Amid persistent market turbulence and indecisiveness regarding monetary policy, investors could look to capitalize on stocks with solid momentum. To that end, it could be wise to buy fundamentally strong stocks Vertex Pharmaceuticals Incorporated (VRTX), US Foods Holding Corp. (USFD), and Vontier Corporation (VNT) which have gained momentum recently.
Although the Fed has consistently expressed its commitment to fight inflation, officials are divided over the decision on interest rates. Federal Reserve Bank of Boston President Susan Collins said that the central bank might be at a point where it could pause interest rate hikes due to “promising signs” that inflation is moderating.
The U.S. consumer price index eased to 4.9% year-on-year in April but remained well above the Fed’s target of 2%. Therefore, officials do not fully support a pause in hikes unless there is clear evidence that inflation is heading down. Fed Chairman Jerome Powell has left his options open, stating that the next decisions will be made on a meeting-by-meeting basis and based on the “totality of incoming data.”
Additionally, investors’ sentiments appear to be weighed down by concerns of a looming recession, although strategists deem it to be a good sign.
According to Michael Yoshikami, founder and CEO of Destination Wealth Management, a U.S. recession may prevent a steep market downturn in the second half of 2023. He stated, “If the economy avoids it and keeps on its frothy path, then I think we’re going to have some problems in the market in the second part of the year.”
Amid the macroeconomic uncertainty, investors could look to buy the featured stocks having strong momentum. Let’s take a closer look at their fundamentals.
Vertex Pharmaceuticals Incorporated (VRTX)
VRTX, a biotechnology company, develops and commercializes therapies for treating cystic fibrosis (CF). It sells its products to specialty pharmacies and specialty distributors, as well as retail pharmacies or pharmacy chains, hospitals, and clinics.
On April 26, 2023, VRTX announced the U.S. Food and Drug Administration (FDA) approved the expanded use of TRIKAFTA® (elexacaftor/tezacaftor/ivacaftor and ivacaftor) to include children with cystic fibrosis (CF) ages 2 through 5 years who have at least one F508del mutation in the cystic fibrosis transmembrane conductance regulator (CFTR) gene or a mutation in the CFTR gene that is responsive to TRIKAFTA® based on in vitro data.
VRTX’s Executive Vice President, Global Medicines Development and Medical Affairs, and Chief Medical Officer, Carmen Bozic, M.D., commented, “Since its initial approval, TRIKAFTA has had a significant impact on the CF community, transforming the lives of thousands of people living with cystic fibrosis. We remain steadfast in our commitment to bringing highly effective CF treatments to people of all ages living with this disease.”
VRTX’s revenue grew at a CAGR of 24.1% over the past three years. Its EBITDA grew at a CAGR of 38.1% over the past three years. Moreover, its EPS grew at a CAGR of 29.5% over the past three years.
VRTX’s net product revenues for the fiscal first quarter ended March 31, 2023, increased 13.2% year-over-year to $2.37 billion. The company’s total assets came in at $18.97 billion, compared to $18.15 billion for the fiscal year ending December 31, 2022.
In addition, its non-GAAP operating income came in at $902.30 million, while its non-GAAP net income and EPS came in at $794 million and $3.05, respectively.
VRTX’s EPS and revenue for the quarter ending June 30, 2023, are expected to increase 8% and 10.3% year-over-year to $3.89 and $2.42 billion, respectively. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 22.4% to close the last trading session at $329.99. VRTX’s stock is trading above its 50-day and 200-day moving averages of $329.16 and $306.32, respectively.
VRTX’s strong fundamentals are reflected in its POWR Ratings. It 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.
Within the Biotech industry, it is ranked #5 out of 373 stocks. The stock has an A grade for Quality and a B for Value, Momentum, and Sentiment. Click here to access all the ratings of VRTX for Growth and Stability.
