As per yesterday’s report by the Commerce Department, the U.S. economy demonstrated its robustness with a better-than-expected GDP growth rate of 2.9% during the fourth quarter of 2022. Despite shouldering the burden of progressive interest-rate hikes by the Federal Reserve, economic growth moderated sequentially by just 30 bps.
Hopes of the market are high that the Fed would respond to the slowing economic momentum with an equally mild interest-rate hike and strengthen the probability of a “soft landing.” However, a 26.7% plunge in residential fixed investment, reflecting a sharp slide in housing, was a reminder that things might worsen before they start improving.
Andrew Hunter, senior U.S. economist for Capital Economics, extrapolated by forecasting, “We still expect the lagged impact of the surge in interest rates to push the economy into a mild recession in the first half of this year.”
Jim Baird, chief investment officer at Plante Moran Financial Advisors, also concurred, “Held aloft by resilient consumer spending, the economy expanded at a solid pace late last year but remains vulnerable to a more pronounced slowdown in the coming quarters.”
Since the robust economy is facing a turbulent path before the central bank feels it’s safe to allow it to catch a break, an end to market volatility seems unlikely in the foreseeable future.
Hence, it could be wise to load up on shares of fundamentally strong and resilient businesses AT&T Inc. (T), Amgen Inc. (AMGN), and Humana Inc. (HUM), whose ever-improving performance could translate into impressive returns in the long run.
AT&T Inc. (T)
T is a global provider of telecommunications, media, and technical services worldwide. The company operates through two segments: Communications; and Latin America. Its offerings include wireless communications, data/broadband, Internet services, video services, local exchange services, long-distance services, telecommunications equipment, managed networking, and wholesale services.
On December 23, T and BlackRock Inc. (BLK), through its subsidiary BlackRock Alternatives, announced the signing of a definitive agreement to form a joint venture, Gigapower, LLC, to operate a commercial fiber platform.
As a result of this collaboration, Gigapower will serve customers outside of T’s traditional 21-state wireline service footprint with fiber access technologies in innovative and efficient ways, while T will leverage its nationwide wireless sales capabilities to sell fiber to customers in Gigapower territories.
On December 15, T announced its quarterly dividend of $0.28 per share on the company’s common shares; Series A dividend of $312.50 per preferred share, or $0.3125 per depositary share; and Series C dividend of $296.875 per preferred share, or $0.296875 per depositary share. The dividends are payable on February 1, 2023.
T pays $1.11 as dividends annually, which translates to a forward yield of 5.44% at the current price, comparable to the four-year average dividend yield of 6.97%.
For its fiscal 2022 fourth quarter, ended December 31, 2022, despite lower Business Wireline revenues, T’s revenues from continuing operations increased 0.8% year-over-year to $31.34 billion due to higher Mobility, Mexico and Consumer Wireline revenues.
During the same period, T’s adjusted operating income increased 12.9% year-over-year to $5.65 billion, while its adjusted EBITDA increased 7.9% year-over-year to $10.23 billion. The company’s adjusted EPS increased 8.9% year-over-year to $0.61.
T’s revenue for the fiscal ending December 2023 is expected to increase 1.5% year-over-year to $122.59 billion, while its EPS is expected to come in at $2.48. Street expects both revenue and EPS to increase by 1.3% and 1.7% during the following fiscal year to come in at $124.13 billion and $2.53, respectively. It has also impressed by surpassing the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 9.4% over the past month to close the last trading session at $20.00.
T has an overall rating of B, which equates to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. It also has a B grade for Value and Quality.
Amgen Inc. (AMGN)
AMGN is a global biotechnology company that discovers, develops, manufactures, and delivers human therapeutics. The company primarily focuses on oncology/hematology, cardiovascular disease, and neuroscience.
On December 12, 2022, AMGN signed an agreement to acquire the complete issued and to-be-issued ordinary share capital of Horizon Therapeutics (HZNP) for an enterprise value of nearly $28.30 billion. Under the terms of the acquisition, each Company shareholder at the Scheme Record Time will be entitled to receive: $116.50 for each Company Share in cash, a premium of 4.7% over the last trading price.
AMGN believes the acquisition to be consistent with its strategy of delivering long-term growth by providing innovative medicines that address the needs of patients who suffer from serious diseases. It is also expected to drive growth in revenue, and non-GAAP EPS is expected to be accretive from 2024.
On December 12, AMGN’s board of directors declared a $2.13 per share dividend for the first quarter of 2023, payable on March 8, 2023, to all stockholders of record as of the close of business on February 15, 2023. This represents a 10% increase from the dividends paid in each of the previous four quarters.
