Despite the Fed’s consecutive rate hikes, inflation is still at a multi-decade high. The Goldman Sachs (GS) CEO David Solomon and JPMorgan Chase & Co. (JPM) CEO Jamie Dimon expects a recession as the tight labor market keeps the Federal Reserve on an aggressive monetary policy tightening track.
Meanwhile, the Fed is expected to deliver a fourth straight big interest-rate hike when they meet next week, bringing the policy rate to 3.75%-4%.
Moreover, International Monetary Fund chief Kristalina Georgieva said on Wednesday that central banks should keep raising interest rates further to fight inflation until they hit a “neutral” level. The fund’s managing director said it would take until 2024 for the positive effect of central banks raising rates globally to be felt.
Amid the growing recession worries, it might be wise to invest in well-established stocks Microsoft Corporation (MSFT) and TravelCenters of America Inc. (TA).
Microsoft Corporation (MSFT)
MSFT is a tech giant that develops, licenses, and supports software, services, devices, and solutions worldwide. The company operates in three segments: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing.
On October 12, it was reported that MSFT and Mercedes-Benz collaborated for a new MO360 Data Platform to make vehicle production more efficient, resilient, and sustainable where Benz is connecting its around 30 passenger car plants worldwide to the Microsoft cloud, enhancing transparency and predictability across its digital production and supply chain. The platform is already available to teams in EMEA and will be deployed in the United States and China.
On September 20, MSFT declared a quarterly dividend of $0.68 per share, payable to shareholders on December 8, reflecting a 10% increase over the previous quarter’s dividend.
MSFT’s total revenue increased 10.6% year-over-year to $50.12 billion in the fiscal first quarter that ended September 30. Its operating income grew 6.3% from the year-ago value to $21.52 billion. The company’s net income and net earnings per common share amounted to $17.56 billion and $2.35, respectively.
The consensus EPS estimate of $10.08 for the fiscal year ending June 2023 indicates a 9.4% improvement year-over-year. Its consensus revenue of $219.03 billion for the same year represents a rise of 10.5% year-over-year. MSFT has topped consensus EPS estimates in three of the trailing four quarters, which is impressive.
The stock has gained 5.4% over the past month to close its last trading session at $250.66.
MSFT’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
MSFT is rated a B in Stability and Quality. Within the Software – Business industry, it is ranked #8 out of 52 stocks.
To see additional POWR Ratings for Growth, Value, Momentum, and Sentiment for MSFT, click 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.
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 0.24x, 77.7% lower than the industry average of 1.06x. Its forward Price/Sales multiple of 0.08 is 90.2% below the industry average of 0.82.
TA has gained 53.7% over the past six months to close its last trading session at $58.57. It has gained 49.1% over the past three months.
It is no surprise that TA has an overall A rating, which translates to Strong Buy in our POWR Rating system.
TA has an A grade for Growth and Value and a B for Sentiment and Quality. It is ranked #1 out of the 46 stocks in the Specialty Retailers industry.
Beyond what we’ve stated above, we have also given TA grades for Momentum and Stability. Get all TA ratings here.
MSFT shares were trading at $236.10 per share on Wednesday morning, down $14.56 (-5.81%). Year-to-date, MSFT has declined -29.34%, versus a -17.71% 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.
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