The global economy seems to have braced itself for a recession, especially since the Federal Reserve announced its third consecutive interest rate hike of 75 basis points and other major central banks followed suit.
Despite the UN’s call to halt increases in interest rates, the Fed seems unlikely to pay any heed to the adverse effects of high-interest rates on the economy. And further pledges to continue with its monetary policy stance until it achieves its long-term inflation target of 2%.
Steve Hanke, professor of applied economics at Johns Hopkins University, predicted that the ‘incompetent’ Fed is on a fast track to cause a ‘whopper of a recession.’ Despite the macroeconomic headwinds, an increased focus on domestic production and steady demand in sectors such as healthcare, agriculture, and logistics stand to benefit fundamentally strong and growth-focused businesses.
Hence, we think it could be wise to invest in resilient stocks McKesson Corporation (MCK), The Mosaic Company (MOS), and TravelCenters of America Inc. (TA), which are well positioned to weather the ongoing market turbulence.
McKesson Corporation (MCK)
MCK is a diversified healthcare service provider focusing on advancing patients' health outcomes globally. The company operates through four segments: U.S. Pharmaceutical, Prescription Technology Solutions (RxTS), Medical-Surgical Solutions, and International.
On September 29, MCK announced that it had extended its pharmaceutical distribution agreement with CVS Health (CVS) through June 2027. MCK and CVS have been partnering to develop patient value propositions for more than 20 years.
On September 19, MCK signed a definitive agreement to acquire Rx Savings Solutions (RxSS), prescription price transparency and benefit insight company. The acquisition, valued at a maximum of $875 million, aligns with McKesson’s strategic growth focus by connecting biopharma and payer services to patients.
In the fiscal 2022 first quarter ended June 30, 2022, MCK’s total revenues increased 7% year-over-year to $67.15 billion. Income from continuing operations attributable to MCK increased 56.6% year-over-year to $766 million, while the net income attributable to MCK increased 58% from the year-ago value to $768 million.
In addition, the company reported an adjusted EPS of $5.83 for the quarter, registering an increase of 4.9% year-over-year.
MCK has grown its revenue at 7.3% CAGR over the last three years. During the same period, the company’s net income and EPS increased at 32.9% and 43.8% CAGRs, respectively.
Analysts expect MCK to report revenue and EPS of $276.48 billion and $24.33 for the fiscal year ending March 2023, indicating increases of 4.7% and 2.7% year-over-year, respectively.
MCK’s stock has gained 41.4% year-to-date to close the last trading session at $350.89.
MCK’s POWR Ratings reflect its positive outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It also has an A grade for Growth and a B for Value, Stability, and Sentiment. Within the Medical – Services industry, it is ranked first among 81 stocks.
To see the additional ratings of MCK for Momentum and Quality, click here.
The Mosaic Company (MOS)
MOS is engaged in producing and marketing concentrated phosphate and potash crop nutrients in North America and other countries. The company operates in segments including Phosphates; Potash; and Mosaic Fertilizantes.
For the second quarter of the fiscal year 2022 ended June 30, MOS’s net sales increased 91.8% year-over-year to $5.37 billion, while its operating earnings increased 245.9% year-over-year to $1.67 billion. During the same period, adjusted EBITDA and net income attributable to MOS increased 144.6% and 136.9% year-over-year to $2.03 billion and $1.04 billion, respectively.
Furthermore, the adjusted net income attributable to MOS came in at $3.64, up 211.1% year-over-year.
MOS has grown its revenue at a 20.2% CAGR over the last three years. During the same period, the company’s net income and EPS increased at 132.9% and 136.2% CAGRs, respectively.
MOS’s revenue is expected to increase 66.2% year-over-year to $20.54 billion, while its EPS is estimated to grow 162.4% year-over-year to $13.22 in the current fiscal year ending December 2022. The stock has gained 27.7% year-to-date to close the last trading session at $51.31.
MOS has an overall rating of B, equating to a Buy in our POWR Ratings system. It has an A grade for Growth and a B for Value and Quality. It is ranked #6 among 30 stocks in the Agriculture industry.
Beyond what is stated above, we’ve also rated MOS for Momentum, Sentiment, and Stability. Get all MOS ratings here.
TravelCenters of America Inc. (TA)
TA operates travel centers in the United States and Canada under the TravelCenters of America, TA, TA Express, Petro Stopping Centers, and Petro brand names. Its offers diesel and gasoline fuel, truck maintenance and repair, full-service and quick-service restaurants, travel stores, car and truck parking, and other services.
In June, TA announced a partnership with Service Management Group (SMG), an enterprise customer and employee experience management partner to more than 500 brands.
The company selected SMG for its ability to capture feedback across the customer journey, industry-leading benchmarks, and outcomes-driven approach. This partnership might fuel TA’s customer experience, boosting its business growth.
On May 5, TA announced opening a new TA Express travel center in Fairfield, Texas. With this franchised location, TA has expanded its nationwide network to 276 sites. Jon Pertchik, CEO of TA, said, “In partnership with our franchisee, we are proud to join the Fairfield community and look forward to serving travelers and residents along Interstate 45.”
In the second quarter of the fiscal year 2022 ended June 30, TA’s revenues increased 67.9% year-over-year to $3.08 billion. Its income from operations grew 89.3% from the year-ago value to $94.23 million. Its adjusted EBITDA rose 66.9% from the prior-year period to $122.75 million.
The company’s adjusted net income and net income attributable to common stockholders came in at $64.40 million and $4.34, up 117% and 108.7% from the prior-year period, respectively.
TA has grown its revenue at 14.6% CAGR over the last three years. During the past ten years, the company’s net income and EPS have grown at 13% and 2.8% CAGRs, respectively.
The consensus EPS estimate of $9.31 for the fiscal year 2022 represents a 126.5% improvement year-over-year. The consensus revenue estimate of $10.86 billion for the current year indicates a 48% increase from the previous year. The company has an impressive earnings surprise history since it has surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of TA have gained 9.6% over the past month and 11.5% year-to-date to close the last trading session at $58.02.
It is no surprise that TA has an overall POWR Ratings of A, which translates to a Strong Buy in our proprietary rating system. It has a grade of A for Growth and Value and a B for Sentiment and Quality.
In the Specialty Retailers industry, it is ranked #1 out of 46 stocks. Click here to see additional POWR Ratings for Momentum and Stability for TA.
MCK shares were trading at $347.75 per share on Friday afternoon, down $3.14 (-0.89%). Year-to-date, MCK has gained 40.54%, versus a -22.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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