Persistent macroeconomic and geopolitical headwinds and fears of a recession have kept the stock market highly volatile this year. While signs of slowing inflation and Fed Chair Jerome Powell’s dovish comments improved investors’ confidence, the stronger-than-expected jobs report and increased wages in November dampened investor sentiment again.
Investors worry that the latest jobs and wages data could probably stop the Fed from lowering the magnitude of its rate hikes, enhancing the odds of a recession.
Chairman and CEO of JPMorgan Chase, Jamie Dimon, seems worried that consumers could spend away all their savings as inflation continues to bite, pushing the economy into a recession next year. Also, Goldman Sachs CEO David Solomon warned that there are rough times ahead, with a growing risk of a recession next year as the central bank battles stubborn inflation.
Given the ongoing uncertainties in the economy, it could be wise to invest in fundamentally strong and resilient stocks Johnson & Johnson (JNJ), Cisco Systems, Inc. (CSCO), Archer-Daniels-Midland Company (ADM), and Cardinal Health, Inc. (CAH), which can provide shelter during any market storm.
Johnson & Johnson (JNJ)
JNJ, the world's largest and most diverse healthcare conglomerate, researches, develops, manufactures, and sells various healthcare goods. Its business operates through three segments, Consumer Health Products; Pharmaceutical Products; and MedTech. Its core focus is items relating to human health and well-being.
On November 1, JNJ and Abiomed (ABMD), a world leader in breakthrough heart, lung, and kidney support technologies, announced that they have entered into a definitive agreement under which JNJ will acquire through a tender offer all outstanding shares of Abiomed, for an upfront payment of $380.00 per share in cash.
ABMD’s skilled workforce, strong ties with clinicians, unique cardiovascular portfolio, and extensive pipeline will complement JNJ's MedTech portfolio. It will also enable JNJ to implement its strategic priorities, and vision for the new JNJ focused on Pharmaceutical and MedTech.
For the fiscal 2022 third quarter ended September 30, 2022, JNJ’s sales in the United States grew 4.1% year-over-year to $12.45 billion, while its overall reported sales increased 1.9% year-over-year to $23.79 billion, with adjusted operational growth of 8.2%. Its net earnings rose 21.6% year-over-year to $4.46 billion, while its EPS increased 22.6% from the year-ago value to $1.68.
The company has increased its dividend for 60 consecutive years. It pays a $4.52 per share dividend annually, which translates to a 2.55% yield on the current price. JNJ’s dividend payout has grown at a 6% CAGR over the past five years. Its four-year average dividend yield is 2.60%.
For the fiscal year ending December 2022, analysts expect JNJ’s revenue to increase 1.4% year-over-year to $95.04 billion. The company’s EPS for the current fiscal year is expected to increase by 2.5% year-over-year to $10.05. JNJ has surpassed the consensus EPS estimates in each of the four trailing quarters, which is impressive.
In addition, analysts expect the company’s EPS and revenue for the next fiscal year (ending December 2023) to grow 3.2% and 2.6% year-over-year to $10.37 and $97.54 billion, respectively.
Over the past month, the stock has gained 2.3% and 7.8% over the past year to close the last trading session at $177.20.
JNJ’s strong fundamentals are reflected in its POWR Ratings. The stock 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, each weighted to an optimal degree.
The stock has an A grade for Stability and a B for Value, Sentiment, and Quality. Within the Medical-Pharmaceuticals industry, it is ranked #5 of 160 stocks.
Beyond what we stated above, we also have JNJ’s ratings for Growth and Momentum. Get all JNJ ratings here.
Cisco Systems, Inc. (CSCO)
CSCO is involved in the creation and marketing of several Internet-related technologies. The business is integrating its platforms for cloud computing, networking, security, and teamwork. The company operates via the Americas, Europe, Middle East, and Africa (EMEA), Asia Pacific, Japan, and China, respectively (APJC).
On December 6, CSCO and Manchester City Football Team announced the installation of WaitTime, the real-time crowd intelligence system, at the Etihad Stadium, making them the first Premier League club to do so. CSCO aims to expand its operations by integrating WaitTime's proprietary technology with its current technologies to handle several crowd control concerns.
On November 29, Cisco AppDynamics introduced its new AppDynamics Cloud features that would help enterprises achieve observability over cloud-native apps linked to business context across the IT estate.
This new feature in AppDynamics Cloud is part of CSCO's expansion strategy by providing engineers with the clarity and knowledge they need to simplify processes. With AppDynamics Cloud, the business aims to redefine the cloud-native observability industry.
For the fiscal 2023 first quarter ended October 29, 2022, CSCO’s total revenue grew 5.7% from the year-ago value to $13.63 billion, while its gross margin increased 3.6% year-over-year to $8.35 billion. The company’s operating income was $3.54 billion, a 3% increase year-over-year.
