The stock market has witnessed wild swings since last year due to the high inflation and the Fed’s monetary tightening. With volatility not likely to diminish anytime soon, investors can check out momentum stocks, Jabil Inc. (JBL), Overseas Shipholding Group, Inc. (OSG), and Adams Resources & Energy, Inc. (AE), which might witness steady gains in 2023 driven by their fundamentals.
A fresh bout of anxieties had set in owing to Fed’s hawkish statements. Recently, San Francisco Fed President Mary Daly commented, “In order to put this episode of high inflation behind us, further policy tightening, maintained for a longer time, will likely be necessary.”
As cautioned by many experts, such persistent rate hikes could tip the economy into recession this year. Recently, former treasury secretary, Larry Summers, warned that despite some resilient data, the possibility of the economy falling into a recession looms large. He worries that tenacious rate hikes by Fed might trigger a downturn.
As per the American Association of Individual Investors (AAII) survey for the week that ended March 1, 2023, 44.8% of investors have become bearish, indicating an unusually high level.
Against this backdrop, quality momentum stocks JBL, OSG, and AE might be solid buys in 2023.
Jabil Inc. (JBL)
JBL offers products and services for manufacturing all over the world. The company operates in two broad segments: Electronics Manufacturing Services and Diversified Manufacturing Services.
On March 6, 2023, JBL announced that its photonics business unit is expanding its design, manufacturing, and testing capabilities, culminating in the launch of a new Active Optical Cable (AOC) family.
Therefore, JBL is uniquely positioned to address the rapid pace of advancements in optics-enabled network and data center architectures while supporting the continuing surge of artificial intelligence (AI), cloud, high-performance computing (HPC), and machine learning (ML) applications.
The new 800G AOC product would address the rising demand for low-cost, high-performance, short-distance interconnects. This should boost the company’s growth prospects.
On January 18, JBL, in cooperation with ams OSRAM and Artilux, announced that its renowned optical design center in Jena, Germany, is currently demonstrating a prototype of a next-generation 3D camera with the ability to seamlessly operate in both indoor and outdoor environments up to a range of 20 meters. The company is continuously innovating and adding to its offerings.
JBL’s trailing-12-month ROCE of 41.31% is 769% higher than the 4.75% industry average. Its trailing-12-month ROTC of 15.90% is 396% higher than the 3.21% industry average.
JBL’s net revenues came in at $9.64 billion for the first quarter (ended November 30, 2022), up 12.5% year-over-year. Its gross profit increased 10.1% year-over-year to $743 million. Also, its core operating income increased 15.3% year-over-year to $461 million.
Its core earnings increased 12.3% year-over-year to $319 million, while its core earnings per share increased 20.3% year-over-year to $2.31 for the same quarter. The company also raised the core EPS projection for the year (the fiscal year 2023) to $8.40.
Analysts expect JBL’s revenue to come at $8.17 billion for the fiscal third quarter (ending May 2023). Its EPS is estimated to rise 11.8% year-over-year to $1.92 for the same quarter. It surpassed EPS and revenue estimates in all four trailing quarters, which is impressive.
Over the past six months, the stock has gained 44.8% to close the last trading session at $84.04. Moreover, it has also gained 19.1% over the past three months. The stock is currently trading above its 50-day and 200-day moving averages of $78.29 and $65.29, respectively, indicating an uptrend.
JBL’s POWR Ratings reflect this promising outlook. It has an overall B rating, equating to a 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 Momentum and a B for Value, Sentiment, and Quality. Within the Technology – Services industry, it is ranked #9 out of 80 stocks.
To see the additional POWR Ratings for Growth, and Stability for JBL, click here.
Overseas Shipholding Group, Inc. (OSG)
OSG is the owner and operator of a fleet of oceangoing vessels engaged in transporting crude oil and petroleum products in the U.S. flag trade. The company serves independent oil traders, refinery operators, and government entities.
