While the Fed’s aggressive monetary policy led to a slight slowdown in inflation last month, investors are hoping for smaller rate hikes to come. However, given that a recession is expected to hit the economy next year, we believe that fundamentally sound stocks Pfizer (PFE), Flowers Foods (FLO) and Xperi (XPER), which are rated Strong Buy in our rating system exclusive rating, might be worth owning. Continue reading.
The central bank’s overnight lending rate is currently within a target range of 3.75% to 4.00%. Investors are overwhelmingly expecting a 50 basis point rate hike at the Fed’s next monetary policy meeting as inflation shows signs of slowing.
The Fed’s most aggressive monetary tightening campaign since the 1980s has so far had a fairly limited effect on aggregate demand. However, recent data shows business activity contracted for a fifth month in November and jobless claims rose last week to a three-month high. This indicates that some more resilient parts of the economy have started to weaken.
Moreover, as the debate widened over the implications of the rapid tightening of monetary policy by the US central bank, a substantial majority of policymakers at the Federal Reserve meeting earlier this month agreed that it would be “probably soon appropriate” from slow the pace of interest rate hikes.
Against this backdrop, we believe the fundamentally strong stock of Pfizer Inc. (DFP), Flowers Foods, Inc. (FLO), and Xperi Inc. (XPER) could be worth owning as we head into 2023. These stocks are rated Strong Buy in our proprietary rating system.
Pfizer Inc. (DFP)
PFE discovers, develops, manufactures, distributes and sells biopharmaceuticals worldwide. It offers medicines and vaccines in various therapeutic areas. The company serves wholesalers, retailers, hospitals, clinics, government agencies, and centers for disease control and prevention.
On November 4, PFE and BioNTech SE (BNTX) announced updated data from a Phase 2/3 clinical trial demonstrating a robust neutralizing immune response one month after a 30 µg booster dose of the bivalent COVID-19 vaccine adapted Omicron BA.4/BA.5 from companies.
These data highlight the potential benefit of the bivalent vaccine for all populations, regardless of prior SARS-CoV-2 infection. This marks a significant achievement for companies in the development of Covid-19 vaccines.
On November 3, 2022, PFE’s investigational cancer immunotherapy, elranatatamab, received Breakthrough Therapy Designation from the U.S. Food and Drug Administration (FDA) for the treatment of people with relapsed or refractory multiple myeloma.
Chris Boshoff, MD, Ph.D., Development Manager, Oncology and Rare Diseases, Pfizer Global Product Development, said, “This is Pfizer’s twelfth FDA breakthrough therapy designation in oncology, a testament to our commitment tirelessly to develop transformational cancer drugs in areas of high unmet need.
On September 22, PFE declared a quarterly dividend of $0.40 per share on its common stock, which was payable to shareholders on December 5. Its annual dividend of $1.60 yields 3.26% at current prices. The company’s dividend payouts have grown at a CAGR of 5.5% over the past three years and at a CAGR of 5.7% over the past five years. The company has a record 12 consecutive years of dividend growth.
In terms of forward EV/EBITDA, PFE is currently trading at 6.11x, 54.1% below the industry average of 13.31x. Its non-GAAP P/E multiple of 7.53 is 57.7% lower than the industry average of 17.79.
In the fiscal third quarter ended September 2022, PFE’s earnings from continuing operations improved 5.8% year-over-year to $8.65 billion. Its non-GAAP net income attributable to common shareholders of Pfizer Inc. increased 39.7% year-on-year to $10.17 billion, while its non-GAAP EPS increased 40.2% year-on-year to reach $1.78.
Street expects PFE’s EPS for the current fiscal year ending December 2022 to be $6.46, indicating a 46.2% year-over-year improvement. The company’s revenue is expected to grow 23.2% year-over-year to $100.15 billion in the same year. Additionally, PFE has exceeded consensus EPS estimates in each of the past four quarters.
The stock has gained 8.7% over the past month to close its last trading session at $48.8.
EFP POWR Rankings reflect this promising prospect. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. POWR ratings rate stocks on 118 different factors, each with its own weighting.
