U.S. employers added 261,000 jobs in October, reflecting continued resilience in the labor market. The jobless rate rose to 3.7%. While the rate at which jobs have been added is still high, there’s evidence of a slowdown compared to the year's first half.
A stronger-than-expected employment growth further plays into the narrative that the Fed may need to hike rates further. Kiran Ganesh, a multi-asset strategist at UBS Global Wealth Management, said, “A case of good news that would be bad news.”
Such has been the impact of the fourth consecutive 75-bps rate hike, announced earlier this week, combined with the indication that an end may not be in sight anytime soon. With hopes of a Fed pivot quelled promptly, all the major market indexes have responded with steep declines, with the S&P 500 on track for its worst week in six weeks.
Amid the uncertain market backdrop, shares of fundamentally solid stocks, Johnson & Johnson (JNJ), PepsiCo, Inc. (PEP), Comcast Corporation (CMCSA), and Hackett Group Inc. (HCKT), are poised to generate steady income and compound capital.
Johnson & Johnson (JNJ)
JNJ is a worldwide researcher, developer, manufacturer, and seller of various healthcare products. The company operates through three segments: Consumer Health; Pharmaceuticals; and MedTech.
On November 1, JNJ announced that it had entered a definitive agreement with ABIOMED Inc (ABMD), a world leader in breakthrough heart, lung, and kidney support technologies, to acquire all outstanding shares of ABMD for an upfront payment of $380.00 per share in cash, corresponding to an enterprise value of approximately $16.6 billion which includes cash acquired.
The transaction broadens Johnson & Johnson MedTech’s (JJMT) position as a growing cardiovascular innovator. According to Joaquin Duato, CEO of JNJ, “The addition of Abiomed provides a strategic platform to advance breakthrough treatments in cardiovascular disease and helps more patients around the world while driving value for our shareholders.”
On October 25, JNJ announced that the U.S. Food and Drug Administration (FDA) approved TECVAYLI™ (teclistamab-cqyv) for treating adult patients with relapsed or refractory multiple myeloma. This off-the-shelf subcutaneous therapy is an essential new medicine for patients with incurable blood cancer who face limited treatment options.
On October 19, JNJ announced its cash dividend of $1.13 per share for the fourth quarter of 2022, payable on December 6, 2022, to shareholders of record at the close of business on November 22, 2022. The company pays $4.52 annually, which translates to a yield of 2.65% at the current price. This compares to a 4-year average yield of 2.60%.
The payout ratio is 44.06%. JNJ has been growing its dividends for the past 59 years.
JNJ’s sales increased 1.9% year-over-year to $23.79 billion in the fiscal 2022 third quarter ended October 2, 2022. The company’s gross profit stood at $15.98 billion during the same period.
Analysts expect JNJ’s revenue for the fiscal year 2022 to increase by 1.4% year-over-year to $95.04 billion. The company’s EPS for the current year is expected to increase 2.5% year-over-year to $10.04. Moreover, JNJ has topped the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 5% over the past month to close the last trading session at $170.72.
JNJ’s POWR Ratings reflect its inherent resilience. The company’s overall A rating translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Stability and a B for Quality. JNJ ranks #9 of 163 stocks in the Medical – Pharmaceuticals industry.
Get additional ratings for JNJ’s Growth, Value, Momentum, and Sentiment here.
PepsiCo, Inc. (PEP)
PEP is a global manufacturer, marketer, distributor, and seller of beverages and convenience foods. The company operates through seven segments: Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East, and South Asia; Asia Pacific, Australia and New Zealand and China Region.
On October 20, PEP announced the continuation of its global agriculture accelerator, the Positive Agriculture Outcomes (PAO) Fund, by granting 14 business projects across 11 countries funding to address some of the most intractable challenges facing agriculture today.
On September 14, PEP and agriculture company Archer Daniels Midland Co. (ADM) announced a 7.5-year strategic commercial partnership to enhance regenerative agriculture across the companies’ shared North American supply chains.
The above developments mark PEP’s commitment to sustainable growth and adherence to the ESG standards it has set for itself.
On September 30, PEP paid out its quarterly dividend of $1.15 per share, translating to a payout of $4.60 annually and yielding 2.59% at the current share price. The company has raised its dividend for 49 consecutive years. Furthermore, its dividend payouts have grown at 7.4% CAGR over the past five years.
For the third quarter of the fiscal year 2022 ended September 3, 2022, PEP’s net revenue increased 8.8% year-over-year to $21.97 billion. The company’s operating profit increased 6.1% year-over-year to $3.53 billion, while the net income attributable to PEP increased 21.5% year-over-year to $2.70 billion, up 21.9% year-over-year.
