Inflation cooled for the sixth straight month in December. The Consumer Price Index (CPI), which peaked at 9.1% in June of last year, increased 6.5% annually, down from 7.1% in November. However, Lael Brainard, the governor of the Federal Reserve, argues that interest rates need to remain high despite inflation showing signs of cooling.
As long as inflation remains above the Fed's 2% target, a series of rate hikes might push the economy into a recession. Jamie Dimon, CEO of JPMorgan Chase & Co. (JPM), has warned that continued rate hikes “might derail the economy.”
Moreover, the aggressive rate hikes by central banks, the Russia-Ukraine war, and the sputtering of the world's major economic engines have led to the World Bank lowering its growth forecast for this year from 3% to 1.7%. The uncertainties have turned Wall Street bearish.
Since market volatility is unlikely to abate anytime soon, fundamentally strong and stable stocks UnitedHealth Group Incorporated (UNH), Centene Corporation (CNC), and Forrester Research, Inc. (FORR) could be wise investments for long-term profits.
UnitedHealth Group Incorporated (UNH)
UNH is a diverse healthcare corporation in the United States. Its segments include UnitedHealthcare; OptumHealth; OptumInsight; and OptumRx. The company provides financial services, pharmacy care services, health benefit plans, access to networks of care provider specialists, and financial services.
On January 10, 2023, Optum, a UNH subsidiary, and Owensboro Health announced their collaboration to enhance patient care and experience in Western Kentucky and Southern Indiana. As per the agreement, about 575 Owensboro Health members are expected to join Optum in April 2023, aiding the company in its operations.
Additionally, on January 5, Optum and Northern Light Health partnered to enhance Maine's healthcare system for patients and caregivers. The company should benefit from the roughly 1,400 Northern Light Health staff who are expected to join Optum in March 2023 and would collaborate to enhance UNH’s business operations.
For the fourth quarter of fiscal 2022 (ended December 31, 2022), UNH’s total revenues increased 12.3% year-over-year to $82.79 billion, and its earnings from operations grew 24.4% from the prior year’s quarter to $6.89 billion. In addition, adjusted net earnings attributable to UNH common shareholders increased 18.1% year-over-year to $5.06 billion, while its adjusted EPS came in at $5.34, up 19.2% year-over-year.
UNH has increased its dividends for 13 consecutive years. It pays a $6.60 per share dividend annually, which translates to a 1.36% yield on the current price level. Moreover, the company’s dividend payouts have grown at a 17.4% CAGR over the past five years.
For the fiscal year ending December 2023, Analysts expect UNH’s revenue to increase 11% year-over-year to $359.92 billion. The company’s EPS for the same year is expected to grow 12.4% from the previous year to $24.94. Moreover, UNH surpassed its consensus EPS in all four trailing quarters, which is impressive.
Shares of UNH have gained 5.1% over the year to close the last trading session at $486.72.
UNH’s POWR Ratings reflect its strong outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Growth, Stability, and Quality. In the 11-stock A-rated Medical - Health Insurance industry, it ranks #5
Beyond what we stated above, we also have UNH’s ratings for Value, Sentiment, and Momentum. Get all UNH ratings here.
Centene Corporation (CNC)
CNC is a multinational healthcare company that offers services and programs to uninsured and underinsured people in the United States. Its segments include Managed Care; and Specialty Services. It offers health plan coverage through government-sponsored programs.
On January 3, 2023, CNC declared that Health Net of California (Health Net), its California subsidiary, had been chosen for direct contracts in Los Angeles and Sacramento counties by the California Department of Health Care Services (DHCS). The new contracts are expected to raise CNC’s projected 2024 adjusted EPS floor from $7.00 to $7.15.
Moreover, on November 17, 2022, CNC announced the signing of a definitive deal to sell Magellan Specialty Health to Evolent Health, Inc. (EVH). At completion, CNC is anticipated to receive roughly $600 million in proceeds, of which at least $400 million would be paid in cash and the remaining amount in EVH common stock.
Additionally, if certain performance benchmarks are fulfilled, CNC is anticipated to receive up to $150 million in cash and EVH common stock in 2024.
The company’s total revenues grew 10.7% year-over-year to $35.87 billion in the fiscal third quarter that ended September 30, 2022, and its earnings before income tax grew 40.1% from the prior year’s period to $1.01 billion. CNC’s adjusted net earnings came in at $755 million, a 1.3% increase year-over-year, and its adjusted EPS increased 3.2% from the year-ago value to $1.30.
The consensus revenue and EPS estimate of $144.53 billion and $5.72 for the fiscal year ended December 2022 indicate a 14.7% and 11.1% year-over-year improvement, respectively. Furthermore, CNC surpassed its consensus EPS in all four trailing quarters.
The stock has gained marginally intra-day to close the last trading session at $76.15.
CNC’s strong prospects are apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
CNC has a B grade for Quality and Value. Within the Medical - Health Insurance industry, it is ranked #6 of 11 stocks.
In addition to the POWR Ratings I’ve just highlighted, you can see CNC’s Growth, Stability, Sentiment, and Momentum ratings here.
Forrester Research, Inc. (FORR)
FORR is an independent research and advisory firm. It operates in three segments: Events; Consulting; and Research. The firm offers consulting projects, live and virtual events, Forrester Research, SiriusDecisions Research, and Forrester Decisions. It offers its products and services globally through a direct sales force.
In November 2022, the company improved its financial outlook for the full-year 2022. It expects total revenue to arrive at $545 million, up from the previous guidance of $535 million. Its adjusted operating margin is expected to come in at 13%, compared to prior guidance of 12%. Moreover, adjusted diluted earnings are expected to come in at $2.40 as compared to the previous guidance of $2.30.
For the fiscal third quarter that ended September 30, 2022, FORR’s total revenues increased 8.1% year-over-year to $127.68 million, and its adjusted income from operations grew 24.5% from the prior-year quarter to $15.81 million. The company’s adjusted net income stood at $10.90 million, a 38% increase year-over-year, while its adjusted EPS stood at $0.57, up 39% from the prior-year period.
Analysts expect FORR’s revenue to increase 9.2% year-over-year to $539.61 million for the fiscal year ended December 2022. The company’s EPS for the same year is expected to grow 12.4% from the previous year to $2.35. Also, FORR surpassed its consensus EPS in all four trailing quarters.
In addition, the company’s revenue and EPS for the ongoing fiscal year ending December 2023 are expected to rise 5.6% and 2% year-over-year to $569.56 million and $2.40, respectively. Shares of FORR have gained 10.2% over the past month to close the last trading session at $36.91.
FORR’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Quality and Sentiment and a B for Value. Within the Financial Services (Enterprise) industry, it has topped among 107 stocks.
To see additional POWR Ratings for Stability, Growth, and Momentum for FORR, click here.
UNH shares were trading at $487.92 per share on Monday morning, up $1.20 (+0.25%). Year-to-date, UNH has declined -7.97%, versus a 4.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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