Furthermore, CSCO’s non-GAAP net income increased 2% year-over-year to $3.50 billion, while its EPS stood at $0.86, a 5% increase from the year-ago value.
On December 7, CSCO's Board of Directors announced a quarterly cash dividend of $0.38 per common share to be paid on January 25, 2023, to all shareholders of record as of the close of business on January 5, 2023.
The company has raised its dividend for 11 consecutive years. It pays a $1.52 per share dividend annually, which translates to a 3.10% yield on the current price. CSCO’s four-year average dividend yield is 2.98%. Its dividend payments have grown at a 6% CAGR over the past five years.
The consensus EPS estimate of $3.55 for the fiscal year (ending July 2023) indicates a 5.6% year-over-year improvement. Likewise, the current year's consensus revenue estimate of $54.49 billion indicates a rise of 5.7% from the previous year. Moreover, it has surpassed the consensus EPS estimates in each of the four trailing quarters.
Shares of CSCO have gained 9.1% over the past month to the last trading session at $48.99.
CSCO’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Quality and a B for Stability. Within the Technology - Communication/Networking industry, it is ranked #3 of 48 stocks.
Click here to see additional ratings of CSCO for Growth, Value, Momentum, and Sentiment.
Archer-Daniels-Midland Company (ADM)
ADM sources agricultural commodities on a global scale and handles their transportation, storage, processing, and merchandising. It operates through three segments, Ag Services and Oilseeds; Carbohydrate Solutions; and Nutrition. It also imports, exports, and distributes agricultural commodities and feed products.
In June, ADM and New Culture, a forerunner in animal-free dairy, forged a strategic alliance to expedite the developing and marketing of alternative dairy products. ADM’s worldwide production capabilities and experience will help speed New Culture’s efforts toward commercializing its animal-free products.
With the help of its extensive array of product development resources and skills, ADM hopes to expand its operations by focusing on advancing New Culture's food service and consumer applications.
For the fiscal 2022 third quarter ended September 30, 2022, ADM’s revenues grew 21.4% year-over-year to $24.68 billion, while its gross profit increased 36.6% year-over-year to $1.81 billion. Adjusted segment operating profit came in at $1.58 billion, a 57.6% increase from the prior year’s period.
In addition, the company’s earnings before income taxes rose 88.4% year-over-year to $1.23 billion, and its EPS increased 91.8% from the previous year’s quarter to $1.86.
ADM pays a $1.60 per share dividend annually, which translates to a 1.73% yield on the current price. Its’s dividend payments have grown at a CAGR of 4.6% over the past five years. The company has a four-year average dividend yield of 2.77% and has increased its dividends for 29 consecutive years.
Analysts expect ADM’s revenue to increase 18.5% year-over-year to $101.04 billion for fiscal 2022 ending December 2022. The company’s EPS for the current fiscal year is expected to increase 45.2% year-over-year to $7.53. ADM has surpassed the consensus EPS estimates in each of the four trailing quarters, which is impressive.
Shares of ADM have gained 4.3% over the past six months and 44.1% over the past year to close the last trading session at $92.40.
ADM’s POWR Ratings reflect its strong outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Growth and a B for Sentiment. Within the Agriculture industry, it is ranked #3 of 28 stocks.
Click here to see additional ratings of ADM for Value, Stability, Quality, and Momentum.
Cardinal Health, Inc. (CAH)
CAH operates as an integrated healthcare services and products firm. It delivers tailored solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, and patients in the home. The business operates in two segments, Pharmaceutical and Medical.
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.
For the fiscal 2023 first quarter ended September 30, 2022, CAH’s revenues increased 13% from the previous year’s quarter to $49.60 billion, while 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. CAH pays a $1.98 per share dividend annually, which translates to a 2.45% yield on the current price. Its four-year average dividend yield is 3.67%.
CAH’s dividend payments have grown at a CAGR of 1.6% over the past five years. The company has increased its dividends for 27 consecutive years.
The consensus EPS estimate of $5.31 for the current fiscal year (ending June 2023) indicates a 4.9% year-over-year improvement. Likewise, the consensus revenue estimate of $199.25 billion for the same year reflects a rise of 9.9% from the prior year.
Furthermore, analysts expect the company’s EPS and revenue for the next fiscal year to rise 17.7% and 6.3% year-over-year to $6.25 and $211.81 billion, respectively.
The stock has gained 50.9% over the past six months and 67.4% over the past year to close the last trading session at $80.78.
CAH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has a B grade for Growth and Value. Within the Medical - Services industry, it ranks #4 of 79 stocks.
Beyond what we stated above, we also have CAH’s ratings for Momentum, Stability, Sentiment, and Quality. Get all CAH ratings here.
JNJ shares were trading at $177.25 per share on Friday morning, up $0.05 (+0.03%). Year-to-date, JNJ has gained 6.33%, versus a -15.74% 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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