The continued Ukraine-Russia war, intensifying supply chain disruptions, and the possibility of aggressive interest rate hikes this year to combat inflation, which hit a fresh 40-year high in March, have kept the stock market under pressure lately. Moreover, many economists expect the U.S. economy to witness a recession in the near term, as indicated by the soaring oil prices.
Therefore, investors should consider betting on quality stocks that tend to remain resilient amid such uncertainties surrounding the stock market and economy. Since quality stocks are considered to generate steady earnings and revenue and possess high profitability, they could be a great hedge against market volatility. Investors' interest in high-quality stocks is evident from the Invesco S&P 500 Quality ETF's (SPHQ) 8.4% returns over the past year and 2.6% gains over the past month.
We think high-quality stocks KLA Corporation (KLAC), Mettler-Toledo International Inc. (MTD), Dolby Laboratories, Inc. (DLB), and Waters Corporation (WAT), which are down more than 15% year-to-date, could be solid bets now.
KLA Corporation (KLAC)
KLAC designs, manufactures, and markets process control and yield management solutions for the semiconductor and related nanoelectronics industries worldwide. The company renders chip and wafer manufacturing products, including defect inspection and review systems, metrology solutions, in situ process monitoring products, computational lithography software, and data analytics systems.
KLAC's total revenue increased 42.5% year-over-year to $2.35 billion during the second quarter ending December 31, 2021. The non-GAAP net income attributable to KLAC grew 68.8% from its year-ago value to $851 million, while its non-GAAP EPS improved 72.5% from its prior-year quarter to $5.59. The cash and cash equivalents increased 15.5% for the six months ended December 31, 2021, to $1.66 billion.
Analysts expect KLAC's revenue to increase 22.5% year-over-year to $2.21 billion for the third quarter ending March 2022. The consensus EPS estimate of $4.84 represents a 25.7% improvement year-over-year for the third quarter ending March 2022. In addition, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters.
The stock has plunged 21.8% year-to-date. However, it has surged 8% over the past nine months.
KLAC's POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock also has an A grade for Quality and a B for Sentiment. Within the A-rated Semiconductor & Wireless Chip industry, it is ranked #40 of 96 stocks.
To see additional POWR Ratings for Growth, Stability, Value, and Momentum for KLAC, click here.
Mettler-Toledo International Inc. (MTD)
MTD is engaged in manufacturing and supplying precision instruments and services worldwide. It has five operational segments: U.S. Operations; Swiss Operations; Western European Operations; Chinese Operations; and Other. The company's laboratory instruments include laboratory balances, liquid pipetting solutions, automated laboratory reactors, titrators, pH meters, process analytics sensors, analyzer technologies, and other analytical instruments.
During the fourth quarter ending December 31, 2021, MTD's net sales increased 10.6% year-over-year to $1.04 billion. The adjusted operating profit increased 9% year-over-year to $319.07 million. The net earnings grew 6.7% from its year-ago value to $230.87 million, while its EPS improved 10.1% from its prior-year quarter to $9.94.
The $7.29 EPS estimate during the first quarter ending March 2022 represents an 11.1% year-over-year growth. Analysts expect MTD's revenue to increase 8% year-over-year to $869.04 million for the first quarter ending March 2022. Moreover, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters.
The stock is down 20.9% year-to-date. However, it has gained 9.1% over the past year and 2.4% over the past month.
MTD's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Quality. In the Medical - Diagnostics/Research industry, it is ranked #5 of 51 stocks.
In total, we rate MTD on eight different levels. Beyond what we've stated above, we have also given MTD grades for Value, Stability, Sentiment, Growth, and Momentum. Get all the MTD ratings here.
Dolby Laboratories, Inc. (DLB)
DLB creates audio and imaging technologies that transform entertainment and communications at the cinema, DTV, transmissions and devices, mobile devices, OTT video, music services, and home entertainment devices. The company develops and licenses its audio technologies, such as AAC & HE-AAC, a digital audio codec solution used for media applications.
In the first quarter ended December 31, 2021, DLB's total revenue amounted to $351.63 million. The operating income came in at $90.58 million, while its non-GAAP net income amounted to $104.5 million. The non-GAAP EPS stood at $1.01 over the period.
Analysts expect DLB's revenue to increase 4% year-over-year to $332.27 million for the second quarter ending March 2022. The consensus EPS estimate of $1.02 for the third quarter ending June 2022 represents a 44.2% improvement year-over-year. In addition, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters.
The company's shares declined 18.3% year-to-date. However, it surged 10.2% over the past month.
It is no surprise that DLB has an overall B rating, which equates to Buy in our POWR Ratings system. DLB has an A grade for Quality and a B grade for Value and Sentiment. Within the Technology - Electronics industry, it is ranked #16 of 48 stocks.
Click here to see the additional POWR Ratings for DLB (Momentum, Growth, and Stability).
Waters Corporation (WAT)
WAT is a specialty measurement company that provides analytical workflow solutions in Asia, the Americas, and Europe. It operates through two segments, Waters and TA. The company designs, manufactures, sells, and services high and ultra-performance liquid chromatography and mass spectrometry (MS) technology systems and support products.
Last month, WAT introduced the new Xevo TQ Absolute system, the most sensitive and compact benchtop tandem mass spec in its class. The exceptionally sensitive Waters Xevo TQ Absolute tandem quadrupole mass spectrometer is up to 45% smaller, uses up to 50% less power and nitrogen, and generates up to 50% less heat than competing tandem quadrupole mass spectrometers.
Also, last month, WAT introduced new software and analytical columns to assist biomolecule drug discovery and development. The new Waters Intact Mass app on waters connect permits scientists using the BioAccord LC-MS System to confirm the mass of biomolecules and impurities made by synthetic or recombinant processes nearly twice as fast as other commercially available options.
For the fourth quarter ending December 31, 2021, WAT's net sales increased 6.3% year-over-year to $836.45 million. The operating income improved to $262.20 million, while its net income came in at $216.24 million. The company's EPS rose 0.9% from its year-ago value to $3.52.
The consensus EPS estimate of $2.33 represents a 1.9% year-over-year improvement during the first quarter ending March 2022. Analysts expect WAT's revenue to increase 4.1% year-over-year to $633.70 million for the same period. In addition, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters. The stock has plunged 19.9% year-to-date.
WAT's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Quality and a B grade for Value. In the Medical - Diagnostics/Research industry, it is ranked #9.
In total, we rate WAT on eight different levels. Beyond what we've stated above, we have also given WAT grades for Stability, Sentiment, Growth, and Momentum. Get all the WAT ratings here.
KLAC shares were trading at $321.37 per share on Thursday afternoon, down $15.15 (-4.50%). Year-to-date, KLAC has declined -25.08%, versus a -7.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
Take Advantage of These 4 High-Quality Stocks Down More Than 15% Year-to-Date StockNews.com
