The Fed has raised benchmark interest rates several times this year and is expected to continue its efforts to bring the multi-decade-high inflation under control. Inflationary pressure continues to weigh on the economy.
Inflation surged 8.2% from a year ago in September and is hovering near the highest level since 1980. Moreover, according to a recent survey by The Conference Board, 98% of CEOs are preparing for a U.S. recession over the next year or year and a half.
However, despite the market headwinds, investors should stay focused on their long-term investment strategies and keep investing in quality stocks to capitalize on their rebound.
“Not only is the current bear market well within the typical range of past bears, those who stick w/ their allocations get rewarded for doing so,” said Charles Rotblut, Vice President at the American Association of Individual Investors.
Given this backdrop, it could be wise to invest in Microsoft Corporation (MSFT), Eli Lilly and Company (LLY), and CVS Health Corporation (CVS), which are fundamentally steady to weather the current market turbulence and deliver significant returns in the long run.
Microsoft Corporation (MSFT)
MSFT is a tech leader 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, Haleon, a global leader in consumer health, and MSFT announced a collaboration to make everyday health more accessible for people who are blind or have low vision through the Microsoft Seeing AI app. Seeing AI is a mobile app designed to help people who have trouble seeing by narrating the world around them. MSFT is continuously evolving its offerings.
On the same day, MSFT announced a partnership with Cisco Systems, Inc. (CSCO) to offer the ability to run Microsoft Teams natively on Cisco Room and Desk devices certified for Microsoft Teams, with the option of Teams as the default experience.
“Our vision to make Teams the best collaboration experience for physical spaces is brought to life by our incredible ecosystem of hardware partners,” said Jeff Teper, president of collaborative apps and platforms at Microsoft. This should be strategically beneficial for the company.
MSFT’s total revenue increased 12.4% year-over-year to $51.87 billion in the fiscal fourth quarter that ended June 30. Its net cash from operations grew 8.5% from the year-ago value to $24.63 billion, while its net income improved 1.7% year-over-year to $16.74 billion. The company’s EPS increased 2.8% from its year-ago value to $2.23.
The consensus EPS estimate of $2.31 for the first fiscal quarter that ended September 2022 indicates a 2% improvement year-over-year. Its revenue is expected to rise 9.9% year-over-year to $49.79 billion for the same quarter. Additionally, MSFT has topped consensus EPS estimates in three of the trailing four quarters, which is impressive.
The stock has gained 70% over the past three years to close its last trading session at $237.53.
MSFT’s POWR Ratings reflect this promising outlook. The stock 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 also rated B in Stability and Quality. Within the Software – Business industry, it is ranked #10 out of 51 stocks. To see additional POWR Ratings for Growth, Value, Sentiment, and Momentum for MSFT, click here.
Eli Lilly and Company (LLY)
LLY discovers, develops, and markets human pharmaceuticals worldwide. The company has collaborations with Incyte Corporation, Boehringer Ingelheim Pharmaceuticals, Inc., AbCellera Biologics Inc., Junshi Biosciences, Regor Therapeutics Group, Lycia Therapeutics, Inc., Kumquat Biosciences Inc., Entos Pharmaceuticals Inc., and Foghorn Therapeutics Inc.
On October 18, LLY announced a definitive agreement to acquire Akouos, Inc., a precision genetic medicine company engaged in developing a portfolio of first-in-class adeno-associated viral gene therapies for the treatment of inner ear conditions.
“With Akouos, we are optimistic that we can make a difference for people with hearing loss and other inner ear conditions,” said Daniel Skovronsky, M.D., Ph.D., Lilly’s chief scientific and medical officer and president of Lilly Research Laboratories.
In the same month, LLY announced the U.S. Food and Drug Administration’s (FDA) grant of Fast Track designation for the investigation of tirzepatide to treat adults with obesity and weight-related comorbidities. This should expedite the development and review of medicines to treat serious conditions and help fill an unmet medical need.
In the second quarter ended June 30, 2022, LLY’s revenue stood at $6.49 billion. Its operating income and net income came in at $1.21 billion and $952.50 million. The company’s EPS was $1.05, compared to $1.53 in the year-ago period.
Analysts expect LLY’s revenue to increase 2.1% year-over-year to $6.91 billion for the third quarter that ended September 2022. Also, the consensus revenue estimate of $28.79 billion indicates a 1.7% year-over-year increase for the ongoing fiscal year.
The company’s shares have surged 206.8% over the past three years and 39.9% over the past year to close its last trading session at $332.76.
LLY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The stock also has a B grade for Stability, Quality, and Growth. LLY is ranked #19 among the 161 stocks in the Medical - Pharmaceuticals industry.
Beyond what is stated above, we have also given LLY grades for Value, Sentiment, and Momentum. Get all LLY ratings here.
CVS Health Corporation (CVS)
CVS, a health solutions company, operates through four segments Health Care Benefits; Pharmacy Services; Retail/LTC; and Corporate/Other. Its offerings include health & wellness services, health plans, pharmacy services, and prescription drug coverage.
For the fiscal 2022 second quarter ended June 30, 2022, CVS’ total revenue increased 11% year-over-year to $80.64 billion. In the same period, its operating income grew 5.6% year-over-year to $4.57 billion, while its net income increased 6.1% year-over-year to $2.96 billion.
Street expects CVS’ EPS and revenue for the third quarter that ended September 30 to increase 1.4% and 4.1% year-over-year to $2 and $76.78 billion, respectively. The company surpassed consensus EPS estimates in each of the trailing four quarters.
The stock has gained 5.9% over the past year and 36.7% over the past three years to close its last trading session at $90.89.
It is no surprise that CVS has an overall rating of A, translating to a Strong Buy in our proprietary rating system. The stock has a B grade for Stability, Growth, Value, and Sentiment. In the 4-stock Medical – Drug Stores industry, CVS is ranked first.
Click here to access additional ratings for Momentum and Quality for CVS.
MSFT shares were trading at $237.59 per share on Tuesday afternoon, up $0.06 (+0.03%). Year-to-date, MSFT has declined -28.89%, versus a -21.18% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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