Aggressive interest rate hikes by the Fed to curb sky-high inflation resulted in massive volatility in the market last year, thereby affecting investors’ confidence. However, with the better-than-expected inflation numbers in October and November, investor sentiment improved alongside hopes of the Fed lowering the size of rate hikes.
In addition, Dubravko Lakos-Bujas, Global Head of Equity Macro Research J.P. Morgan, predicted that while the first half of the year would witness the Fed’s tightening, several factors should signal a pivot, subsequently driving an asset recovery and pushing the S&P 500 to 4,200 by year-end 2023.
Echoing this sentiment, Bruce Helmer, co-founder of the Wealth Enhancement Group, said in an interview, “I’m confident 2023 will be better than 2022 for investors.”
Given the current market scenario, investing in growth stocks could be a lucrative way to channel investments and generate returns. Therefore, we think fundamentally strong growth stocks CVS Health Corporation (CVS) and Universal Logistics Holdings, Inc. (ULH) might be solid buys now.
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 15, 2022, CVS announced a quarterly dividend of $0.605 per share on the common stock of the corporation, which indicates an increase of 10% over the previous quarterly dividend. The dividend is payable to its shareholders on February 1, 2023. This reflects the cash generation ability of the company.
On December 1, CVS opened its first MinuteClinic locations in northern Delaware. MinuteClinic, the medical clinics inside select CVS Pharmacy stores, offers affordable care for acute and chronic conditions for patients aged 18 months or older. The new locations might be beneficial for the company.
Over the past three years, CVS’s revenue, EBIT, and EBITDA have grown at 8.9%, 7.2%, and 5.9% CAGRs, respectively.
For the fiscal third quarter ended September 30, 2022, CVS’ total revenues increased 10% year-over-year to $81.16 billion. Its adjusted operating income increased by 3.9% from the prior-year period to $4.23 billion. In addition, the company’s adjusted earnings per share came in at $2.09, up 6.1% year-over-year.
Analysts expect CVS’ revenue and EPS for the fiscal second quarter (ending June 2023) to increase 2.3% and 2.1% from the prior-year period to $82.46 billion and $2.45, respectively. Also, the company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
Over the past five days, the stock has lost marginally to close the last trading session at $91.98.
CVS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to 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 for Stability and Sentiment. It is ranked first out of the four stocks in the B-rated Medical – Drug Stores industry.
Beyond what we’ve mentioned above, we have also given CVS grades for Value, Momentum, and Quality. Get all CVS ratings here.
Universal Logistics Holdings, Inc. (ULH)
ULH provides transportation and logistics solutions in the United States, Mexico, Canada, and Colombia. It offers truckload services; domestic and international freight forwarding, customs brokerage services; and final mile and ground expedite services.
In October, ULH’s declared a dividend of $0.105 per share of common stock, which was payable to shareholders on January 3, 2023. This reflects the company’s ability to pay back its shareholders.
ULH’s revenue has grown at 10% and 11.7% CAGRs over the past three and five years, respectively. Moreover, its EBIT has grown at a 29% CAGR over the past three years.
For the fiscal third quarter that ended October 1, 2022, ULH’s total operating revenues increased 13.5% year-over-year to $505.69 million, while its net income increased 371.9% year-over-year to $48.48 million. Furthermore, its EPS came in at $1.84, representing a 384.2% increase from the prior-year quarter.
For the fiscal year ending December 2023, Street expects ULH’s revenue and EPS to come in at $1.96 billion and $5.50, respectively. ULH has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 24.4% over the past six months to close the last trading session at $33.79. Moreover, it has gained 1.1% over the past three months.
ULH’s POWR Ratings reflect this positive outlook. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
In addition, it has an A grade for Growth and Sentiment and a B for Value, Momentum, and Stability. It is ranked first among 16 stocks in the A-rated Air Freight & Shipping Services industry. Click here to see the rating of ULH for Quality.
CVS shares were trading at $90.86 per share on Thursday afternoon, down $1.12 (-1.22%). Year-to-date, CVS has declined -2.50%, versus a -0.39% 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.
2 Growth Stocks to Buy Now for Outsized Returns in 2023 StockNews.com
