The explosion of banking stress has reshaped the entire U.S. interest rate map, wiping expectations of further Federal Reserve rate hikes off the table and sending U.S. Treasury bond volatility to its highest since 2009. However, a still-tight labor market continues to stroke fears and might compel the Fed to continue with interest rate hikes.
Therefore, we think investing in fundamentally strong stocks Bristol-Myers Squibb Company (BMY), General Motors Company (GM), McKesson Corporation (MCK), Cardinal Health, Inc. (CAH), and American Vanguard Corporation (AVD) could be beneficial. Let’s take a closer look at why you should add these stocks to your watchlist.
The market conditions are ripe with uncertainty and a stock market pullback following last week’s market selloff amid the Silicon Valley Bank collapse, resulting in a domino effect on regional banks, including First Republic Bank, and the KBW Index declining 6%.
The Consumer Price Index (CPI) increased 0.4% for the month, putting the annual inflation rate at 6%, in line with Dow Jones estimates. This will likely keep the Federal Reserve on track to raise benchmark interest rates by 0.25 percentage points.
According to the CME FedWatch tool, the markets are now pricing in a more than 85% chance of a 25-basis-point hike. Contrastingly, analysts at Goldman Sachs also believe that the FOMC will not deliver a rate hike at its next meeting, citing “recent stress” in the financial sector.
As the market stress strokes volatility, investors could add these quality stocks, BMY, GM, MCK, CAH, and AVD, to their watchlist now.
Bristol-Myers Squibb Company (BMY)
BMY is a biopharmaceutical company offering pharmaceutical products for treating hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and COVID-19 diseases.
On March 3, the company declared a quarterly dividend of $0.57 per share on the common stock, payable to its shareholders on May 1, 2023. BMY’s four-year average dividend yield is 3.02%, and its forward annual dividend of $2.28 translates to a 3.47% yield on current prices. Its dividends have grown at 9.2% and 6.9% CAGRs over the past three and five years, respectively.
On the same day, BMY announced that the European Commission (EC) had granted full Marketing Authorization for Reblozyl® (luspatercept) as a treatment for adult patients with anemia-associated, non-transfusion-dependent (NTD) beta-thalassemia.
Additionally, in January, the company received a positive Committee for Medicinal Products for Human Use (CHMP) opinion for the same. In the pivotal BEYOND study, Reblozyl significantly increased hemoglobin levels, which were sustained over a longer time compared to placebo.
Such positive approvals are expected to expand the adoption of Reblozyl in Europe.
For the fiscal year 2022 that ended on December 31, 2022, BMY’s total in-line products and new product portfolio revenue increased 6.5% year-over-year to $33.34 billion. Its non-GAAP EBIT grew 2.1% year-over-year to $19.55 billion, while net earnings attributable to BMY increased 2.8% year-over-year to $16.53 billion. The company’s non-GAAP EPS increased 7.5% from its prior-year value to $7.70.
Its revenue and EBITDA have increased at CAGRs of 20.9% and 37.3% over the past three years. Also, its net income has increased at a 22.5% CAGR over the same period.
Analysts expect BMY’s EPS and revenue for the fiscal second quarter (ending June 2023) to increase 8.6% and marginally year-over-year to $2.10 and $11.96 billion, respectively. The company surpassed the consensus EPS estimates in each of the trailing four quarters, which is excellent.
The stock’s trailing-12-month EBITDA margin of 43.68% is significantly higher than the 3.39% industry average. Also, its trailing 12-month ROCE of 18.88% compares to the negative industry average of 39.86%.
BMY shares have lost 4.2% over the past year to close the last trading session at $66.
BMY’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and a B for Growth, Stability, and Quality. Among the 167 stocks in the Medical – Pharmaceuticals industry, it is ranked #2. To see the other ratings of BMY for Momentum and Sentiment, click here.
General Motors Company (GM)
GM designs, builds, and sells trucks, crossovers, cars, and automobile parts and accessories worldwide. The company operates through GM North America; GM International; Cruise; and GM Financial segments.
On February 9, GM and GlobalFoundries Inc. (GFS) announced a strategic, long-term agreement to establish a dedicated capacity corridor exclusively for GM’s chip supply. This agreement should help GM reduce the number of unique chips required to power its complex, tech-heavy vehicles.
In the same month, GM Defense LLC, a subsidiary of GM, signed a collaborative Memorandum of Understanding (MOU) with the Tawazun Council as the first step toward a formal partnership to develop future products in the areas of advanced mobility and power solutions. This collaboration is expected to expand its footprint in the Middle East.
