for Growth and Value. Within the Medical – Services industry, it ranks #3 out of 77 stocks.
Beyond what has been stated above, we have also given CAH’s ratings for Momentum, Stability, Sentiment, and Quality. Get all CAH ratings here.
KT Corporation (KT)
Headquartered in Seongnam, South Korea, KT is a telecommunications service provider. The company operates through four segments: Information and Communications Technologies; Finance; Satellite Broadcasting; and Other.
On September 7, 2022, KT and Hyundai Motor Company (HYMTF) announced an expansion in their strategic partnership to lead the future mobility market. Both companies plan to research 6G autonomous driving technology and Advanced Air Mobility communication network based on satellite communication.
Moreover, both parties agreed to acquire mutual shares through the treasury stock exchange, aiming to create synergy in future businesses, enhance the execution and sustainability of mutual cooperation, and strengthen long-term partnerships.
KT’s operating revenue increased 4.2% year-over-year to ₩6.48 trillion ($5.07 billion) in the third quarter of the fiscal year 2022. Its EBITDA increased 6.4% year-over-year to ₩1.36 trillion ($1.07 billion), while its operating income increased 18.4% year-over-year to ₩452.90 billion ($354.77 million).
Analysts expect KT’s revenue and EPS for the fiscal year ending December 2023 to increase 3.1% and 4.2% year-over-year to $20.82 billion and $1.96, respectively. The stock has gained 12.3% over the past three months to close the last trading session at $13.68. Moreover, it has gained 1.4% over the past five days.
It is no surprise that KT has an overall A rating, which equates to a Strong Buy in our POWR Rating system.
It also has an A grade for Value and Stability. The stock is ranked #3 of 46 in the A-rated Telecom – Foreign industry.
Click here to get additional ratings for KT (Growth, Momentum, Sentiment, and Quality).
BMY shares rose $0.30 (+0.41%) in premarket trading Monday. Year-to-date, BMY has gained 2.68%, versus a 1.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi’s interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy.Having earned a master’s degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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