Although the Federal Reserve broke a string of four straight 75 basis point hikes by announcing a 50-basis-point hike last week, the officials signaled plans to keep raising rates through next year, with no reductions until 2024. Based on its median forecast, the terminal rate is projected to reach as high as 5.1% in 2023.
Furthermore, retail sales and industrial production declined in November, showing signs of a slowing economy and increasing the likelihood of the economy tipping into a recession. Retail sales fell 0.6% from the previous month, recording the biggest decline this year, while manufacturing output fell 0.6%, the first decline since June.
According to the latest Bloomberg survey, economists predict a 70% chance of a recession in the United States next year. The recession odds are up from the 65% prediction in November and more than double what was estimated six months ago. The survey also shows 0.3% average GDP growth next year, including an annualized 0.7% decrease in the second quarter and flat readings in the first and third quarters.
Amid a highly uncertain market backdrop, it could be wise to invest in fundamentally sound stocks Cardinal Health, Inc. (CAH), United Microelectronics Corporation (UMC), MasterCraft Boat Holdings, Inc. (MCFT), and GEE Group, Inc. (JOB).
Cardinal Health, Inc. (CAH)
CAH provides various healthcare services and products in the United States, Canada, Europe, and Asia. The company operates through two segments: Pharmaceutical and Medical. It offers customized solutions for hospitals, healthcare systems, pharmacies, clinical laboratories, and at-home patients.
On November 15, CAH announced the launch of Velocare™, a last-mile fulfillment and supply chain network that provides patients with the essential supplies and services they require for hospital-level care at home in a couple of hours.
By expanding its at-Home Solutions supply chain and logistical capabilities, CAH aims to increase its efficiency and scalability and reach patients receiving hospital-level care at home.
In September, CAH and PayrHealth announced a collaboration to help specialty physician practices simplify payor contracting and maximize financial performance.
“We are very excited to partner with PayrHealth to bring meaningful efficiencies and cost savings to practices, so they can focus on patient care,” said Amy Valley, vice president of Clinical Strategy & Technology Solutions at CAH.
For the fiscal 2023 first quarter ended September 30, 2022, CAH’s revenues increased 13% year-over-year to $49.60 billion. Its pharmaceutical segment’s revenue and profit grew 15% and 6% year-over-year to $45.80 billion and $431 million, respectively. The company’s cash inflows from operating activities were $23 million, compared to cash outflows of $646 million in the prior-year period.
The consensus revenue estimate of $200 billion for the fiscal year ending June 2023 represents a 10.3% improvement year-over-year. The consensus EPS estimate of $5.32 for the current year indicates a 5.2% year-over-year growth. Moreover, the company has surpassed the consensus revenue estimates in each of the trailing four quarters.
Furthermore, the company’s revenue and EPS for the next fiscal year are expected to grow 5.8% and 17.5% year-over-year to $211.60 billion and $6.25, respectively.
Shares of CAH have gained 54.6% over the past six months and 62% over the past year to close the last trading session at $79.58.
CAH’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall B rating indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CAH has a grade of B for Growth and Value. Within the Medical – Services industry, it is ranked #5 of 78 stocks. To see additional POWR Ratings (Sentiment, Quality, Momentum, and Stability) for CAH, click here.
United Microelectronics Corporation (UMC)
Headquartered in Hsinchu City, Taiwan, UMC is a semiconductor wafer foundry operating in Taiwan, Singapore, China, Hong Kong, and globally. The company offers circuit design, mask tooling, wafer fabrication, and assembly and testing services. It serves fabless design and integrated device manufacturers.
On September 12, UMC and Avalanche Technology, the leader in next-generation MRAM technology, announced the availability of new High-Reliability Persistent SRAM (P-SRAM) memory devices through UMC’s 22nm process technology.
“With our comprehensive foundry technology portfolio and focus on manufacturing excellence, UMC is well positioned to serve the growing demand for persistent memory through Avalanche Technology’s powerful solutions,” said G C Hung, Vice President of the Result Delivery Office Research Development at UMC.