US Foods Holding Corp. (USFD)
USFD engages in the marketing, sale, and distribution of fresh, frozen, and dry food and non-food products to foodservice customers in the United States. The company’s customers include independently owned single and multi-unit restaurants, regional concepts, national restaurant chains, hospitals, nursing homes, hotels and motels, country clubs, government and military organizations, colleges and universities, and retail locations.
USFD’s revenue grew at a CAGR of 9.9% over the past three years. Its EBITDA grew at a CAGR of 3.5% over the past three years. In addition, its EPS grew at a CAGR of 18.7% over the past three years.
On May 19, 2023, USFD announced that it had agreed to acquire Renzi Foodservice, a broadline distributor. The acquisition will allow USFD to further expand its reach into central upstate New York, where the company does not have a distribution center.
USFD’s CEO, Dave Flitman, said, “We look forward to welcoming the Renzi team to US Foods as we continue to deliver on our long-range plan and enhance our position with new and existing customers throughout the region.”
USFD’s net sales for the first quarter ended April 1, 2023, increased 9.5% year-over-year to $8.54 billion. Its adjusted gross profit increased 14% year-over-year to $1.45 billion. The company’s adjusted net income increased 56.3% year-over-year to $125 million.
Its adjusted EBITDA increased 39.8% year-over-year to $337 million. Additionally, its adjusted EPS came in at $0.50, representing a 38.9% increase over the prior-year quarter.
USFD’s EPS and revenue for the quarter ending June 30, 2023, are expected to increase 11.7% and 6% year-over-year to $0.75 and $9.35 billion, respectively.
Over the past nine months, the stock has gained 27.1% to close the last trading session at $39.95. USFD’s stock is trading above its 50-day and 200-day moving averages of $37.78 and $34.50, respectively.
USFD’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked #3 out of 81 stocks in the B-rated Food Makers industry. It has an A grade for Growth and a B for Value, Momentum, and Sentiment. We have also given USFD grades for Stability and Quality. Get all USFD ratings here.
Vontier Corporation (VNT)
VNT engages in the research and development, manufacture, sale, and distribution of technical equipment, components, software, and services for manufacturing, repairing, and servicing in the mobility ecosystem worldwide. It operates through two segments: Mobility Technologies, and Diagnostics and Repair Technologies.
On April 17, 2023, VNT announced the sale of its Global Traffic Technologies, LLC (GTT) business to Miovision for $107 million.
According to President and CEO, Mark Morelli, the transaction is an example of the company’s continued commitment to transforming its portfolio, focused on delivering smart, sustainable solutions to lead the evolution of the mobility ecosystem, while driving top-tier financial performance for its shareholders. Moreover, the net proceeds are expected to be deployed toward future debt reduction and share repurchase.
VNT’s revenue grew at a CAGR of 5.7% over the past three years. Its EBITDA grew at a CAGR of 3.8% over the past three years. In addition, its total assets grew at a CAGR of 15.4% over the past three years.
For the fiscal first quarter ended March 31, 2023, VNT’s sales increased 3.8% year-over-year to $776.4 million. The company’s gross profit increased 5.3% year-over-year to $353 million.
Its net cash provided by operating activities increased 96.1% year-over-year to $81 million. Additionally, its adjusted net earnings and adjusted EPS came in at $106.10 million and $0.68, respectively.
VNT’s EPS and revenue for fiscal 2024 are expected to increase 9.8% and 2.1% year-over-year to $3.13 and $3.14 billion, respectively. It has an excellent earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 55.4% year-to-year to close the last trading session at $30.03. The stock is trading above its 50-day and 200-day moving averages of $27.21 and $22.58, respectively.
VNT’s POWR Ratings reflect its solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It is ranked #11 out of 91 stocks in the B-rated Industrial - Equipment industry. It has a B grade for Value, Momentum, Sentiment, and Quality. In total, we rate VNT on eight different levels. Beyond what we stated above, we have also given VNT grades for Growth and Stability. Get all VNT ratings here.
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VRTX shares were trading at $329.99 per share on Monday afternoon, down $2.64 (-0.79%). Year-to-date, VRTX has gained 14.27%, versus a 10.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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