This month, the Fed’s third consecutive 75-basis-point rate hike has led to a broad-based stock market sell-off, sending the S&P 500 to a new low for the year. Officials now predict the key rate to end at 4.25% to 4.5% in 2022 and 4.5% to 4.75% in the next year, indicating another three-quarter point hike in November and a half-point rate rise in December. This makes it unlikely for the market to return to stability anytime soon.
However, on the bright side, CNBC’s Jim Cramer said inflation could soon decline, leaning on charts analysis from legendary technician Larry Williams. “The charts, as interpreted by Larry Williams, suggest that inflation could soon cool down substantially — soon — if history’s any guide,” he said.
The ongoing market sell-off could provide investors an opportunity to load up on shares of fundamentally sound companies trading below their intrinsic values. To that end, Microsoft Corporation (MSFT), HCA Healthcare, Inc. (HCA), and APA Corporation (APA) might be ideal investments now.
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 September 20, MSFT announced a quarterly dividend of $0.68 per share, reflecting a 10% increase from the previous quarter’s dividend. The dividend is payable on December 8, 2022. This demonstrates the company’s strong cash positioning.
On August 9, MSFT and Barclays PLC (BCS) announced that BCS had deployed Microsoft Teams as its preferred collaboration platform. This plan included enhancing the data retention, search, and retrieval capabilities available with MSFT to meet BCS’ needs. This demonstrates MSFT’s growing Teams market.
MSFT’s total revenue increased 12.4% year-over-year to $51.87 billion in the 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 $2.32 for the first fiscal quarter ending September 2022 indicates a 2.3% improvement year-over-year. Its revenue is expected to rise 10.1% year-over-year to $49.90 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 slumped 1.5% intraday to close its last trading session at $237.50.
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 #11 out of 54 stocks. To see additional POWR Ratings for Growth, Value, Sentiment, and Momentum for MSFT, click here.
HCA Healthcare, Inc. (HCA)
HCA is a healthcare services company that owns and operates general and acute care hospitals offering medical, surgical, emergency, and outpatient services. The company operates in two geographically organized groups- The National and American Groups.
On August 9, 2022, HCA collaborated with Johnson & Johnson (JNJ) to address key healthcare clinical and industry issues. Through this initiative, both companies would focus on improving health equity and enhancing nursing support and patient care.
On June 23, HCA and McKesson Corporation (MCK) proposed the formation of a joint venture combining HCA’s Sarah Cannon Research Institute (SCRI) and McKesson’s US Oncology Research (USOR) to expand clinical research services and improve treatment options for cancer patients.
Sam Hazen, chief executive officer of HCA, said, "We believe this joint venture with McKesson, which unifies our oncology research experts, will promote the development of individualized therapies and provide more opportunities for cancer patients to receive new treatments."
HCA’s revenue increased 2.7% year-over-year to $14.82 billion in the second quarter that ended June 30, 2022. The company’s total assets increased 1.6% to $51.58 billion in the six-month period that ended June 30.
Analysts expect HCA’s EPS to be $4.89 for the fiscal fourth quarter ending December 2022, indicating a 10.7% improvement year-over-year. The consensus revenue estimate of $15.60 billion for the same period indicates a 3.6% year-over-year increase.
The stock has gained 6.8% over the past three months to close the last trading session at $187.68.
The company has an overall B rating, which translates to Buy in our proprietary rating system. It also has a B grade for Value, Stability, Sentiment, and Quality. HCA is ranked first among the 13 stocks in the Medical – Hospitals industry.
Click here to see the additional ratings of HCA for Growth and Momentum.
APA Corporation (APA)
APA, through its subsidiaries, explores, develops, and produces oil and gas properties in the United States, Egypt, and the United Kingdom. The company also operates gathering, processing, and transmission assets in West Texas and holds ownership in four Permian-to-Gulf Coast pipelines.
On September 23, APA announced the engagement of GHD, a privately-owned global professional services company specializing in implementing and verifying sustainability projects.
“We are pleased to work with GHD to support our ongoing efforts to verify the emissions we eliminate through various environmental projects,” said APA Environment, Health and Safety (EHS) Vice President Jessica Jackson. This should help the company meet its environmental goals and eliminate at least 1 million tonnes of CO2 by the end of 2024.
In the same month, APA’s Board of Directors announced an increase in its dividend on common shares from an annualized rate of 50 cents per share to $1.00 per share. This demonstrates the company’s strong balance sheet and cash flow positioning.
For the fiscal second quarter that ended June 30, 2022, APA’s total revenues came in at $3.05 billion, up 71.3% year-over-year. Net income attributable to APA increased 193% year-over-year to $926 million. Moreover, its net income per share increased 230.5% year-over-year to $2.71.
Analysts expect APA’s revenue to increase 55.5% year-over-year to $2.57 billion in the current quarter ending September 2022. Its EPS is estimated to increase 133.2% year-over-year to $2.29 in the same period. The company also beat the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 64.3% over the past year to close the last trading session at $34.95.
It is no surprise that APA has an overall A grade, equating to a Strong Buy in our POWR Ratings system. The stock also has an A grade for Momentum and Quality and a B for Growth and Value. It is ranked #9 of 94 stocks in the B-rated Energy - Oil & Gas industry.
We have also rated APA for Stability and Sentiment. Click here to learn all APA POWR Ratings.
MSFT shares were trading at $237.96 per share on Friday morning, up $0.46 (+0.19%). Year-to-date, MSFT has declined -28.78%, versus a -22.69% 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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