It has been a volatile past few weeks for the major market indexes as August’s CPI (Consumer Price Index) climbed higher than expected, and the Fed announced the third consecutive 75 basis point rate hike.
The Fed’s upward revision of the key rate for this year has severely dented investor sentiment. With the central bank expected to continue to raise rates aggressively in the upcoming months, the odds of a recession by the start of next year are high.
On the other hand, the unemployment rate fell to 3.5% in September, while payrolls rose by 263,000, indicating a strong job market. Traders have now assigned an 82% chance of a three-quarter point move and expect another half-point increase in December.
We believe fundamentally solid stocks, Merck & Co., Inc. (MRK), Cigna Corporation (CI), and APA Corporation (APA), which have shown resiliency in the face of market volatility, could be ideal buys now.
Merck & Co., Inc. (MRK)
MRK is a global healthcare company that offers solutions through its prescription medicines, vaccines, biologic therapies, and animal health products. The company operates in the Pharmaceutical and Animal Health segments.
On September 22, 2022, Merck Animal Health announced that it had signed a definitive agreement to acquire Vence. Merck Animal Health President Rick DeLuca said, “The acquisition of Vence will broaden our portfolio with complementary products and technologies to advance animal health and well-being as well as outcomes for our customers.”
MRK’s sales increased 28% year-over-year to $14.59 billion for the second quarter that ended June 30, 2022. The company’s non-GAAP net income rose 204.2% year-over-year to $4.74 billion. Its non-GAAP EPS came in at $1.87, representing an increase of 206.6% year-over-year.
Analysts expect MRK’s EPS and revenue for the September 30, 2022, quarter to increase 0.2% and 6.7% year-over-year to $1.75 and $14.03 billion, respectively. It surpassed Street EPS estimates in each of the trailing four quarters. The stock has gained 14% year-to-date to close the last trading session at $87.44.
It is trading above its 50-day and 200-day moving averages of $87.07 and $85.31.
MRK’s POWR Ratings reflect solid prospects. 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 a B grade for Growth, Value, Sentiment, and Quality. It is ranked #2 out of 164 stocks in the Medical – Pharmaceuticals industry. Click here to see other ratings of MRK for Momentum and Stability.
Cigna Corporation (CI)
CI provides insurance and related products and services in the United States. Its segments are Evernorth; and Cigna Healthcare. The company distributes its products and services through insurance brokers and consultants.
On August 29, 2022, CI declared that it will expand the reach of its ACA Marketplace exchange plans, by which more customers and communities will be able to access affordable, predictable, and simple healthcare coverage in 2023. This should boost CI’s revenues in the long run.
For the fiscal second quarter that ended June 30, 2022, CI’s total revenues increased 5.4% year-over-year to $45.48 billion. Its adjusted income from operations rose 9.6% year-over-year to $1.98 billion. In addition, its adjusted EPS came in at $6.22, representing an increase of 18.7% year-over-year.
For the quarter ending December 31, 2022, CI’s EPS is expected to increase 6.8% year-over-year to $5.10. Its revenue for the quarter that ended September 30, 2022, is expected to increase 0.9% year-over-year to $44.71 billion. It surpassed consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 44.2% to close the last trading session at $293.08.
It is trading above its 50-day and 200-day moving averages of $285.58 and $257.44.
CI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has a B grade for Growth, Value, Sentiment, and Quality. Within the A-rated Medical -Health Insurance industry, it is ranked #5 out of 11 stocks. To see the other ratings of CI for Momentum and Stability, click here.
APA Corporation (APA)
APA explores for, develops, and produces oil and gas resources in the United States, Egypt, and the United Kingdom, as well as offshore Suriname exploration. The company also owns and operates collection, processing, and transmission assets in West Texas and four Permian-to-Gulf Coast pipelines.
On September 22, 2022, APA announced the hiring of GHD, a privately held global professional services firm specializing in implementing and verifying sustainability projects. This engagement reinforces APA’s commitment to environmental protection, which includes an all-employee compensation-linked target established earlier this year to reduce at least 1 million tons of CO2e by the end of 2024.
APA’s adjusted earnings increased 204.8% year-over-year to $811 million for the second quarter that ended June 30, 2022. The company’s non-GAAP EPS came in at $2.37, representing an increase of 238.6% year-over-year. Its adjusted EBITDAX increased 93.6% year-over-year to $1.95 billion.
Analysts expect APA’s EPS and revenue for the quarter that ended September 30, 2022, to increase 118% and 47% year-over-year to $2.14 and $2.43 billion, respectively. Over the past year, the stock has gained 90.9% to close the last trading session at $42.20.
It is trading above its 50-day and 200-day moving averages of $36.83 and $37.30.
APA’s POWR Ratings reflect solid prospects. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
It has an A grade for Momentum and Quality and a B for Growth and Value. It is ranked #11 out of 94 stocks within the B-rated Energy – Oil & Gas industry. Click here to see the other rating of APA for Stability and Sentiment.
MRK shares were trading at $87.21 per share on Friday afternoon, down $0.23 (-0.26%). Year-to-date, MRK has gained 16.68%, versus a -22.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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