On January 31, Lithium Americas Corp. (LAC) and GM announced that they would jointly invest in developing the Thacker Pass mine in Nevada, with GM investing $650 million in LAC. The lithium carbonate from Thacker Pass is expected to be used in GM’s Ultium battery cells.
For the fiscal fourth quarter that ended December 31, 2022, GM’s revenue increased 28.4% year-over-year to $43.11 billion. Its net income attributable to stockholders increased 14.8% year-over-year to $2 billion. In addition, its adjusted EPS came in at $2.12, representing a 57% increase from the year-ago quarter.
The company’s EBITDA and EBIT grew at CAGRs of 11.8% and 23%, respectively, over the past three years. Moreover, its revenue grew at 4.5% CAGR over the same period.
GM’s revenue for the quarter ending March 31, 2023, is expected to increase 9.1% year-over-year to $39.24 billion. Its EPS for the quarter ending June 30, 2023, is expected to increase 41.4% year-over-year to $1.61. Furthermore, it surpassed the consensus EPS estimates in three of the trailing four quarters.
GM’s trailing-12-month net income margin and ROCE of 6.34% and 13.98% are 38.5% and 24.2% higher than the industry averages of 4.58% and 11.26%, respectively.
The stock has gained 10.8% over the past nine months to close the last trading session at $35.76.
GM’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to Buy in our proprietary rating system.
It also has a B grade for Growth, Value, and Sentiment. Out of 59 stocks in the Auto & Vehicle Manufacturers industry, it is ranked #22.
Click here to see the additional POWR Ratings of GM (Momentum, Stability, and Quality).
McKesson Corporation (MCK)
MCK is a diversified healthcare service provider focusing on advancing health outcomes for patients globally. It operates its business through four segments: U.S. Pharmaceutical; Prescription Technology Solutions (RxTS); Medical-Surgical Solutions; and International.
On January 26, the company declared a regular dividend of 54 cents per share of common stock, payable on April 3, 2023. MCK’s annual dividend of $2.16 yields 0.64% on the current share price. It has a four-year average yield of 0.89%.
Its dividend payouts have increased at an 8.9% CAGR over the past three years and a 10% CAGR over the past five years. The company has a record of 15 consecutive years of dividend growth.
Last year in September, MCK partnered with CVS Health Corporation (CVS) to distribute pharmaceuticals to mail order and specialty pharmacies, retail pharmacies, and distribution centers through June 2027. This extended pharmaceutical distribution agreement enables both companies to expand their market reach and boost overall revenue.
In the fiscal third quarter that ended December 31, 2022, MCK’s total revenues increased 2.7% year-over-year to $70.49 billion. The company’s income from continuing operations improved significantly year-over-year to $1.12 billion, while its adjusted earnings increased 3% from the year-ago value to $972 million. Also, its adjusted EPS came in at $6.90, representing an increase of 12.2% year-over-year.
Its EBITDA and EBIT have increased at CAGRs of 8.7% and 15.4% over the past three years. Also, its levered FCF margin has increased at a 24.8% CAGR over the same period.
In addition, the stock’s trailing-12-month net income margin, ROTC, and ROTA of 1.15%, 39.24%, and 5.01% compare with negative industry averages of 7.07%, 22.02%, and 31.19%, respectively.
The consensus EPS estimate of $7.11 for the fourth quarter (ending March 31, 2023) represents a 21.9% improvement year-over-year. The consensus revenue estimate of $68.08 billion for the current quarter indicates a 3% increase from the prior-year period. The company has an impressive earnings surprise history, surpassing the consensus revenue estimates in three of the trailing four quarters.
Over the past year, the stock has gained 19.3% to close the last trading session at $335.40.
MCK’s strong prospects are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Growth and Value and a B for Stability and Sentiment. In the Medical - Services industry, it is ranked first out of 76 stocks. To see the ratings of MCK for Momentum and Quality, click here.
Cardinal Health, Inc. (CAH)
CAH is an integrated healthcare services and solutions provider. It offers customized solutions for healthcare organizations like hospitals, pharmacies, ambulatory surgery facilities, clinical laboratories, and patients receiving care at home. The company operates through two segments: Pharmaceutical and Medical.
On March 6, CAH collaborated with Signify Health, Inc. (SGFY) to offer in-home clinical and medication management services through its Outcomes™ business. This collaboration should help reduce costs and eliminate gaps in care for more than 2.3 million members nationwide to assist their treatment journey by offering coordinated care from SGFY clinicians.
