Yesterday’s release of the minutes of the Fed’s meeting conveyed growing support for slowing interest rate hikes in response to data suggesting cooling inflation. On similar lines, Kansas City Fed President Esther George said in an interview last week, “When I think about inflation today, we’ve kind of turned the tide of supply-chain, production-side shortages.”
Hence, stocks rallied globally on hopes of a transition in the Fed’s hawkish stance, beginning with a downshift to a 50-basis-point rate hike next month. This would be a welcome break after persistent sell-offs triggered by four consecutive 75-basis-point rate hikes took the wind out of the sails of the market and the economy.
In such a situation, it could be opportune to invest in trending stocks on Wall Street, such as Merck & Co., Inc. (MRK), AT&T Inc. (T), The Mosaic Company (MOS), and Photronics, Inc. (PLAB). These stocks have gained momentum lately and are well-positioned to maintain the same.
Merck & Co., Inc. (MRK)
MRK is a global healthcare company offering prescription medicines, vaccines, biological therapies, and animal health products. The company operates through Pharmaceuticals and Animal Health segments.
On November 21, MRK announced that it has entered into a definitive agreement with Imago BioSciences, Inc. (IMGO), under which MRK, through a subsidiary, will acquire IMGO for $36.00 per share in cash for an approximate total equity value of $1.35 billion.
According to Robert M. Davis, president, and chief executive officer of MRK, this acquisition would augment the company’s pipeline and strengthen its presence in the growing field of hematology.
On October 7, MRK paid its quarterly dividend of $0.69 per share. The company pays a $2.76 per share dividend annually, which translates to a 2.58% yield on the current price. This compares to its 4-year average yield of 2.95%. The current dividend payout ratio is 35.51%. The company’s dividend payouts have grown for 11 consecutive years.
In the fiscal 2022 third quarter ended September 30, 2022, MRK’s sales increased 13.7% year-over-year to $14.96 billion. The company’s non-GAAP net income grew 3.9% from the year-ago quarter to $4.70 billion, or $1.85 per share.
Analysts expect MRK’s revenue for the current year to come in at $59.07 billion, indicating an increase of 21.3% year-over-year. During the same period, the company’s EPS is also expected to increase 22.7% year-over-year to $7.38. Furthermore, MRK has topped the consensus EPS estimates in each of the trailing four quarters.
The stock is currently trading significantly above its 50-day and 200-day moving averages of $94.50 and $88.53, reflecting the hype surrounding it. It has gained 9.4% over the past month and 39% year-to-date to close the last trading session at $106.82.
MRK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
MRK has grade B for Growth, Value, Sentiment, and Quality. It is ranked #11 among 162 stocks in the Medical – Pharmaceuticals industry.
Click here to see MRK’s POWR Ratings for Growth, Stability, and Momentum.
AT&T Inc. (T)
T is a global provider of telecommunications, media, and technical services worldwide. The company operates through two segments: Communications; and Latin America. Its offerings include wireless communications, data/broadband, Internet services, video services, local exchange services, long-distance services, telecommunications equipment, managed networking, and wholesale services.
On November 1, T paid its quarterly dividend of $0.2775 per share on the company’s common shares; Series A dividend of $312.50 per preferred share, or $0.3125 per depositary share; and Series C dividend of $296.875 per preferred share, or $0.296875 per depositary share. The company pays $1.11 as dividends annually, which translates to a yield of 5.84% at the current price.
On August 8, T announced that it delivered ‘FirstNet and Family,’ a simplified experience that gives America’s first responders the best of 2 networks – public safety of the FirstNet network and the AT&T commercial network – to keep their worlds connected. This should help T continue to witness growing demand from various agencies and organizations.
For its fiscal 2022 third quarter ended September 30, 2022, T’s revenues came in at $30 billion. Excluding the impact of U.S. Video separation in July 2021, standalone operating revenues for T were up 3.1% from $29.1 billion in the year-ago quarter. Its income from continuing operations increased 26% year-over-year to $6.3 billion. As a result, the company’s adjusted EPS grew 3% year-over-year to $0.68.
