The Federal Reserve is most likely going for its fourth straight supersized hike, raising interest rates by three-quarters of a percentage point. U.S. central bankers have also been debating over when to downshift to smaller interest rate hikes and save the economy from a tailspin.
“There is little reason for the committee to limit its optionality for December, as even the most dovish participants would likely prefer more information about how inflation and overtightening risks are evolving before signaling a policy turn,” Barclays economists also wrote.
Though the U.S. economy posted its first period of positive growth in the third quarter, the Bureau of Economic Analysis (BEA) report also showed an underlying picture of the slowing economy in key areas, particularly consumer and private investment.
Amid the uncertainties, we think fundamentally strong stocks Bristol-Myers Squibb Company (BMY) and TravelCenters of America Inc. (TA), which are A-rated in our proprietary POWR Ratings system, might be solid buys now.
Bristol-Myers Squibb Company (BMY)
BMY engages in the discovery, development, licensing, manufacture, and sale of biopharmaceutical products globally. The company’s offerings include products for hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and COVID-19 diseases.
On October 27, BMY announced that the company and Obsidian Therapeutics, Inc have opted to extend the term of the parties’ multi-year strategic collaboration for the discovery and development of novel, regulated cell therapies that utilize Obsidian’s cytoDRiVE® technology for the controlled expression of the immune enhancer CD40L.
This extension provides Bristol Myers Squibb with the exclusive option to in-license worldwide rights for cell therapy candidates incorporating Obsidian’s cytoDRiVE technology.
On October 4, BMY entered into an agreement with Autolus Therapeutics plc (AUTL), a clinical-stage biopharmaceutical company developing next-generation programmed T-cell therapies. Under the agreement, BMY would receive access to AUTL’s RQR8 safety switch for cell therapy programs on a target-by-target basis for cancer treatment.
In June, BMY declared a quarterly dividend of $0.54 per share on its $.10 par value common stock, which was payable to shareholders on August 1. Its annual dividend of $2.16 yields 2.89% on prevailing prices. The company’s dividend payouts have increased at a 9% CAGR over the past three years and a 6.4% CAGR over the past five years. The company has 15 years of consecutive dividend growth.
In the fiscal third quarter ended September 30, BMY’s earnings before income taxes increased 2.4% year-over-year to $2.21 billion. The company’s net earnings amounted to $1.61 billion, up 3.6% year-over-year, while the EPS improved 8.7% from the prior-year quarter to $0.75.
Analysts expect BMY’s revenue for the fiscal first quarter ending March 2023 to grow marginally to $11.66 billion. The company’s EPS is expected to increase by 3.21% from the prior year to $2.02 for the same fiscal quarter. BMY has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
In terms of its forward EV/EBIT, BMY is currently trading at 10.64x, 37% below the industry average of 16.9x. Its forward Price/Cash Flow multiple of 10.10 is 39.4% lower than the industry average of 16.64.
BMY has gained 31.6% over the past year to close its last trading session at $76.83. The stock has gained 23.2% year-to-date.
BMY’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
BMY has a B for Value, Stability, and Sentiment. In the 164-stock Medical -Pharmaceuticals industry, it is ranked #13.
Beyond what we’ve stated above, we have also given BMY grades for Momentum, Growth, and Quality. Get all BMY ratings here.
TravelCenters of America Inc. (TA)
TA operates travel centers, truck service facilities, and restaurants in the United States and Canada. The company operates travel centers that offer various products and services, operates quick-service restaurants, and travel stores that provide general merchandise.
On October 26, TA announced network expansion and guest experience updates, including the opening of four new travel centers, the planned opening of four additional locations, and the completed enhancements of over 50 travel centers. This might bolster the revenue streams of the company.
In the second quarter ended June 30, TA’s total revenues increased 67.9% year-over-year to $3.08 billion. Its income from operations grew 89.3% year-over-year to $94.23 million. The company’s adjusted net income rose 117% year-over-year to $64.40 million, while its adjusted net income per share came in at $4.34, increasing 108.7% from its prior year quarter value.
Analysts expect TA’s revenue for the current fiscal year to be $10.86 billion, indicating a 48% year-over-year growth. The company’s EPS for the same quarter is expected to increase 126.5% from the prior-year value to $9.31. Additionally, TA has an excellent record of surpassing each of the consensus EPS estimates of the trailing four quarters.
In terms of its forward EV/Sales, TA is currently trading at 0.25x, 77.1% below the industry average of 1.08x. Its forward Price/Sales multiple of 0.09 is 89.4% below the industry average of 0.83.
TA has gained 68.7% over the past six months to close its last trading session at $64.11. It has gained 53.7% over the past three months.
It is no surprise that TA has an overall A rating, which translates to Strong Buy in our POWR Ratings system. TA also has an A grade for Growth and Value and a B for Sentiment and Quality. It is ranked #1 of 45 stocks in the Specialty Retailers industry.
In addition to the POWR Rating grades just highlighted, you can see TA ratings for Momentum and Stability.
BMY shares were trading at $78.09 per share on Monday afternoon, up $1.26 (+1.64%). Year-to-date, BMY has gained 29.13%, versus a -17.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
2 A-Rated Stocks to Buy Before It’s Too Late StockNews.com
