With inflation still above the Fed’s comfort level and the labor market tight, Fed Chair Jerome Powell has warned interest rates are likely to rise higher than previously expected. Benchmark interest rates are expected to remain elevated for a while longer.
Although the market is expected to remain volatile, new investors looking to build their portfolio could consider fundamentally strong stocks such as The Coca-Cola Company (KO), Albertsons Companies, Inc. (ACI), Juniper Networks, Inc. (JNPR) buy. and Universal Logistics Holdings, Inc. (ULH).
Before we assess the fundamentals of these stocks, let’s discuss the reasons why the market is likely to be volatile this year.
Although annual inflation fell for the seventh consecutive month in January, a sequential price increase of 0.5% was observed. Additionally, personal consumption expenditure (PCE) increased 0.6% mom and 4.7% year-on-year.
In addition, the labor market is likely to remain tight. According to payroll services company ADP, personal payrolls rose 242,000 in February versus the 205,000 estimate.
Brian Moynihan, CEO of Bank of America, sees the economy slipping into a technical recession starting in the third quarter.
With this in mind, investors looking to build their portfolios could buy fundamentally strong stocks KO, ACI, JNPR, and ULH.
The Coca Cola Company (KO)
The popular beverage company KO produces, markets and sells various non-alcoholic beverages. The company offers sparkling soft drinks; flavored and fortified water and sports drinks; plant based juices, dairy products and beverages; tea and coffee; and energy drinks.
In terms of trailing 12-month EBIT margin, KO is 28.49%, up 255.6% from the industry average of 8.01%. Likewise, the 12-month leveraged FCF margin of 18.17% is 619.2% above the industry average of 2.53%.
KO net operating income increased 7% year-on-year to $10.13 billion for the fourth quarter ended December 31, 2022. Non-GAAP gross income increased 6% year over year to $5.76 billion. The company’s non-GAAP operating income increased 10.9% year over year to $2.32 billion. Non-GAAP net income and non-GAAP EPS were $1.94 billion and $0.45, respectively.
KO’s earnings per share and revenue for the quarter ended March 31, 2023 are projected to increase 1% and 2.9%, respectively, to $0.65 billion and $10.81 billion, respectively. The company has a commendable earnings surprise record, beating consensus estimates for earnings per share in each of the last four quarters. Over the past year, the stock is up 0.9% to close the last trading session at $59.46.
KO’s POWR ratings reflect his solid prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings evaluate stocks based on 118 different factors, each with its own weighting.
Within the B-rated beverage industry, it ranks 17th out of 37 stocks. The company has a B grade for stability, mood and quality. Click here to view KO’s additional POWR ratings for Growth, Value and Momentum.
Albertson’s Companies, Inc. (ACI)
ACI operates grocery and drug stores. The Company offers grocery products, general merchandise, health and beauty care products, pharmacies, fuel and other items and services. It also produces and processes food for sale in stores.
In terms of trailing-12-month asset turnover, ACI is 2.64x, 220% ahead of the industry average of 0.83x. Likewise, the 81.65% return on the trailing 12-month common equity is 728.7% above the industry average of 9.85%.
On January 12, 2023, freshness technology company Afresh Technologies and ACI announced the completion of an enterprise rollout of the predictive ordering and inventory management platform Afresh.
Suzanne Long, ACI’s Chief Sustainability and Transformation Officer, believes the partnership with Afresh will help the company better manage its inventory to support its environmental sustainability goals by reducing food waste. In addition, it ensures its customers access to fresher products.
ACI net sales and other income for the third quarter ended December 3, 2022 increased 8.5% year-on-year to $18.15 billion. The company’s adjusted net income increased 10.5% year over year to $505.10 million.
Additionally, adjusted EBITDA increased 10.2% year over year to $1.16 billion, while adjusted net EPS was $0.87, up 10.1% from the year-ago quarter.
Analysts expect ACI’s fiscal 2023 earnings per share to rise 4.9% year over year to $3.22. Revenue for the quarter ended February 28, 2023 is projected to increase 4.5% year over year to $18.17 billion. Over the past month, the stock is down 5.7% to close the last trading session at $19.93.
