This week, the Fed launched its half-point interest rate hike lower than the four consecutive three-quarter-point hikes in previous meets. Although inflation improved significantly over the past two months, the 2% inflation rate targeted by the Federal Reserve suggests a long way to go.
Fed Chair Jerome Powell asserted in hawkish remarks, “Restoring price stability will likely require maintaining a restrictive policy stance for some time.”
However, the cooling inflation has boosted investors’ sentiments reducing the odds of a recession next year. According to Goldman Sachs Research, the U.S. economy is forecasted to narrowly avoid a recession and have a soft landing next year.
The stock market has been under pressure this year due to uncertainties. Tech-heavy Nasdaq composite has lost 34.7% year-to-date. However, fundamentally-sound Nasdaq stocks PepsiCo, Inc. (PEP), Broadcom Inc. (AVGO), and Comcast Corporation (CMCSA) have managed to deliver a steady performance and could be ideal buys now.
PepsiCo, Inc. (PEP)
PEP is a global food and beverage giant with a broad portfolio of soft drinks. The company’s segments include Frito-Lay North America, Quaker Foods North America, and PepsiCo Beverages North America. Its product offerings also include branded dips, cheese-flavored snacks, tortillas, and dairy products.
On December 5, 2022, a new packaging goal was announced to double down the scale of reusable packing models from 10% to 20% by 2030. This ambition is driven by disruptive innovation that aligns perfectly with the company’s sustainable packaging vision.
PEP’s net revenue increased 8.8% year-over-year to $21.97 billion for the third quarter that ended September 3, 2022. The company’s gross profit increased 8% year-over-year to $11.66 billion, while its non-GAAP operating profit rose 10.9% from the year-ago value to $3.59 billion. In addition, its non-GAAP net income increased 10.1% year-over-year to $2.73 billion. Also, its non-GAAP EPS came in at $1.97, up 10.1% year-over-year.
The consensus EPS estimate of $1.64 for the fourth quarter ending December 31, 2022, represents a 7.3% improvement year-over-year. The consensus revenue estimate of $26.59 billion for the current quarter indicates a 5.3% increase from the same period last year. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
Over the past nine months, the stock has gained 17.6% to close the last trading session at $183.36.
PEP’s strong fundamentals are reflected in its POWR Ratings. It 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, with each factor weighted to an optimal degree.
It has an A grade for Quality and a B for Growth, Stability, and Sentiment. Out of 33 stocks in the A-rated Beverages industry, PEP is ranked #7. Click here to see the other ratings of PEP for Value and Momentum.
Broadcom Inc. (AVGO)
AVGO designs, develops, and supplies a range of semiconductor devices focusing on complex and mixed signal complementary metal oxide semiconductor-based devices and analog III-V-based products. It operates through two segments: semiconductor solutions and infrastructure software.
On October 25, 2022, AVGO’s ValueOps solution, Rally Software, received FedRAMP authorization for federal agencies and departments procuring cloud services. This approval enables the company to provide Value Stream Management solutions to government agencies for digital transformation and strengthens AVGO’s leadership position.
For the fourth quarter that ended October 30, 2022, AVGO’s net revenue increased 20.6% year-over-year to $8.93 billion. Its adjusted EBITDA rose 25.8% year-over-year to $5.72 billion, while its non-GAAP net income came in at $4.54 billion, up 29.8% from its year-ago period. AVGO’s non-GAAP EPS stood at $10.45, indicating a 33.8% year-over-year increase.
The consensus revenue estimate of $8.90 billion for the fiscal first quarter (ending January 31, 2023) represents a 15.5% increase from the same period last year. The consensus EPS estimate of $10.2 for the current quarter represents a 21.3% increase from the same period last year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past month, the stock has gained 11.9% to close the last trading session at $574.44.
AVGO’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. It has an A grade for Quality. Within the Semiconductor & Wireless Chip industry, it is ranked #17 out of 93 stocks.
In addition to the POWR Ratings I’ve just highlighted, you can see AVGO’s Growth, Value, Momentum, Stability, and Sentiment ratings here.
Comcast Corporation (CMCSA)
CMCSA is a global media and technology company operating through five segments: Cable Communications; Media, Studios; Theme Parks; and Sky.
On December 12, 2022, CMCSA launched the world’s first live, multigigabit symmetrical Internet connection powered by 10G and Full Duplex DOCSIS 4.0. 10G technology. This technology promises to offer customers next-level net speed and performance and is expected to significantly boost CMCSA’s product portfolio.
CMCSA’s adjusted net income increased 4.5% year-over-year to $4.22 billion in the fiscal third quarter (ended September 30, 2022). The company’s adjusted EBITDA increased 5.9% from the year-ago value to $9.48 billion, while its adjusted EPS increased 10.3% from the year-ago value to $0.96.
Analysts expect CMCSA’s EPS and revenue to increase 7.4% and 0.5% year-over-year to $0.83 and $30.47 billion, respectively, in the fiscal fourth quarter (ending December 31, 2022). The company has surpassed the consensus EPS estimates in each of the trailing four quarters, which is excellent.
Shares of CMCSA have gained 3.6% over the past month to close the last trading session at $35.35.
CMCSA has an overall rating of B, which translates to a Buy in our proprietary rating system. It also has a B grade for Growth and Quality. It is ranked first among the 9-stock Entertainment - TV & Internet Providers industry.
To see the other ratings of CMCSA for Value, Momentum, Stability, and Sentiment, click here.
PEP shares were unchanged in premarket trading Thursday. Year-to-date, PEP has gained 8.38%, versus a -16.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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