Analysts expect PEP’s revenue for the current fiscal year to increase 6.8% year-over-year to $84.85 billion. During the same period, the company’s EPS is estimated to grow 8.4% year-over-year to $6.78. It has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 8.8% over the past month to close the last trading session at $177.78.
PEP’s strong fundamentals are reflected in its overall rating of A, which indicates a Strong Buy in our POWR Ratings system. It also has an A grade for Quality and grade B for Growth, Stability, and Sentiment.
PEP is ranked #9 of 33 stocks in the A-rated Beverages industry.
Click here for the additional POWR Ratings for Value and Momentum for PEP.
Comcast Corporation (CMCSA)
CMCSA is a global media and technology company. It operates through three segments: Cable Communications; Media; Studios; Theme Parks; and Sky.
On October 27, CMCSA declared its quarterly dividend of $0.27 a share on the company’s common stock. The dividend is payable on January 25, 2023, to shareholders of record as of the close of business on January 4, 2023.
CMCSA pays $1.08 as a dividend annually, which translates to a yield of 3.55% at the current price. This compares favorably to the 4-year average dividend yield of 2.04%. CMCSA’s dividend payouts have grown for the past five years at an 11.7% CAGR.
On September 21, CMCSA announced that it is working with Samsung to deliver 5G Radio Access Network (RAN) solutions that can be used to enhance 5G connectivity for Xfinity Mobile and Comcast Business Mobile customers in Comcast service areas. The company expects this to deliver more next-generation applications and services to its customers seamlessly.
On September 14, CMCSA announced an expansion in its share repurchase authorization to a total of $20.0 billion, with $9 billion worth of shares repurchased to date. This demonstrates the company’s financial strength and commitment to enhancing shareholder value.
For the third quarter of the fiscal year 2022 ended September 30, CMCSA’s adjusted EBITDA increased 5.9% year-over-year to $9.48 billion, while its adjusted net income grew 4.5% year-over-year to $4.22 billion. As a result, its adjusted EPS rose 10.3% year-over-year to $0.96.
Analysts expect CMCSA’s revenue to increase 4.3% year-over-year to $121.43 billion in the current fiscal year, ending December 31, 2022, while its EPS is expected to grow 11.4% year-over-year to $3.60 for the same period. Also, the company has an impressive earnings history, surpassing the consensus EPS estimates in each of the four trailing quarters.
The stock has gained marginally over the past month to close the last trading session at $30.38.
CMCSA’s overall rating of B equates to a Buy in our POWR Ratings system. It also has Grade B for Quality.
CMCSA tops the list of nine stocks in the Entertainment – TV & Internet Providers industry.
Click here for the additional POWR Ratings for Growth, Value, Momentum, Stability, and Sentiment for CMCSA.
Hackett Group Inc. (HCKT)
HCKT operates as a business and technology consulting firm. The company offers benchmarking, executive advisory, business transformation, and cloud enterprise application implementation.
On September 22, HCKT announced the launch of a new Market Intelligence Service for software and service providers and users. The service will measure software and service providers’ ability to deliver business value and their unique capabilities to help companies achieve Digital World Class performance.
HCKT believes the new service will be a powerful and attractive value proposition for all C-level executives and their respective teams.
HCKT’s total revenue increased 3.7% year-over-year to $75.93 million for the second quarter of 2022. The company’s total assets stood at $217.89 million as of July 1, 2022, compared to $207.54 million as of December 31, 2021.
HCKT pays $0.44 annually as a dividend, translating to a 2.11% yield at the current price. The 4-year average dividend yield is 2.16%, and the company’s payouts have grown at 9% CAGR over the past five years.
Analysts expect HCKT’s revenue and EPS for the fiscal year 2022 to increase 6.6% and 10.4% year-over-year to $297.20 million and $1.45, respectively. Also, the company has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 15.4% over the past month to close the last trading session at $20.84.
HCKT’s promising outlook is reflected in its overall POWR Rating of A, which translates to a Strong Buy in our proprietary rating system. It also has a grade of A for Quality and B for Stability and Sentiment.
HCKT tops the list of 10 stocks in the A-rated Outsourcing – Tech Services industry.
Click here for additional ratings of HCKT (Growth, Value, and Momentum).
JNJ shares were trading at $170.70 per share on Friday afternoon, down $0.02 (-0.01%). Year-to-date, JNJ has gained 1.75%, versus a -20.17% 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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