With inflation still alarmingly high, the Fed is poised to raise interest rates further. This is predicted to keep the stock market volatile. Amid this, investors should focus on their long-term strategies and buy fundamentally strong stocks Visa (V), Pfizer (PFE), and Molina Healthcare (MOH), which have solid growth potential. Keep reading.
Last year, the stock market witnessed extreme volatility as geopolitical issues, high inflation, and interest rate hikes weighed on investors’ sentiments. Although the stock market might remain under pressure this year, fundamentally solid stocks Visa Inc. (V), Pfizer Inc. (PFE), and Molina Healthcare, Inc. (MOH) could be worth adding to your long-term portfolios.
The Federal Reserve might raise interest rates by half percentage point this month and is likely to lift rates higher than previously expected as the economy shows resilience.
Jerome Powell told the Senate Banking Committee, “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”
While inflation is falling, it is not falling fast enough. The headline inflation rate is expected to have reduced to 6.0% year on year in February, while core CPI is anticipated to be 5.5%.
According to Elliot Eisenberg, Ph.D., a Miami-based economist, the country will enter a recession this year, but it will be a mild recession.
The anticipated market turbulence should not deter investors from investing in V, PFE, and MOH, which have solid long-term growth potential.
Visa Inc. (V)
V is a leading payments technology company that facilitates digital payments among consumers, merchants, financial institutions, strategic partners, businesses, and government entities. In addition, it provides card products, platforms, and value-added services. The company offers its products and services under Visa, Visa Electron, Interlink, VPAY, and PLUS brands.
V’s trailing-12-month gross profit margin of 97.58% is 99.6% higher than the industry average of 48.89%. Its trailing-12-month ROTA of 17.77% is substantially higher than the industry average of 1.56%.
V has paid dividends for 14 consecutive years. Over the last three years, V’s dividend payouts have grown at a 14.5% CAGR. While V’s four-year average dividend yield is 0.62%, its current dividend translates to a 0.84% yield.
V’s net revenues came in at $7.94 billion for the first quarter that ended December 31, 2022, up 12.4% year-over-year. Its operating income came in at $5.10 billion, up 6.6% year-over-year, while its non-GAAP net income increased 17.4% year-over-year to $4.58 billion. The company’s non-GAAP EPS came in at $2.18, up 20.4% year-over-year.
V’s revenue is expected to increase by 10.4% year-over-year to $32.35 billion in 2023. Its EPS is expected to grow 12.5% year-over-year to $8.44 in 2023. It surpassed EPS estimates in all four trailing quarters. Over the past nine months, the stock has gained 11.6% to close the last trading session at $214.47.
V’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
V has an A grade for Quality and a B for Stability. Within the Consumer Financial Services industry, it is ranked #8 out of 50 stocks. Click here to access the additional POWR Ratings for V (Value, Sentiment, Momentum, and Growth).
Pfizer Inc. (PFE)
PFE discovers, develops, manufactures, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas. The company serves wholesalers, retailers, hospitals, clinics, government agencies, and disease control and prevention centers.
On March 13, 2023, PFE and Seagen Inc. (SGEN) announced a formal merger agreement in which Pfizer would acquire Seagen, a worldwide biotechnology business that discovers, develops, and commercializes revolutionary cancer therapies, for $229 in cash per Seagen share, for a total enterprise value of $43 billion. This should enhance PFE’s capabilities.
On March 10, 2023, PFE announced that the FDA had approved ZAVZPRETTM (zavegepant), the first and only calcitonin gene-related peptide (CGRP) receptor antagonist nasal spray for the immediate treatment of migraine with or without aura in adults, marking a significant achievement for the company.
PFE’s trailing-12-month gross profit margin of 66.02% is 19% higher than the industry average of 55.48%. Its trailing-12-month ROTA of 15.91% is higher than the industry average of negative 31.19%.
PFE has paid dividends for 33 consecutive years. Over the last three years, PFE’s dividend payouts have grown at a 5.2% CAGR. While PFE’s four-year average dividend yield is 3.65%, its current dividend translates to a 4.11% yield.
For the fourth quarter that ended December 2022, PFE’s revenues came in at $24.29 billion, up 1.9% year-over-year. Its income from continuing operations increased 39.7% year-over-year to $5 billion.
Also, its non-GAAP adjusted net income attributable to PFE common shareholders came in at $6.55 billion, up 44.2% year-over-year. In comparison, its non-GAAP adjusted EPS increased 44.3% year-over-year to $1.14.
Analysts expects PFE’s revenue to increase 3.2% year-over-year to $70.91 billion in 2024. Its EPS is expected to grow 12.1% year-over-year to $3.79 in 2024. It surpassed EPS estimates in all four trailing quarters. PFE’s shares have gained marginally intraday to close the last trading session at $39.86.
It’s no surprise that PFE has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Value and a B for Quality. It is ranked #14 out of 167 stocks in the Medical – Pharmaceuticals industry.
Beyond what is stated above, we’ve also rated PFE for Growth, Stability, Sentiment, and Momentum. Get all PFE ratings here.
Molina Healthcare, Inc. (MOH)
MOH offers managed healthcare services under Medicaid and Medicare programs and through state insurance marketplaces. The company operates through four segments: Medicaid; Medicare; Marketplace; and Other.
Its trailing-12-month EBITDA margin of 4.85% is 43.2% higher than the industry average of 3.39%. Its trailing-12-month ROTA of 6.43% is higher than the industry average of negative 31.19%.
MOH’s total revenues came in at $8.22 billion for the fourth quarter that ended December 31, 2022, up 11% year-over-year. The company’s adjusted net income increased 41.2% year-over-year to $240 million, while its adjusted EPS came in at $4.10, representing a 42.4% increase year-over-year.
Joseph Zubretsky, President and CEO, said, “The fourth quarter completes another strong year of operating and financial performance. We are very pleased with our business performance during the year, as well as the progress we made in 2022 on our growth strategy, which has created a solid and growing financial profile as we head into 2023.”
The consensus revenue estimate of $36.77 billion for the fiscal year 2024 indicates a 10.5% increase year-over-year. Its EPS is expected to grow 17.1% year-over-year to $23.18 in 2024. It surpassed EPS estimates in all four trailing quarters. The stock has gained marginally intraday to close the last trading session at $263.69.
MOH’s overall B rating equates to a Buy in our POWR Ratings system.
It has a B for Value and Quality. It is ranked #5 out of 10 stocks in the A-rated Medical – Health Insurance industry. To see additional POWR Ratings for Growth, Stability, Sentiment, and Momentum for MOH, click here.
What To Do Next?
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V shares were unchanged in premarket trading Tuesday. Year-to-date, V has gained 3.43%, versus a 0.77% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master’s degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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