Despite being marred by the macroeconomic headwinds and heavy losses last year, the stock market has embarked on a recovery so far in 2023. In the past three months, equities have cheered the early signs of disinflation, leading investors to hope for an end to the Fed’s aggressive interest rate-hiking cycle.
While recession warnings and layoffs dominate the news of late, market experts believe the market will likely rally in 2023. According to Bloomberg, renowned investment firms believe that the stock market this year could bring big gains for investors if they get the market right. Their optimism stems from the easing inflation, evident from the recent economic data.
Moreover, Deutsche Bank AG (DB) predicts the S&P 500 Index to rise to 4,500 in the first half of 2023 before registering a 25% decline in the third quarter.
However, according to a recent poll of economists, the World Economic Forum found that nearly two-thirds of the respondents believe there will be a recession this year. The World Economic Forum Chief Economists Outlook, January 2023, finds that growth prospects remain anemic, and the risk of a global recession is high.
With uncertainty in the air, it could be wise to add high-quality stocks AbbVie Inc. (ABBV), Cisco Systems, Inc. (CSCO), and Hugo Boss AG (BOSSY) to your portfolio.
AbbVie Inc. (ABBV)
ABBV is engaged in developing, manufacturing, and selling pharmaceuticals globally. It offers its products in various categories: immunology, oncology, neuroscience, eye care, and women's healthcare. The company markets its products to wholesalers, distributors, government agencies, healthcare facilities, and independent retailers.
On January 10, 2023, ABBV and Anima Biotech collaborated to discover and develop mRNA biology modulators for three targets across oncology and immunology. This collaboration leverages Anima's mRNA Lightning technology platform and ABBV’s extensive expertise to strengthen the company’s capability to address 'undruggable' targets with implications across multiple therapy areas.
In the same month, the company announced a multi-year collaboration with Immunome, Inc. (IMNM), a clinical-stage biopharmaceutical company that discovers and develops antibody therapeutics for oncology and infectious disease to identify up to 10 novel target-antibody pairs leveraging IMNM’s Discovery Engine. The partnership enables both companies to yield multiple therapeutic candidates and enhance their pipelines.
ABBV’s trailing-12-month gross profit margin of 69.83% is 25.9% higher than the 55.48% industry average. Likewise, its trailing-12-month EBITDA margin of 51.54% is significantly higher than the industry average of 3.73%.
ABBV’s net revenues increased 3.3% year-over-year to $14.81 billion in the third quarter that ended September 30, 2022. The company’s non-GAAP net earnings increased 29.1% from the year-ago value to $6.53 billion, while its adjusted EPS rose 29.3% from the prior-year quarter to $3.66.
Analysts expect ABBV’s EPS and revenue to increase 8.1% and 2.7% year-over-year to $3.58 and $15.29 billion, respectively, in the fiscal fourth quarter that ended December 31, 2022. It surpassed the EPS estimates in each of the trailing four quarters. ABBV has gained 9.8% over the past year to close the last trading session at $147.40.
ABBV’s POWR Ratings reflect this promising outlook. The company 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.
It has an A grade for Quality and a B for Growth and Value. Among the 169 stocks in the Medical – Pharmaceuticals industry, it is ranked #6. To see the other ratings of ABBV for Momentum, Stability, and Sentiment, click here.
Cisco Systems, Inc. (CSCO)
CSCO designs, manufactures, and sells Internet Protocol-based networking and other communications and information technology products. In addition, it provides infrastructure platforms, including networking technologies of switching, routing, wireless, and data center products.
On January 25, 2023, the company paid a quarterly dividend of $0.38 per common share. Its annual dividend of $1.52 yields 3.17% at the current price level. Its dividend payouts have increased at a 2.8% CAGR over the past three years and a 5.6% CAGR over the past five years. CSCO has a record of 11 years of consecutive dividend growth.
On November 29, 2022, CSCO launched new AppDynamics Cloud capabilities that allow organizations to achieve observability over cloud-native applications correlated to business context across the entire IT estate. The new capabilities would initially support cloud-native applications and digital services running on AWS as both companies continue to empower organizations on their journey to full-stack observability.
CSCO’s trailing-12-month return on total assets of 12.36% is 738.5% higher than the 1.47% industry average. Likewise, its trailing-12-month net income margin of 22% is 577.7% higher than the industry average of 3.25%.
CSCO’s total revenue increased 5.7% year-over-year to $13.63 billion for the fiscal first quarter (ended October 29, 2022). The company’s operating income grew 3% year-over-year to $3.54 billion, while its non-GAAP net income came in at $3.55 billion, representing a 2.1% year-over-year increase. Also, its non-GAAP EPS came in at $0.86, up 4.9% year-over-year.
The consensus EPS estimate of $0.86 for the second quarter ending January 31, 2023, represents a 1.9% improvement year-over-year. The consensus revenue estimate of $13.42 billion for the current quarter indicates a 5.5% increase from the prior-year period. The company has an excellent earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.
It has gained 10.3% over the past six months to close the last trading session at $48.34.
CSCO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Quality and a B for Stability. Within the B-rated Technology - Communication/Networking industry, it is ranked #3 out of 48 stocks. Click here to see the other ratings of CSCO for Growth, Value, Momentum, and Sentiment.
Hugo Boss AG (BOSSY)
Headquartered in Metzingen, Germany, BOSSY and its subsidiaries create, develop, and distribute clothing, shoes, and accessories for men and women worldwide. It sells business, casual, athleisure, evening attire, shoes and accessories, licensed items, and children’s apparel.
On January 17, 2023, Daniel Grieder, Chief Executive Officer of BOSSY, said, “Our successful comeback in 2022 is testament to the rigorous and determined execution of our ‘CLAIM 5’ strategy. In particular our bold branding refresh impressively fueled the brand power of BOSS and HUGO throughout the year. Building on this strong foundation, we will continue to pursue our ambition to ultimately become one of the top 100 global brands.”
BOSSY’s trailing-12-month levered FCF margin and ROCE of 9.31% and 21.86% are 609.9% and 69.1% higher than the 1.31% and 12.93% industry averages, respectively. Likewise, its trailing-12-month gross profit margin of 62.21% is 75.4% higher than the industry average of 35.46%.
For the fiscal third quarter that ended September 30, 2022, BOSSY’s sales increased 23.6% year-over-year to €933 million ($1.02 billion), and its gross profit grew 21.7% year-over-year to €567 million ($617.92 million).
Its operating EBIT increased 12% from the previous-year quarter to €84 million ($91.54 million). The company’s net income came in at €60 million ($65.39 million), up 11.1% year-over-year. Also, its EPS came in at €0.84, up 10.5% year-over-year.
Street expects BOSSY’s revenue for the fourth quarter, which ended on December 31, 2022, to increase 13.7% year-over-year to $1.13 billion. Shares of BOSSY have gained 36.6% over the past three months to close the last trading session at $13.15.
BOSSY’s solid prospects are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The stock has an A grade for Quality and a B for Value and Stability.
Out of 67 stocks in the Fashion & Luxury industry, BOSSY is ranked first. To see additional ratings of BOSSY for Growth, Momentum, and Sentiment, click here.
ABBV shares were trading at $146.65 per share on Friday afternoon, down $0.75 (-0.51%). Year-to-date, ABBV has declined -8.39%, versus a 6.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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