The stock has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive. It has gained 7.5% over the past month to close the last trading session at $19.09 and is currently trading above its 50-day and 200-day moving averages of $17.06 and $18.51, respectively.
T has an overall rating of B, which equates to Buy in our POWR Ratings system. It has a grade of B for Value and Quality.
T is ranked #4 of 19 stocks in the Telecom – Domestic industry.
Click here to access the additional ratings for T’s Stability, Growth, Sentiment, and Momentum.
The Mosaic Company (MOS)
MOS produces and markets concentrated phosphate and potash crop nutrients in North America and other countries. The company operates in segments including Phosphates; Potash; and Mosaic Fertilizantes.
On October 19, MOS announced a quarterly dividend of $0.15 per share on the company's common stock, payable on December 15, 2022, to stockholders of record as of the close of business on December 1, 2022. The company pays $0.60 per share as a dividend annually. This translates to a 4-year average dividend yield of 1.19%, better than the 4-year average dividend yield of 0.81%.
MOS has increased its dividend payouts for three consecutive years.
For the third quarter of the fiscal year 2022 ended September 30, MOS’s net sales increased 56.5% year-over-year to $5.35 billion, while its operating earnings increased 115.9% year-over-year to $1.16 billion. During the same period, adjusted EBITDA and net earnings attributable to MOS increased 74% and 126.3% year-over-year to $1.69 billion and $841.7 million, respectively.
As a result, MOS’s adjusted EPS came in at $3.22, up 138.5% year-over-year.
MOS’s revenue is expected to increase 55.3% year-over-year to $19.2 billion, while its EPS is estimated to grow 137.1% year-over-year to $11.95 in the current fiscal year ending December 2022.
The stock has gained 25.9% year-to-date to close the last trading session at $50.60. It is trading at 4.22 times its forward earnings, significantly less than the industry average of 12.67.
MOS has an overall rating of B, equating to a Buy in our POWR Ratings system. It also has a grade B for Growth, Value, and Quality.
MOS is ranked #6 among 28 stocks in the Agriculture industry.
Beyond what is stated above, we have also rated MOS for Momentum, Sentiment, and Stability. Get all MOS ratings here.
Photronics, Inc. (PLAB)
PLAB manufactures and sells photomask products and services in the United States and internationally. Its products are used to manufacture integrated circuits (ICs) and flat panel displays (FPDs) and to transfer circuit patterns onto semiconductor wafers, FDP substrates, and other electrical and optical components.
PLAB’s revenues increased 28.9% year-over-year to $219.95 million in the fiscal 2022 third quarter ended July 31, 2022. Its operating income grew 123.9% from the year-ago value to $63.73 million, while its net income came in at $49.22 million, up 102.1% year-over-year. The company’s EPS grew 82.1% from the prior-year quarter to $0.51.
Analysts expect PLAB’s revenue and EPS for the fiscal ending October 2023 to increase 5.9% and 9.5% year-over-year to $872.50 million and $2.02, respectively. The company has further impressed by surpassing EPS estimates in each of the trailing four quarters.
PLAB’s stock is trading above its 50-day and 200-day moving averages of $16.22 and $18.09, respectively, indicating its popularity on Wall Street. It has gained 20.9% over the past month to close the last trading session at $18.99.
PLAB has an overall rating of B, translating to a Buy in our POWR Ratings system. It also has a grade B for Growth, Value, and Quality.
PLAB is ranked #6 among 93 stocks in the Semiconductor & Wireless Chip industry.
Beyond what is stated above, we have also rated PLAB for Stability, Sentiment, and Momentum. Get all PLAB ratings here.
MRK shares were trading at $106.82 per share on Thursday afternoon, down $0.08 (-0.07%). Year-to-date, MRK has gained 42.91%, versus a -14.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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