After witnessing a significant pullback in April, the equity markets are bracing for an aggressive interest rate hike this month. According to Jim Caron, chief fixed-income strategist at Morgan Stanley Investment Management, "I think they're going 50 bps and it seems like they're dead set on hiking rates enough to kill inflation."
Bill Dudley, the former president of the New York Federal Reserve Bank, has argued that the chance of a recession in 2023 and 2024 is "definitely higher than 50%." Given this backdrop, mega-cap stocks are gaining traction, given their robust financials and stable cash flows. These companies have sufficient funds to withstand market fluctuations, making them ideal investment bets amid the surging market volatility.
Fundamentally sound stocks Abbott Laboratories (ABT), Broadcom Inc. (AVGO), and Pfizer Inc. (PFE) have plummeted in price of late but are expected to offer good returns in the near term.
Abbott Laboratories (ABT)
ABT in Abbott Park, Ill., and its subsidiaries discover, develop, manufacture, and sell healthcare products worldwide. It operates in four segments: Established Pharmaceutical Products; Diagnostic Products; Nutritional Products; and Medical Devices. Its market capitalization is $198.27 billion.
On April 27, 2022, ABT, CamDiab, and Ypsomed announced their partnership to develop and commercialize an integrated automated insulin delivery (AID) system to manage diabetic patients effectively. This program aims to simplify the lifestyle of diabetics and is expected to generate good profits for the company.
ABT's net sales came in at $11.89 billion for the first quarter, ended March 31, 2022, up 13.8% year-over-year. The company's net earnings came in at $2.45 billion, up 36.5% year-over-year. Also, its EPS was $1.37, up 37% year-over-year.
For the quarter ended June 2022, analysts expect ABT's revenue to increase 5.5% to $10.23 billion. Its EPS is estimated to grow 11.5% per annum for the next five years. It surpassed EPS estimates in each of the trailing four quarters. Over the past month, the stock has declined 5.2% to close yesterday's session at $112.43.
ABT's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
ABT has an A grade for Growth and Sentiment and a B grade for Stability and Quality. Within the Medical - Devices & Equipment industry, it is ranked #2 out of 157 stocks. Click here to see the additional POWR Ratings for Value and Momentum for ABT.
Click here to checkout our Healthcare Sector Report for 2022
Broadcom Inc. (AVGO)
AVGO in Glen Rock, N.J., designs, develops, and supplies various semiconductor devices focusing on complex digital and mixed-signal complementary metal oxide semiconductor-based devices and analog III-V based products worldwide. The company operates in two segments–Semiconductor Solutions and Infrastructure Software. Its market capitalization is $237.28 billion.
On March 3, 2022, Kirsten Spears, AVGO's CFO, said, "Consistent with our commitment to return excess cash to shareholders, we returned $4.5 billion to shareholders in the quarter including $1.8 billion of cash dividends and $2.7 billion of share repurchases."
AVGO's net revenue for its fiscal year 2022 first quarter, ended Jan. 30, 2022, came in at $7.71 billion, up 15.8% year-over-year. Its non-GAAP net income was $3.74 billion, up 25.8% year-over-year, while its non-GAAP EPS came in at $8.39, up 26.9% year-over-year.
Analysts expect AVGO's revenue to increase 16.4% year-over-year to $31.96 billion in its fiscal year 2022. Its EPS is expected to be $35.52 for its fiscal year 2022, up 26.8% year-over-year. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has declined 7.3% in price over the past month to close yesterday's session at $581.17.
It is no surprise that AVGO has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has a B grade for Growth, Sentiment, and Quality.
AVGO is ranked #6 of 95 stocks in the A-rated Semiconductor & Wireless Chip industry. In addition to the POWR Ratings I have just highlighted, we have also rated the stock for Value, Momentum, and Stability. Click here to get all the AVGO ratings.
Note that AVGO is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
Click here to checkout our Semiconductor Industry Report for 2022
Pfizer Inc. (PFE)
New York City-based PFE discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas. In addition, the company participates in a contract manufacturing business. Its market capitalization is $278.38 billion.
On May 3, 2022, Frank D'Amelio, Chief Financial Officer and Executive Vice President, said, "We entered the open market to repurchase shares of our stock for the first time since 2019. We will continue to thoughtfully deploy our capital in a variety of shareholder-friendly ways with the goal of maximizing the value we provide to all of our stakeholders, including patients and shareholders."
For its fiscal 2022 first quarter, PFE's revenues increased 76.8% year-over-year to $25.66 billion. The company's adjusted income came in at $9.34 billion, up 74.5% year-over-year. And its EPS came in at $1.37, up 59.3% year-over-year.
Analysts expect PFE's revenue to increase 33% to $108.14 billion in 2022. Its EPS is estimated to increase 61.8% to $7.15 in 2022. Also, it surpassed EPS estimates in each of the four trailing quarters. The stock declined 4.4% in price over the past month to close yesterday's session at $49.29.
PFE's POWR Ratings reflect solid prospects. The company has an overall A rating, which equates to a Strong Buy in our proprietary rating system.
In addition, it has a B grade for Growth, Value, and Quality. PFE is ranked #7 of 169 stocks in the Medical - Pharmaceuticals industry. Click here to see the additional POWR Ratings for PFE (Momentum, Stability, and Sentiment).
Click here to checkout our Healthcare Sector Report for 2022
ABT shares were trading at $112.96 per share on Wednesday afternoon, up $0.53 (+0.47%). Year-to-date, ABT has declined -19.13%, versus a -11.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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