The risk of a recession has increased significantly after Federal Reserve Chair Jerome Powell indicated last week that the Central Bank is far from done with interest rate hikes. With inflation control and balance sheet reduction being the sole focus of the Fed, optimistic growth estimates and exorbitant valuations seem like a distant memory.
Moreover, investors have begun gearing up for negative earnings surprises as the U.S. retail sales data suggests that consumers are beginning to feel the bite of high borrowing costs and inflation.
“There’s still so much concern overhanging markets about the never-ending Covid story and the worries about a hard landing due to rate hikes,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. She further added that, amid the general doom and gloom, an end-of-the-year rally might fizzle out soon, even if it materializes.
Given that the market is not expected to stabilize anytime soon, fundamentally strong stocks with resilient demand have seen rising volumes as investors seek refuge from what Jamie Dimon has described as an ‘economic hurricane.’
To that end, Comcast Corporation (CMCSA) and AT&T Inc. (T) seem worth keeping tabs on for healthy risk-adjusted returns.
Comcast Corporation (CMCSA)
CMCSA is a global media and technology company. It operates through three segments: Cable Communications; Media; Studios; Theme Parks; and Sky.
On December 12, CMCSA announced the world’s first live, multigigabit symmetrical Internet connection powered by 10G and Full Duplex DOCSIS 4.0. This technology will revolutionize the availability of ultra-fast speeds by delivering multi-gigabit symmetrical services over the already-installed connections.
This path-breaking technology is expected to give CMCSA a first-mover advantage over its peers, leading to an increase in market share.
On October 27, CMCSA declared its quarterly dividend of $0.27 a share on the company’s common stock. The dividend is payable on January 25, 2023, to shareholders of record as of the close of business on January 4, 2023.
CMCSA pays $1.08 as a dividend annually, which translates to a yield of 3.13% at the current price. This compares favorably to the 4-year average dividend yield of 2.07%. CMCSA’s dividend payouts have grown for the past five years at an 11.7% CAGR.
On September 14, CMCSA announced an expansion in its share repurchase authorization to a total of $20.0 billion, with $9 billion worth of shares repurchased to date. This demonstrates the company’s financial strength and commitment to enhancing shareholder value.
For the third quarter of the fiscal year 2022 ended September 30, CMCSA’s adjusted EBITDA increased 5.9% year-over-year to $9.48 billion, while its adjusted net income grew 4.5% year-over-year to $4.22 billion. As a result, its adjusted EPS rose 10.3% year-over-year to $0.96.
Analysts expect CMCSA’s revenue to increase 4.2% year-over-year to $121.27 billion in the current fiscal year, ending December 31, 2022, while its EPS is expected to grow 11.3% year-over-year to $3.59 for the same period. Also, the company has an impressive earnings history, surpassing the consensus EPS estimates in each of the four trailing quarters.
The stock has registered an average 10-day trading volume of 30.24 million. It gained 1.1% over the past month to close the last trading session at $34.49.
CMCSA’s overall rating of B equates to a Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CMCSA also has a grade of B for Quality and Growth. It tops the list of nine stocks in the Entertainment – TV & Internet Providers industry.
Click here for the additional POWR Ratings for Value, Momentum, Stability, and Sentiment for CMCSA.
AT&T Inc. (T)
T is a global provider of telecommunications, media, and technical services worldwide. The company operates through two segments: Communications; and Latin America. Its offerings include wireless communications, data/broadband, Internet services, video services, local exchange services, long-distance services, telecommunications equipment, managed networking, and wholesale services.
On December 15, T announced its quarterly dividend of $0.28 per share on the company’s common shares; Series A dividend of $312.50 per preferred share, or $0.3125 per depositary share; and Series C dividend of $296.875 per preferred share, or $0.296875 per depositary share. The dividends are payable on February 1, 2023, to stockholders of record of the respective shares at the close of business on January 10, 2023.
T pays $1.11 as dividends annually, which translates to a yield of 6% at the current price, comparable to the four-year average dividend yield of 6.8%.
On December 6, T’s COO Jeff McElfresh indicated that the company expects full-year capital investment in the $24 billion range to meet the growing demand for core connectivity while meeting full-year 2022 guidance for free cash flow in the $14 billion range.
For its fiscal 2022 third quarter ended September 30, 2022, T’s revenues came in at $30 billion. Excluding the impact of U.S. Video separation in July 2021, standalone operating revenues for T were up 3.1% from $29.1 billion in the year-ago quarter. Its income from continuing operations increased 26% year-over-year to $6.3 billion. As a result, the company’s adjusted EPS grew 3% year-over-year to $0.68.
The stock has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive. It has registered an average 10-day trading volume of 44.87 million and has gained 27.5% year-to-date to close the last trading session at $18.49.
T has an overall rating of B, which equates to Buy in our POWR Ratings system. It also has a B grade for Value and Quality. T is ranked #5 of 19 stocks in the Telecom – Domestic industry.
Click here to access the additional ratings for T’s Stability, Growth, Sentiment, and Momentum.
CMCSA shares were trading at $34.00 per share on Monday afternoon, down $0.49 (-1.42%). Year-to-date, CMCSA has declined -30.66%, versus a -19.03% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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