Recent financial system failures have instilled fear among investors. However, on the bright side, with inflation and retail sales easing moderately for the month, hopes of an economic expansion have been rekindled. Against this backdrop, let us look at some stocks Cisco Systems, Inc. (CSCO), Albertsons Companies, Inc. (ACI), and Universal Logistics Holdings, Inc. (ULH), for the next bull market now.
The stock market kicked off the year in a state of euphoria, which gradually lost its steam due to a strong job report. In addition, fears of a recession have been exacerbated on Wall Street due to worries over the fate of Credit Suisse.
Emily Roland, the co-chief investment strategist at John Hancock Asset Management, commented, “The no landing scenario has quickly evaporated. Something is breaking right now and we think a recession has potentially been pulled forward.”
While some experts anticipate a recession, some believe that regulators' quick support, including guaranteeing the funds of depositors, will prevent a crisis and allow for a soft landing.
Moreover, easing price pressure and a drop in retail sales in February signaled a cooling economy. Jay Hatfield, chief investment officer at Infrastructure Capital Management, is “extremely” bullish on the longer-term investing outlook and sticks with his target of 4,500 points for the S&P 500.
Although uncertainties exist, the possibility of an impending bull market also exists. Therefore, quality stocks CSCO, ACI, and ULH might be wise portfolio additions now.
Cisco Systems, Inc. (CSCO)
CSCO manufactures and sells Internet Protocol-based networking and other products related to the communications and information technology industry. The company serves businesses of various sizes, governments, public institutions, and service providers.
On February 27, CSCO and T-Mobile US, Inc. (TMUS) announced plans to offer businesses Cisco Meraki’s first-ever 5G cellular gateways for fixed wireless access (FWA), the MG51 and MG51E. The Cisco Meraki MG51 and MG51E cellular gateways introduce a new, 5G-powered, cloud-first way of doing wide area networking (WAN).
Also, on the same day, CSCO announced its collaboration with Mercedes-Benz to provide an optimal mobile office experience in its new Mercedes-Benz E-Class vehicles. These vehicles will be equipped with Webex Meetings and Calling and utilize Webex AI audio capabilities to enable greater flexibility for the hybrid workforce while putting safety at the forefront. These innovations could boost CSCO’s growth prospects.
CSCO declared a quarterly dividend of $0.39 per common share, up 3% from the previous quarter's dividend. This dividend is scheduled to be paid to all stockholders on April 26, 2023. This reflects the shareholder return ability of the company.
CSCO’s revenue has grown at 1% and 2% CAGRs over the past three and five years, respectively.
CSCO’s trailing-12-month levered FCF margin of 25.56% is 288% higher than the industry average of 6.59%. Also, its trailing-12-month ROCE of 27.92% is 472.9% higher than the 4.87% industry average.
For the fiscal second quarter that ended January 28, 2023, CSCO’s total revenue increased 6.9% year-over-year to $13.59 billion. The company’s non-GAAP net income increased 2.6% year-over-year to $3.64 billion. CSCO’s non-GAAP EPS for the quarter increased 4.8% from the prior-year period to $0.88.
For the fiscal year ending 2023, the company expects its revenue to grow between 9% and 10.5% year-over-year. Its non-GAAP EPS is expected to come between $3.73 and $3.78 for the same period. For the third quarter of fiscal 2023, CSCO expects revenue to grow between 11% and 13% year-over-year and non-GAAP EPS to come between $0.96 and $0.98.
For the fiscal third quarter ending April 2023, analysts expect CSCO’s revenue to come in at $14.36 billion, representing an increase of 11.9% year-over-year. For the same quarter, the consensus EPS estimate of $0.97 indicates an 11.3% year-over-year increase. The company surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 15.8% over the past six months to close its last trading session at $50.12. Moreover, it gained 2.2% intraday.
CSCO’s POWR Ratings reflect its solid prospects. CSCO has an overall A rating, 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.
CSCO has an A grade for Quality and B for Momentum, Stability, and Sentiment. Within the Technology - Communication/Networking industry, it is ranked #4 out of 51 stocks.