Moreover, Brent Stutz, senior vice president and general manager of Outcomes™, believes that this partnership would help drive more powerful connections across transitions of care, enabling pharmacies and payers to reach patients who are often in need of additional support.
On February 10, the company declared a quarterly dividend of $0.4957 per share from its capital surplus, payable to its shareholders on April 15, 2023. The company has raised its dividends for 28 consecutive years and pays a $1.98 per share dividend annually, which translates to a 2.83% yield on the current price. Its four-year average dividend yield is 3.59%.
For the fiscal 2023 second quarter that ended December 31, 2022, CAH’s revenues increased 13.2% year-over-year to $51.47 billion. Its gross margin grew 2.9% from the year-ago value to $1.66 billion, while its non-GAAP EBIT rose marginally year-over-year to $450 million. Also, its non-GAAP EPS increased 3.9% from the prior-year quarter to $1.32.
Street expects CAH’s EPS and revenue for the current quarter (ending March 31, 2023) to increase 1.9% and 10.3% year-over-year to $1.48 and $49.45 billion, respectively. Moreover, it topped the revenue estimates in each of the trailing four quarters, which is promising.
CAH’s revenue has grown at CAGRs of 8.9% and 7.8% over the past three and five years, respectively. In addition, its levered FCF grew at a CAGR of 36.5% over the past three years.
In terms of the trailing-12-month, the stock’s EBIT margin and ROTC of 0.82% and 20.32% compare with the negative industry averages of 0.86% and 22.02%, respectively.
Over the past nine months, the stock has gained 36.1% to close the last trading day at $70.10.
It’s no surprise that CAH has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has a B grade for Growth, Value, and Sentiment. Within the Medical - Services industry, it is ranked #2 of 76 stocks.
Beyond what we stated above, we also have CAH’s ratings for Momentum, Stability, and Quality. Get all CAH ratings here.
American Vanguard Corporation (AVD)
AVD is a diversified specialty and agricultural products company that develops and markets products for crop protection and management, turf and ornamentals management, and public and animal health. Its products include insecticides, fungicides, herbicides, soil health, plant nutrition, molluscicides, and soil fumigants, which are marketed in liquid, powder, and granular forms.
On March 13, the company declared a quarterly dividend of $0.03 per share of its common stock for distribution on April 14, 2023. It pays a $0.12 per share dividend annually, which translates to a 0.60% yield on the current price.
Its four-year average dividend yield is 0.44%. The company’s dividend payouts have grown at 9.5% CAGR over the past three years and an 11.8% CAGR over the past five years.
On January 17, AMGUARD Environmental Technologies, the specialty markets division of AMVAC Chemical Corporation, a wholly owned subsidiary of AVD, acquired the leading microbial cleaning products of American Bio-Systems. This should benefit the company significantly in the long run.
In the same month, the company was named a "Top 10 Precision Farming Solutions Provider" for 2022 by AgriBusiness Review magazine and is prominently featured in the publication's December 2022 edition. This recognition depicts AVD’s strong innovation and growth in the technology solutions market.
AVD’s trailing-12-month gross profit margin of 39.65% is 33.2% higher than the 29.76% industry average. Also, its trailing-12-month levered FCF margin of 5.28% is 21.1% higher than the industry average of 4.36%.
For the fiscal year that ended December 31, 2022, AVD’s net sales increased 9.3% year-over-year to $609.62 million. The company’s operating income grew 31.4% year-over-year to $40.65 million, while its net income came in at $27.40 million, representing a 47.4% year-over-year increase.
In addition, its adjusted EBITDA increased 15.1% from the year-ago value to $73.10 million. Also, its EPS stood at $0.92, up 50.8% year-over-year.
AVD’s revenue and EBITDA have increased at CAGRs of 9.1% and 12.5%, respectively, over the past three years, while its net income has grown at a 17.3% CAGR.
Analysts expect AVD’s EPS and revenue for the fiscal second quarter (ending June 2023) to increase 56.5% and 10.3% year-over-year to $0.36 and $163.40 million, respectively. The company surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive.
Over the past year, AVD has gained 15.5% to close the last trading session at $20.10.
AVD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Sentiment and a B for Value, Stability, and Quality. In the B-rated Chemicals industry, it is ranked #4 out of 84 stocks. Click here to view the other ratings of AVD for Growth and Momentum.
What To Do Next?
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What gives these stocks the right stuff to become big winners, even in this brutal stock market?
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BMY shares were trading at $65.93 per share on Tuesday afternoon, down $0.07 (-0.11%). Year-to-date, BMY has declined -7.64%, versus a 1.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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