The Federal Reserve’s aggressive rate hikes to curb the persistently high inflation and geopolitical concerns have brought upon a stock market downturn this year. However, the last CPI data showed signs of slowing inflation. Therefore, Fed Chairman Jerome Powell recently indicated that the central bank would raise interest rates at a slower pace.
Analysts expect a 50-basis-point rate increase at the Fed’s December monetary policy meeting. Powell said, “It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down.”
U.S. equities rallied after Powell’s speech, with the S&P 500 index moving above its 200-day moving average for the first time since April 2022. Moreover, the Dow Jones Industrial Average hauled itself from the bear market territory.
David Russell, VP of market intelligence at TradeStation Group, said, “Powell needs to keep talking tough but he gave Wall Street reason for hope.” “Everyone knows rate hikes take time to operate and we’re seeing their effects as the labor market cools” he added.
According to Goldman Sachs Research, the U.S. economy is forecasted to narrowly avoid a recession as inflation cools off and unemployment climbs slightly. The investment bank’s economists believe there is a 35% probability of the U.S. tipping into a recession over the next year. This estimate is below the median of 65% among forecasters in a Wall Street Journal survey.
Amid this backdrop, investors may consider buying fundamentally strong stocks with solid growth prospects, such as AbbVie Inc. (ABBV), Bristol-Myers Squibb Company (BMY), and Lifeway Foods, Inc. (LWAY).
AbbVie Inc. (ABBV)
Biopharmaceutical company ABBV is engaged in the research, development, manufacturing, commercialization, and sale of medicines and therapies. The company is present in various therapeutic categories like immunology, oncology, aesthetic, neuroscience, and women's health products.
On October 22, 2022, ABBV acquired DJS Antibodies Ltd., a privately held UK-based biotechnology company involved in discovering and developing antibody medicines that target difficult-to-drug disease-causing proteins, such as G protein-coupled receptors (GPCRs).
“This acquisition will deliver new capabilities to enhance our current antibody research activities, an opportunity to strengthen our immunology portfolio, and provide a strong foothold for expanded research efforts in the dynamic bioscience hub in Oxford, UK,” said Jonathon Sedgwick, Ph.D., ABBV’s VP and Global head of discovery research.
ABBV’s net revenues increased 3.3% year-over-year to $14.81 billion in the third quarter ended September 30, 2022. The company’s operating income increased 6.9% year-over-year to $4.60 billion. Its adjusted after-tax earnings increased 29.1% year-over-year to $6.53 billion. Also, its adjusted EPS came in at $3.66, representing an increase of 29.3% year-over-year.
Analysts expect ABBV’s EPS and revenue for the quarter ending December 31, 2022, to increase 10.8% and 3.1% year-over-year to $3.67 and $15.35 billion, respectively. It has surpassed Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 39.8% to close the last trading session at $161.18.
ABBV’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 an A grade for Quality and a B for Growth and Value. It is ranked #5 out of 160 stocks in the Medical -Pharmaceuticals industry. Click here to see the additional ratings of ABBV for Momentum, Stability, and Stability.
Bristol-Myers Squibb Company (BMY)
BMY develops, licenses, manufactures, and markets biopharmaceutical products worldwide. It offers products for hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and COVID-19.
On August 17, 2022, BMY announced the completion of the acquisition of Turning Point Therapeutics, Inc. BMY’s Executive VP of Strategy & Business Development, Elizabeth Mily, said, “Turning Point has distinguished itself in the field of precision oncology, and this acquisition will further strengthen our leading oncology franchise.”
BMY’s total in-line products and new product portfolio revenue increased 8% year-over-year to $8.62 billion for the third quarter ended September 30, 2022. The company’s non-GAAP earnings before income taxes increased 0.9% year-over-year to $5.13 billion. Its non-GAAP EPS attributable to BMY increased 3.1% year-over-year to $1.99. Also, its total expenses increased 4.8% year-over-year to $9 billion.
For fiscal 2022, BMY’s EPS is expected to increase 1.4% year-over-year to $7.62. Its revenue for the quarter ending June 30, 2023, is expected to increase 1% year-over-year to $12 billion. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 49.7% to close the last trading session at $80.28.
BMY’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 is ranked #4 in the same industry. It has an A grade for Value and a B for Stability, Sentiment, and Quality. To see the other ratings of BMY for Growth and Momentum, click here.
Lifeway Foods, Inc. (LWAY)
LWAY produces, markets, and sells probiotic-based products internationally. The company’s primary product is drinkable kefir, a cultured dairy product. The company also provides European-style soft cheeses. The company sells its products under the Lifeway and Fresh Made brand names and under private labels.
Julie Smolyansky, LWAY’s President and CEO, stated, “We have recently gained traction within the convenience channel, and see this as an opportunity to build brand awareness and introduce new consumers to our single-serve products. We look forward to finishing the year strong and preparing for a healthy 2023.”
LWAY’s net sales increased 29.1% year-over-year to $38.14 million in the third quarter ended September 30, 2022. The company’s gross profit increased 8.5% year-over-year to $7.58 million. Its net income increased 104.8% year-over-year to $983K. Also, its EPS came in at $0.06, representing an increase of 100% year-over-year.
Analysts expect LWAY’s EPS and revenue for fiscal 2023 to increase 375% and 5% year-over-year to $0.38 and $152 million, respectively. The stock has gained 45.2% year-to-date to close the last trading session at $6.68.
It’s no surprise that LWAY has an overall rating of A, which equates to a Strong Buy in our POWR Rating system. It has an A grade for Growth and a B for Value, Stability, Sentiment, and Quality. It is ranked #4 out of 49 stocks in the Food Makers industry. Click here to see LWAY’s rating for Momentum as well.
ABBV shares were trading at $161.01 per share on Thursday morning, down $0.17 (-0.11%). Year-to-date, ABBV has gained 23.55%, versus a -12.85% 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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