PFE is rated A in value and a B in growth, sentiment and quality. Within the Medical – Pharmaceutical industry, it is ranked #2 out of 162 stocks. Click here to see additional POWR ratings for stability and momentum for PFE.
Flowers Foods, Inc. (FLO)
FLO is a producer and distributor of packaged bakery foods. The company offers fresh bread, rolls, buns, cupcakes, tortillas, frozen bread and rolls. Its portfolio includes brands such as Nature’s Own, Dave’s Killer Bread (DKB), Wonder, Canyon Bakehouse, Tastykake and Mrs. Freshley’s.
On November 18, FLO declared a quarterly dividend of $0.22 per share, an increase of 4.8% over the same quarter last year. This is the 81st consecutive quarterly dividend paid by the company and is payable on December 16, 2022.
Its $0.88 annual dividend yields 2.98% at current prices. The company’s dividend payouts have grown at a CAGR of 5.1% over the past three years and at a CAGR of 5.4% over the past five years. The company has a record 8 consecutive years of dividend growth.
FLO’s advanced EV/Sales multiple of 1.49 is 11.7% lower than the industry average of 1.69.
FLO’s sales increased 12.7% year-over-year to $1.16 billion for the third quarter ended October 8, 2022. Its net income improved 4.3% from year-over-year to $40.53 million, while its EPS grew 5.6% year-over-year. at $0.19.
Analysts expect FLO’s revenue for the fiscal fourth quarter ending December 2022 to increase 12.3% year-over-year to $1.10 billion, while its current-year EPS is expected to rise 18% YoY to $0.24.
FLO has gained 9.6% over the past month to close the latest trading session at $29.59.
It’s no surprise that FLO has an overall rating of A, which equates to a strong buy in our POWR rating system. The stock has a B rating for growth and quality. It is ranked No. 9 out of 82 stocks in the B rating Food manufacturers industry.
To access additional FLO ratings for Value, Momentum, Stability and Sentiment, Click here.
Xperi Inc. (XPER)
XPER provides software and services in the United States. It provides consumers with a seamless end-to-end entertainment experience from choice to consumption, at home, in the car and on the go. The company has three business categories: Pay-TV, Consumer Electronics; Connected car; and media platform.
On October 10, XPER celebrated its first day of listing as an independent company on the New York Stock Exchange.
Jon Kirchner, CEO of XPER, said, “Today, we are an independent company with a strong balance sheet, a leadership team with a strong mandate and an exciting path to significant growth and profitability. The achievement of this strategic milestone is the result of years of continuous effort.
In terms of price/sales futures, XPER is currently trading at 0.88x, which is 64.9% below the industry average of 2.50x. Its EV/Futures multiple of 0.70 is 73.1% below the industry average of 2.59.
XPER’s revenue increased 3.3% year-over-year to $121.64 million for the third quarter ended September 30, 2022. For the nine months ended September 30, its net cash provided by financing activities increased by 115.3% compared to the same period last year, while its cash and cash equivalents at the end of the nine months increased by 68.3% year-on-year.
XPER’s revenue is expected to increase 7.7% year-over-year to $535.32 million in the next fiscal year ending December 2023. Its EPS is expected to increase 88% year-over-year. the other over the next year.
Its shares fell slightly during the day to close the last trading session at $10.32.
XPER’s strong fundamentals are reflected in its POWR ratings. The stock’s overall A rating indicates a strong buy in our proprietary rating system. It has a B grade in growth, feeling and quality. In category B Semiconductor and wireless chip industry, it is ranked #3 out of 92 stocks.
In addition to the POWR ratings above, XPER is also rated for value, stability, and momentum. Get all the XPER ratings here.
Shares of PFE remained unchanged in premarket trading on Thursday. Year-to-date, the PFE is down -14.59%, compared to a -14.29% rise in the benchmark S&P 500 over the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and her passion for writing made Kritika an analyst and financial journalist. She earned her Bachelor of Commerce degree and is currently pursuing the CFA program. With its fundamental approach, it aims to help investors identify untapped investment opportunities.
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