Heavy tech layoffs are expected to soften the labor market in the near term while inducing layoffs across other industries. However, declining inflation and anticipated slower rate hikes might help the country avoid a probable recession.
Moody's Analytics chief economist Mark Zandi said, "With a bit of luck and some reasonably deft policymaking by the Fed, the economy should avoid an outright downturn."
Moreover, Bank of America Corp. (BAC) Chief Brian Moynihan believes U.S. consumer sentiment is still pretty robust, and wage growth will provide the impetus for further development. Furthermore, experts believe the stock market will recover this year.
Given this backdrop, it could be wise to buy quality stocks CVS Health Corporation (CVS), McKesson Corporation (MCK), and Archer-Daniels-Midland Company (ADM) which look poised to soar in 2023. These stocks are A (Strong Buy) rated in our POWR Ratings system.
CVS Health Corporation (CVS)
CVS provides health services in the United States. Its segments are Health Care Benefits; Pharmacy Services; and Retail/LTC.
In terms of forward EV/Sales, CVS' 0.53x is 87.4% lower than the industry average of 4.17x. Its forward Price/Sales of 0.36x is 92.3% lower than the industry average of 4.72x.
CVS' trailing-12-month EBITDA margin of 6.08% is 71.1% higher than the industry average of 3.55%. Its trailing-12-month asset turnover ratio of 1.35% is 295.9% higher than the industry average of 0.34%.
Its revenue increased at an 8.9% CAGR over the past three years.
CVS' total revenues came in at $81.16 billion for the quarter ended September 30, 2022, up 10% year-over-year. Its product revenue came in at $57.64 billion, up 11.2% year-over-year, while its premiums revenue came in at $21 billion, up 10.6% year-over-year.
Analysts expect CVS' revenue to increase 3.2% year-over-year to $324.98 billion in 2023. Its EPS is expected to increase by 5.4% per annum for the next five years. It surpassed EPS estimates in all four trailing quarters.
CVS' shares have lost marginally intraday to close the last trading session at $87.00. However, Wall Street analysts expect the stock to hit $116.50 in the near term, indicating a potential upside of 33.9%.
CVS' POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our POWR Rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CVS has an A grade for Growth and a B for Value, Stability, and Sentiment. CVS is ranked first among the four stocks within the B-rated Medical – Drug Stores industry. Click here for additional CVS ratings (Momentum and Quality).
McKesson Corporation (MCK)
MCK provides healthcare services in the United States and internationally. It operates through four segments: U.S. Pharmaceutical; International; Medical-Surgical Solutions; and Prescription Technology Solutions (RxTS).
MCK's forward EV/Sales of 0.21x is 94.9% lower than the industry average of 4.17x. Its forward Price/Sales of 0.19x is 95.9% lower than the industry average of 4.72x.
The stock's trailing-12-month ROTC and ROTA of 29.18% and 3.26% are higher than the industry averages of negative 22.09% and 30.92%.
Its revenue has grown at a 7% CAGR over the past three years.
MCK's revenues came in at $70.16 billion for the fiscal 2023 second quarter ended September 30, 2022, up 5.4% year-over-year. Its net income increased 246.8% year-over-year to $926 million, while its EPS came in at $6.42, representing an increase of 275.4% year-over-year.
Street expects MCK's revenue to increase 4.6% year-over-year to $276.13 billion in 2023. Its EPS is expected to increase 4.6% year-over-year to $24.79 in 2023.
The stock has gained 50.1% over the past year to close the last trading session at $378.04. Wall Street analysts expect the stock to hit $426.25 in the near term, indicating a potential upside of 12.8%.
MCK's overall A rating equates to a Strong Buy in our proprietary rating system.
It has an A grade for Growth and a B for Value, Stability, and Quality. MCK is ranked #2 out of 79 stocks in the Medical - Services industry. Get additional MCK ratings for Momentum and Sentiment here.
Archer-Daniels-Midland Company (ADM)
ADM procures, transports, stores, processes, and merchandises agricultural commodities, products, and ingredients in the United States, Switzerland, the Cayman Islands, Brazil, Mexico, the United Kingdom, and internationally. The company has three segments: Ag Services and Oilseeds; Carbohydrate Solutions; and Nutrition.
ADM's forward EV/Sales of 0.55x is 69% lower than the industry average of 1.77x. Its forward Price/Sales of 0.46x is 59.5% lower than the industry average of 1.14x.
ADM's trailing-12-month ROTC and ROTA of 8.01% and 7.04% are 30% and 94.4% higher than the industry averages of 6.17% and 3.62%, respectively.
Its revenue and EPS have grown at 15.4% and 51.1% CAGRs over the past three years.
ADM's revenues came in at $24.68 billion for the third quarter that ended September 30, 2022, up 21.4% year-over-year. Its gross profit increased 36.6% year-over-year to $1.81 billion. Also, its adjusted net earnings came in at $1.05 billion, up 91.2% year-over-year, while its adjusted EPS came in at $1.86, up 91.8% year-over-year.
ADM's revenue is expected to increase 8.5% year-over-year to $25.04 billion for the yet-to-be-reported quarter ending December 2022. Its EPS is expected to increase by 8.5% per annum for the next five years. It surpassed EPS estimates in all four trailing quarters.
Over the past year, the stock has gained 23% to close the last trading session at $84.75. Wall Street analysts expect the stock to hit $103.40 in the near term, indicating a potential upside of 22%.
It's no surprise that ADM has an overall A rating, equating to a Strong Buy in our proprietary rating system.
Also, the stock has an A grade for Growth and a B for Sentiment and Quality. Within the Agriculture industry, it is ranked #2 out of 28 stocks. To see ADM's additional POWR Ratings for Value, Momentum, and Stability, click here.
CVS shares rose $0.10 (+0.11%) in premarket trading Monday. Year-to-date, CVS has declined -5.89%, versus a 3.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
3 Strong Buy Stocks With Major Upside Potential in 2023 StockNews.com