For the third quarter of fiscal 2022 ended September 30, UMC’s operating revenues came in at $2.38 billion, up 34.9% year-over-year. The company’s operating income increased 99.2% from the prior-year period to $950 million. Its net income grew 57.4% year-over-year to $861 million, while its EPS came in at $0.07, up 53.3% year-over-year.
Analysts expect UMC’s revenue for the fiscal year (ending December 2022) to increase 18.8% year-over-year to $9.14 billion. The company’s EPS for the same year is expected to increase 42.9% year-over-year to $1.18. Over the past month, the stock has declined 8.5% to close the last trading session at $6.78.
UMC’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall A rating translates to a Strong Buy in our proprietary rating system.
UMC has an A grade for Quality and Value. In the B-rated Semiconductor & Wireless Chip industry, it is ranked #1 out of 93 stocks.
Click here for the additional POWR Ratings for Stability, Growth, Momentum, and Sentiment for UMC.
MasterCraft Boat Holdings, Inc. (MCFT)
MCFT designs, manufactures, and markets recreational powerboats. The company operates through four segments: MasterCraft; Crest; NauticStar; and Aviara.
On November 2, MCFT announced an expansion of its popular entry-level NXT lineup with the all-new 2023 NXT21 and NXT23. The new models deliver best-in-class wave performance, added storage, spacious hybrid bow design, and standard telematics.
According to George Steinbarger, Chief Revenue Officer at MCFT, since the introduction of the NXT line in 2015, the company’s entry-level offering has been well-received by customers.
For the fiscal 2023 first quarter ended October 2, 2022, MCFT’s net sales increased 29.7% year-over-year to $169.5 million. The company’s adjusted EBITDA grew 72.8% from the year-ago value to $35.94 million. Its net income from continuing operations increased 101.4% year-over-year to $24.64 million. Also, its adjusted net income per share came in at $1.43, up 90.7% year-over-year.
MCFT’s EPS for the fiscal 2022 second quarter (ending December 31, 2022) is estimated to increase 11.2% year-over-year to $1.01. Moreover, the company has surpassed consensus EPS estimates in each of the trailing four quarters, which is impressive. The stock has gained 21.2% over the past six months to close the last trading session at $25.43.
It's no surprise that MCFT has an overall rating of A, equating to a Strong Buy in our POWR Ratings system. The stock has a grade B for Growth, Value, and Quality.
MCFT is ranked #2 of 37 stocks in the Athletics & Recreation industry. Beyond what is stated above, we have also rated MCFT for Momentum, Sentiment, and Stability. Get all MCFT ratings here.
GEE Group, Inc. (JOB)
JOB provides permanent and temporary professional and industrial staffing and placement services in the United States. The company operates through two business segments: Industrial Staffing Services and Professional Staffing Services.
For the fiscal 2022 fourth quarter ended September 30, 2022, JOB’s net revenue increased marginally year-over-year to $41.52 million. As of September 30, the company’s cash and total current assets stood at $18.85 million and $42.22 million, up 89.5% and 25.3% year-over-year, respectively. Its non-GAAP free cash flow for the year came in at $8.90 million, compared to $244,000 in the previous year.
Analysts expect JOB’s revenue to increase 12.5% year-over-year to $167.53 million for the fiscal year ending September 2022. Likewise, the revenue estimate of $175.90 million indicates a 5% growth from the previous year. Also, the company has surpassed the consensus revenue estimates in three of the trailing four quarters.
Shares of JOB have gained 18.9% over the past six months and 39.2% over the past year to close its last trading session at $0.65.
JOB’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
JOB has a grade of A for Sentiment and Value. Within the A-rated Outsourcing-Staffing Services industry, it is ranked #9 out of 21 stocks.
Beyond what we’ve stated above, we have also given grades for Stability, Momentum, and Quality. Get all JOB ratings here.
CAH shares were trading at $80.40 per share on Wednesday morning, up $0.82 (+1.03%). Year-to-date, CAH has gained 60.13%, versus a -17.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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