On December 8, 2022, OSG announced that it had exercised options to extend its six bareboat charter agreements with American Shipping Company ASA for an additional three-year term commencing in December 2023.
“We believe the market continues to support attractive commercial opportunities for these vessel leases to supplement the strong and stable cash flow generation from our niche businesses,” said Sam Norton, OSG’s President and CEO.
On November 15, 2022, the company announced the purchase of $5 million shares of its common stock from Cyrus Capital at $2.86 per share. The price paid in this share purchase equates to an enterprise value of roughly 4.5 times the expected adjusted EBITDA for 2022, an implied valuation considered very attractive for OSG.
OSG’s trailing-12-month levered FCF margin of 15.41% is 129.6% higher than the 6.71% industry average.
OSG’s shipping revenues increased 30.9% year-over-year for the third quarter that ended September 30, 2022, to $123.06 million. The company’s net income came in at $13.25 million, compared to a net loss of $16.01 million in the year-ago period. Also, its EPS came in at $0.15, compared to a loss per share of $0.18 in the prior-year period.
Over the past three months, the stock has gained 31.3% to close the last trading session at $3.65. Over the past month, it has gained 4%. The stock is currently trading above its 50-day and 200-day moving averages of $3.48 and $2.87, respectively.
It is no surprise that OSG has an overall rating of A, which equates to a Strong Buy in our POWR Ratings system.
It has an A grade for Momentum and a B for Growth, Value, Sentiment, and Quality. In the 42-stock A-rated Shipping industry, it is ranked first.
Click here to see the additional rating of OSG for Stability.
Adams Resources & Energy, Inc. (AE)
AE markets, transports, and stores various U.S. crude oil and natural gas basins. The company has three operational segments: Crude Oil Marketing, Transportation, and Storage; Tank truck Transportation of Liquid Chemicals, Pressurized Gases, Asphalt, and Dry Bulk; and Pipeline Transportation, Terminalling, and Storage of Crude Oil.
On February 21, AE declared a quarterly cash dividend for the fourth quarter of 2022 of $0.24 per common share, payable to the shareholders on March 24, 2023. The company has consistently paid dividends since 1994. This reflects its unwavering focus on ensuring the stability of the business and the strength of its corporate financial position.
In November 2022, AE announced the repurchase of all of the shares of Adams common stock owned by KSA Industries, Inc. The total purchase price was approximately $70 million or $36 per share and would be funded by a combination of existing cash on hand and a new term loan.
Along with the company’s recent acquisitions, repurchasing of shares is expected to enhance the value for all remaining shareholders. Kevin Roycraft, Chief Executive Officer of the company, said, “The company will also see an immediate annual savings of roughly $1.9 million in dividend payments at the current dividend rate.”
AE’s 7.84x trailing-12-month asset turnover ratio is significantly higher than the industry average of 0.66x.
For the fiscal third quarter that ended September 30, AE’s total revenues increased 50.1% year-over-year to $852.90 million. Its operating earnings grew 30.1% from the prior-year quarter to $2.99 million, while its net earnings grew 41.7% from its year-ago value to $2.19 million. The company’s net earnings per common share improved by 38.9% from its year-ago value to $0.50.
The consensus EPS estimate of $4.01 for the fiscal year ending December 2023 represents a 19% improvement year-over-year. The company’s revenue is expected to come in at $3.10 billion.
The stock has gained 88.2% over the past six months and 38.5% over the past three months to close the last trading session at $53.86. The stock is currently trading above its 50-day and 200-day moving averages of $50.13 and $37.61, respectively.
AE’s POWR Ratings reflect its promising prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock also has an A grade for Momentum and Sentiment and a B for Value and Quality. Within the B-rated 91 stock Energy – Oil & Gas industry, it is ranked #16.
Click here for additional POWR Ratings for AE (Stability and Growth).
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JBL shares were unchanged in premarket trading Wednesday. Year-to-date, JBL has gained 23.34%, versus a 4.14% 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.
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