At a recent policy meet, the Federal Reserve’s officials agreed that the central bank should slow the rate hikes. Officials also acknowledged that they had made significant progress in their fight against the multi-decade high inflation.
Moreover, according to St. Louis Federal Reserve leader James Bullard the chances of the US economy experiencing a “soft landing” have grown since the fall of 2022. Also, according to Fundstrat Global Advisors, the U.S. market may record a 20% or more return in 2023.
Fundstrat’s head of research, Tom Lee, said, “Stocks are 5X more likely to rise 20% than be flat, and more than half of the instances are over 20% gains.”
Given the backdrop, investors could consider buying fundamentally strong growth stocks CVS Health Corporation (CVS) and General Motors Company (GM), which look poised to deliver solid returns ahead.
CVS Health Corporation (CVS)
CVS provides health services in the United States. The company operates through three segments: Health Care Benefits; Pharmacy Services; and Retail/LTC. It operates retail locations, online retail pharmacy websites, LTC pharmacies, and onsite pharmacies.
On December 1, CVS opened its first MinuteClinic locations in northern Delaware. MinuteClinic, the medical clinics inside select CVS Pharmacy stores, provides low-cost care for acute and chronic diseases to people 18 months and older. The company is continuing to expand its footprint, which should help strengthen its position in the industry.
CVS’ revenue has increased at a CAGR of 8.9% over the past three years, while its EBIT has increased at a 7.2% CAGR.
CVS has paid dividends for 14 consecutive years. Over the last three years, CVS’s dividend payouts have grown at a 3.2% CAGR. While CVS’s four-year average dividend yield is 2.77%, its current dividend translates to a 2.64% yield.
CVS’ total revenues increased 10% year-over-year to $81.16 billion for the fiscal third quarter that ended September 30, 2022. During the same period, the company’s product revenue increased 11.2% year-over-year to $57.64 billion.
Also, its current assets came in at $68.34 billion for the period ended September 30, 2022, compared to $60.01 billion for the period ended December 31, 2021.
Street expects CVS’ revenue to increase 3.4% year-over-year to $325.6 billion in 2023. Its EPS is expected to increase 2.7% year-over-year to $8.86 in 2023. It surpassed EPS estimates in each of the four trailing quarters. CVS’s stock has gained 3.7% over the past three months to close the last trading session at $91.49.
CVS’ Strong fundamentals are reflected in its POWR Ratings. The stock’s overall A rating represents a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CVS has an A grade for Growth and a B grade for Value, Stability, and Sentiment. Within the Medical - Drug Stores industry, it is ranked first among the four stocks.
Beyond what is stated above, we’ve also rated CVS for Momentum and Quality. Get all CVS ratings here.
General Motors Company (GM)
General Motors Company designs, builds, and sells trucks, crossovers, cars, and automobile parts and accessories worldwide. The company operates through GM North America; GM International; Cruise; and GM Financial segments.
On November 17, 2022, GM and Vale Canada Limited, a subsidiary of Vale S.A. (VALE), signed a long-term supply deal for battery-grade nickel sulfate to improve North American EV supply chains. This agreement is expected to assist GM in meeting its goal of producing one million electric vehicles annually in North America by 2025.
GM’s EBIT has increased at a 13.3% CAGR over the past three years. Also, its net income grew at a 2.6% CAGR over the past three years.
GM’s four-year average dividend yield is 2.10%, and its current dividend translates to a 1% yield.
GM’s total net sales came in at $41.89 billion for the third quarter that ended September 30, 2022, up 56.4% year-over-year. Its adjusted EBIT increased 46.7% year-over-year to $4.28 billion. In addition, its EPS increased 48℅ year-over-year to $2.25.
GM’s revenue is expected to increase by 3.7% year-over-year to $159.85 billion in 2023. Its EPS is expected to grow 15.7% per annum for the next five years. It surpassed EPS estimates in three of four trailing quarters. Over the past six months, the stock has gained 11.2% to close the last trading session at $35.92.
It’s no surprise that GM has an overall B rating, equating to a Buy in our POWR Ratings system. It also has an A grade for Growth and a B for Value and Sentiment.
The stock is ranked #19 out of 62 in the Auto & Vehicle Manufacturers industry. Click here to access the additional POWR Ratings for GM (Stability, Quality, and Momentum).
CVS shares fell $0.29 (-0.32%) in premarket trading Tuesday. Year-to-date, CVS has declined -1.82%, versus a 1.42% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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