It’s no surprise that ACI has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It is ranked 6th out of 39 stocks in the A-rated grocery/big box retail industry. It has a B grade for value, vibe and quality.
Overall, we rate ACI on eight different levels. Beyond the above, we have also assigned ACI scores for growth, momentum and stability. Get all ACI reviews here.
Juniper Networks, Inc. (JNPR)
JNPR designs, develops and sells networking products and services worldwide. The Company offers routing products such as ACX Series Universal Access Routers; MX Series Ethernet Routers; PTX Series Packet Transport Routers; wide area network SDN controller; and session smart routers.
In terms of trailing 12-month EBIT margin, JNPR is 10.17%, up 73% from the industry average of 5.88%. Its trailing 12-month net profit margin of 8.88% is 204.6% above the industry average of 2.92%. Likewise, the 10.71% return on the trailing 12-month common equity is 125.4% above the industry average of 4.75%.
On March 8, 2023, JNPR announced that Shaare Zedek Medical Center has begun a full digital transformation of its operations to provide superior patient experiences and exceptional care using Juniper’s data center solutions.
Gos Hein van de Wouw, JNPR’s Vice President, Enterprise, EMEA, believes the company will provide high-performance technologies to Shaare Zedek Medical Center to ensure it is fully prepared for further digital acceleration.
JNPR’s total net revenue increased 11.5% year over year to $1.45 billion for the fourth quarter ended December 31, 2022. Non-GAAP operating income increased 13.5% year over year to $276.50 million.
Non-GAAP net income increased 12.1% year over year to $213.80 million. Additionally, non-GAAP EPS was $0.65, up 12.1% from the year-ago quarter.
JNPR’s earnings per share and revenue for the quarter ended March 31, 2023 are projected to increase 38.9% and 14.6% year over year, to $0.43 and $1.34 billion, respectively. Over the past six months, the stock is up 7% to close the last trading session at $31.06.
JNPR’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. In addition, it has a B grade for growth and quality. It ranks 7th out of 49 stocks within the B-rated Technology – Communications/Networking industry.
Click here to view JNPR’s additional POWR ratings for Value, Momentum, Stability and Sentiment.
Universal Logistics Holdings, Inc. (ULH)
ULH provides transportation and logistics solutions in the United States, Mexico, Canada and Colombia. It offers truckloading services; national and international forwarding services, customs brokerage services; and last mile and ground acceleration services.
In terms of trailing 12-month EBIT margin, ULH is 11.93%, up 24% from the industry average of 9.62%. Likewise, 1.72 times the trailing 12-month asset turnover is 116.8% above the industry average of 0.79.
For the fourth fiscal quarter ended December 31, 2022, ULH’s operating income increased 102.6% year over year to $48.17 million. The company’s net income increased 106.5% year over year to $33.45 million. In addition, EBITDA rose 71.3% year over year to $67.96 million, while EPS came in at $1.27, up 111.7% from the year-ago quarter.
For fiscal 2024, ULH’s earnings per share and revenue are expected to increase 31.2% and 3.8% year over year, to $5.55 and $1.92 billion, respectively. ULH has a commendable earnings surprise record, beating consensus estimates for earnings per share in three of the last four quarters. Over the past year, the stock is up 53% to close the last trading session at $30.17.
ULH’s positive outlook is reflected in its POWR ratings. The stock has an overall rating of B, resulting in a Buy in our proprietary rating system. It is #3 of 16 stocks in the B-rated air cargo and shipping services industry. In addition, it has an A grade for value.
Click here to view ULH’s Growth, Momentum, Stability, Sentiment and Quality ratings.
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KO shares traded at $59.36 per share on Friday morning, down $0.10 (-0.17%). Year-to-date, KO is down -6.68% versus the benchmark S&P 500 index’s 2.18% gain over the same period.
About the author: Malaika Alphonsus
Malaika’s passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to help investors make informed investment decisions. More…
