A hotter-than-expected September inflation reading has rattled financial markets, and investors now expect a 0.75 percentage point rate hike by the Fed in November and December. The Federal Reserve is strongly committed to control inflationary pressure.
“The more inflation comes in above expectations, the more they’re going to have to prove that commitment, which means higher interest rates and cooling in the underlying economy,” said Michelle Meyer, chief U.S. economist at the Mastercard Economics Institute. This is increasing the chances of an impending recession.
However, according to Morgan Stanley’s strategist Michael J. Wilson, the stock market could witness a short-term rally. He also believes that inflation has now peaked and “could fall rapidly next year.”
Given the backdrop, we think investors should invest in fundamentally solid stocks Cigna Corporation (CI) and SX Corporation (CSX), which look poised to generate significant returns in the long run.
Cigna Corporation (CI)
CI provides insurance and related products and services in the United States. It sells its offerings through insurance brokers and consultants. The company operates through the Evernorth; and Cigna Healthcare segments.
On October 12, CI announced the availability of comprehensive and cost-effective health plans for Texas residents on the individual marketplace this year. This should provide access to affordable, predictable, and simple healthcare coverage and attract more customers.
On September 15, Evernorth, CI’s health services business segment, expanded its Digital Health Formulary to include five new app-based programs and help people better manage their sleep issues, anxiety, alcohol and opioid use disorders, and inflammatory conditions. This should help the company address the unmet needs of patients with chronic health conditions.
For its second quarter ended June 30, 2022, CI’s total revenues increased 5.4% year-over-year to $45.48 billion. Its adjusted income from operations came in at $1.98 billion, up 9.6% year-over-year, while its adjusted EPS came in at $6.22, up 18.7% year-over-year.
Analysts expect CI’s revenue to increase 3.3% year-over-year to $179.89 billion in fiscal 2022. Its EPS is estimated to increase 12.4% year-over-year to $23 in the same period.
The stock has gained 45.4% over the past year and 28.6% year-to-date to close the last trading session at $295.30.
CI’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 POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CI has a B grade for Growth, Value, Sentiment, and Quality. Within the A-rated Medical – Health Insurance industry, it is ranked #5 out of 11 stocks.
Click here for the additional POWR Ratings for Momentum and Stability for CI.
SX Corporation (CSX)
CSX, a premier transportation company, offers rail, intermodal, and rail-to-truck transload services and solutions to customers in various markets, including energy, industrial, construction, agricultural, and consumer products.
During the second quarter ended June 2022, CSX’s revenue increased 28% year-over-year to $3.82 billion. Its operating income increased by 1% year-over-year to $1.70 billion. The company’s net earnings surged marginally from the prior-year quarter to $1.18 billion, while its EPS grew 4% year-over-year to $0.54.
Street expects CSX’s EPS and revenue to grow 20.1% and 17.5% year-over-year to $1.87 and $14.71 billion in fiscal 2022. The company also beat the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 19.5% over the past three years to close the last trading session at $27.31.
CSX’s POWR Ratings reflect this promising outlook. The stock has a B grade for Quality and Momentum. It is ranked #7 out of the 15 stocks in the B-rated Railroads industry.
In addition to the POWR Rating grades we’ve stated above, you can see CSX ratings for Growth, Value, Sentiment, and Stability here.
CI shares were trading at $295.43 per share on Monday morning, up $0.13 (+0.04%). Year-to-date, CI has gained 30.33%, versus a -21.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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