AMGN pays $8.52 annually as dividends. This translates to a forward yield of 3.32% at the current price, better than the 4-year average dividend yield of 2.87%. The company pays out a whopping 42.2% of its earnings as dividends. Its payouts have grown for 11 consecutive years and at 11% CAGR over the past five years.
On October 20, AMGN announced that it had completed its acquisition of ChemoCentryx, Inc. (CCXI), a biopharmaceutical company, for $52 per share in cash, representing aggregate merger consideration of approximately $3.70 billion.
AMGN expects CCXI to enhance the former’s leading inflammation and nephrology portfolio while adding three early-stage drug candidates targeting chemoattractant receptors and other inflammatory diseases and an oral checkpoint for cancer.
For the third quarter of 2022, excluding the 2% negative impact of foreign exchange on product sales, AMGN’s total revenue increased 2% year-over-year to $6.65 billion, driven by the volume growth of 8% during the period.
During the same period, AMGN’s non-GAAP operating income rose 7.4% year-over-year to $3.28 billion, while its non-GAAP net income increased 8.9% year-over-year to $2.53 billion. Its non-GAAP EPS grew 15.2% year-over-year to $4.70.
Ahead of its earnings release on January 31, AMGN’s revenue and EPS are expected to come in at $ 26.24 billion and $17.67, representing increases of 1% and 3.3% year-over-year, respectively. Revenue and EPS are expected to increase by 3.8% and 4.3% during the current fiscal year to $ 27.24 billion and $18.43, respectively.
Additionally, AMGN has impressed by surpassing consensus EPS estimates in each of the trailing four quarters.
The stock has gained 1.5% over the past six months and 14.5% over the past year to close the last trading session at $254.88.
AMGN’s POWR Ratings reflect its stable outlook. The company has an overall rating of B, which translates to a Buy in our proprietary rating system. It has an A grade for Quality and B for Value and Stability.
Humana Inc. (HUM)
HUM operates primarily as a health and well-being company. The company operates through three segments: Retail; Group and Specialty; and Healthcare Services. The company provides medical and supplemental benefit plans. In addition, it offers commercial fully-insured medical and specialty health insurance benefits, administrative services, and military services.
Today, HUM paid its quarterly cash dividend of $0.79 per share. As a result, the company’s annual dividend payout amounts to $3.15 per share. This translates to a forward yield of 0.63% at the current price, compared to the 4-year average dividend yield of 0.65%.
HUM’s dividend payouts have increased for six consecutive years and at a 14.5% CAGR over the past five years.
On December 22, 2022, HUM announced that it had been awarded the next managed care support contract for the TRICARE East Region by the Defense Health Agency of the U.S. Department of Defense (DoD). TRICARE is a military healthcare program that provides benefits to military service members, retirees, and their families.
Under the terms of the award, HUM would have an opportunity to build on its 26-year history with the DoD and TRICARE by covering approximately 4.6 million beneficiaries in a region consisting of 24 states and Washington, D.C.
On November 22, HUM announced the completion of its public offering of $1.25 billion in aggregate principal amount of senior notes. The company used the net proceeds from the Senior Notes Offerings to repay and retire its debts that matured in December 2022.
For the third quarter of fiscal 2022, ended September 30, 2022, HUM’s adjusted revenue increased 9% year-over-year to $22.75 billion. During the same period, the company’s adjusted pre-tax income increased 42.5% year-over-year to $1.14 billion, while its adjusted EPS increased 42.4% year-over-year to $2.88.
Analysts expect HUM’s revenue and EPS for the fiscal ended December 31, 2022, to come in at $92.86 billion and $25.06, representing increases of 11.8% and 21.4% year-over-year, respectively. Revenue and EPS are expected to increase by 8.9% and 11.8% during the current fiscal to come in at $101.14 billion and $28.01, respectively.
HUM has further impressed by surpassing consensus EPS estimates in each of the trailing four quarters.
HUM has gained 1.4% over the past six months and 32.4% over the past year to close the last trading session at $499.36.
HUM's overall rating of A translates to a Strong Buy in our POWR Ratings system. It has a B grade for Growth, Value, and Quality.
HUM is ranked #2 of 11 stocks in the A-rated Medical – Health Insurance industry.
Click here for additional POWR Ratings for Sentiment, Stability, and Momentum for HUM.
T shares were trading at $19.84 per share on Friday afternoon, down $0.16 (-0.80%). Year-to-date, T has gained 9.32%, versus a 6.24% 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.3 Stocks That Could Make You a Millionaire in the Long Term appeared first on StockNews.com