Click here to see the additional POWR Ratings for CSCO (Growth and Value).
Albertsons Companies, Inc. (ACI)
ACI is engaged in the operation of food and drug stores in the United States. It offers grocery, general merchandise, health and beauty care products, pharmacy, fuel, and other items and services.
On February 6, ACI announced the pricing of its private offering of $750 million aggregate principal amount of its 6.50% senior notes due 2028.
ACI intends to use the net proceeds from the offering, together with cash on hand, to repay in full all $750 million outstanding of its 3.5% senior notes due 2023, which are scheduled to mature on February 15, 2023, and pay fees and expenses related to the refinancing and the issuance of the notes.
On January 10, ACI declared a dividend for the fourth quarter of the fiscal year 2022 of $0.12 per share of common stock, paid on February 10, 2023. This reflects the cash generation ability of the company.
ACI’s revenue has grown at 7.9% and 5.2% CAGRs over the past three and five years, respectively. Moreover, its EBIT and EBITDA have grown at 36.4% and 17.2% CAGRs, respectively, over the past three years.
ACI’s trailing-12-month ROCE of 81.65% is 707.1% higher than the 10.12% industry average.
ACI’s net sales and other revenue increased 8.5% year-over-year to $18.15 billion in the fiscal third quarter that ended December 3, 2022. Its gross margin grew 6% from the year-ago value to $5.12 billion.
The company’s adjusted net income came in at $505.10 million, representing an increase of 10.5% year-over-year, while its adjusted net income per Class A share rose 10.1% year-over-year to $0.87.
ACI’s revenue is expected to increase 1.8% year-over-year to $23.73 billion in the fiscal first quarter ending May 2023. Its EPS is expected to come at $0.93 for the same quarter. It surpassed the consensus revenue estimates in each of the trailing four quarters.
The stock declined marginally intraday to close the last trading session at $19.68.
ACI’s POWR Ratings reflect its solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has a B grade for Value, Quality, and Sentiment. Within the A-rated 39-stock Grocery/Big Box Retailers industry, it is ranked #6.
In addition to the POWR Ratings we have mentioned above, click here to see the other ratings of ACI for Growth, Momentum, and Stability.
Universal Logistics Holdings, Inc. (ULH)
ULH provides transportation and logistics solutions in the United States, Mexico, Canada, and Colombia. It offers truckload services; domestic and international freight forwarding, customs brokerage services; and final mile and ground expedite services.
In February, ULH’s declared a dividend of $0.105 per share of common stock, which was payable to shareholders on April 6, 2023. This reflects the company’s ability to pay back its shareholders.
ULH’s revenue has grown at 10.1% and 10.6% CAGRs over the past three and five years, respectively. Moreover, its EBIT and EBITDA have grown at 36.1% and 21.5% CAGRs, respectively, over the past three years.
ULH’s trailing-12-month ROCE of 45.02% is 229.3% higher than the 13.67% industry average.
For the fiscal fourth quarter that ended December 31, 2022, ULH’s income from operation increased 102.6% year-over-year to $48.17 million, while its net income increased 106.5% year-over-year to $33.45 million. Furthermore, its EPS came in at $1.27, representing a 111.7% increase from the prior-year quarter.
For the fiscal second quarter ending June 2023, ULH’s EPS and revenue are expected to come at $1.01 and $448.10 million, respectively. For the fiscal year ending December 2023, Street expects ULH’s revenue and EPS to come in at $1.85 billion and $4.23, respectively. ULH surpassed the consensus EPS and revenue estimates in three of the trailing four quarters.
The stock has gained 22.3% over the past year to close the last trading session at $26.97.
ULH’s POWR Ratings reflect this positive outlook. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
In addition, ULH has an A grade for Value. It is ranked second of 16 stocks in the B-rated Air Freight & Shipping Services industry.
Click here to see the rating of ULH for Growth, Momentum, Stability, Sentiment, and Quality.
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CSCO shares were trading at $49.98 per share on Friday morning, down $0.14 (-0.28%). Year-to-date, CSCO has gained 5.75%, versus a 1.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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