The U.S. GDP contracted by 0.9% in the second quarter, marking the second consecutive quarter of negative economic growth. Moreover, a slowdown in global business activity and high jobless claims are fueling current recessionary concerns.
However, better-than-expected second-quarter corporate profits and the Fed’s indication of pausing its rate hike depending on economic conditions helped the market rebound over the past couple of days. The market is expected to remain volatile in the near term based on the economic uncertainties.
Regardless of the market conditions, higher profit margins, lower valuations, and solid growth attributes make Abbott Laboratories (ABT), Coca-Cola Consolidated, Inc. (COKE), DLH Holdings Corp. (DLHC), Friedman Industries, Incorporated (FRD), and ICL Group Ltd (ICL), ideal additions to your portfolio for long-term gains.
Abbott Laboratories (ABT)
ABT discovers, develops, and sells healthcare products focused on cardiovascular, diabetes care, diagnostics, neuromodulation, nutrition, and medicine worldwide. Its products are sold directly to wholesalers, distributors, government agencies, health care facilities, pharmacies, and independent retailers.
On July 12, 2022, the U.S. Food and Drug Administration (FDA) granted Breakthrough Device Designation to investigate the use of ABT’s deep brain stimulation (DBS) system, personalized, adjustable therapy that implants thin wires into targeted areas of the brain, in treatment-resistant depression (TRD), a form of major depressive disorder (MDD).
While ABT’s DBS system has been used to help control symptoms for people with movement disorders, such as Parkinson’s disease and essential tremor, evidence suggests that implanting electrodes in parts that regulate mood could help reduce symptoms of TRD. This should help ABT gain widespread recognition across the industry.
For its fiscal 2022 second quarter ended June 30, 2022, ABT’s net sales increased 10.1% year-over-year to $11.26 billion. The company’s adjusted gross profit came in at $6.38 billion, representing a 9.6% year-over-year improvement. Its adjusted pre-tax income came in at $2.97 billion for the quarter, up 20.4% from the prior-year period.
While its adjusted net earnings increased 20.8% year-over-year to $2.54 billion, its adjusted EPS grew 22.2% to $1.43.
ABT surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. Its EPS is expected to grow at an 11% rate per annum over the next five years.
The stock’s 14.59x trailing-12-month EV/EBITDA is 11.5% lower than the 16.48x industry average. In terms of forward Price/Cash Flow, ABT is trading at 19.33x, 2.2% lower than the 19.77x industry average.
ABT’s EBIT growth of 26.3% over the past year, 86.7% above the industry average of 14.1%. Its forward levered free cash flow growth of 17.2% is 241.7% higher than the 5% industry average.
Its 57.9% trailing-12-month gross profit margin is 5.2% higher than the 55% industry average. The company’s trailing-12-month levered free cash flow margin of 30.4% is 600.3% higher than the industry average of 4.3%. Over the past week, the stock has gained 1.1% to close the last trading session at $110.36.
ABT’s POWR Ratings reflect this promising outlook. It has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Stability, Sentiment, and Quality. Click here to see the additional ratings for ABT’s Value, Growth, and Momentum.
ABT is ranked #4 of 146 stocks in the Medical - Devices & Equipment industry.
Coca-Cola Consolidated, Inc. (COKE)
COKE and its subsidiaries manufacture, market, and distribute nonalcoholic beverages, primarily products of The Coca-Cola Company (KO) in the United States. It also distributes products for various other beverage brands, including Dr Pepper and Monster Energy.
It distributes its products directly to grocery stores, mass merchandise stores, club stores, convenience stores, drug stores, restaurants, and vending machine outlets.
COKE’S net sales for its fiscal 2022 first quarter ended April 1, 2022, increased 10.6% year-over-year to $3.08 billion. The company’s non-GAAP gross profit came in at $500.09 million, up 11.5% from the prior-year period. Its non-GAAP income came in at $117.31 million for the quarter, indicating a 25.2% rise from the year-ago period.
COKE’s non-GAAP net income came in at $78.98 million, representing a 28.9% year-over-year improvement. COKE’s EPS grew 75.3% from the year-ago period to $9.94. The company had $127.09 million in cash and equivalents as of April 1, 2022.
Analysts expect the company’s EPS to come in at $36.66 for its fiscal 2022 ending December 31, 2022, representing a 13.9% rise from the prior-year period. It surpassed Street EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $5.93 billion for the same fiscal year represents a 6.5% year-over-year improvement.
The stock’s 0.97x trailing-12-month EV/Sales is 48% lower than the 1.86x industry average. In terms of forward Price/Sales, COKE is trading at 0.83x, 32.1% lower than the 1.23x industry average.
Its EBIT growth of 27.3% over the past year, 468.5% above the industry average of 4.8%. Its 33.5% trailing-12-month ROE is 166.1% higher than the 12.6% industry average. The company’s trailing-12-month ROTC of 17.8% is 176.5% higher than the industry average of 6.4%. Over the past week, the stock has gained 2% to close the last trading session at $506.79.
COKE’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system.
It has an A grade for Growth and a B for Stability, Value, Sentiment, and Quality. In addition to the POWR Ratings grades we have just highlighted, one can see COKE’s Momentum ratings here.
COKE is ranked #2 of 35 stocks in the A-rated Beverages industry.
DLH Holdings Corp. (DLHC)
DLHC is a full-service provider of technology-enabled health and human services that focuses on providing solutions in Defense and Veterans Health Solutions, Human Solutions and Services, and Public Health and Life Sciences market areas. It primarily serves the federal health services market.
On July 11, 2022, DLHC’s Social & Scientific Systems, Inc. subsidiary was awarded an Indefinite Delivery/Indefinite Quantity (ID/IQ) contract to provide support to the National Cancer Institute’s (NCI) Division of Cancer Epidemiology and Genetics (DCEG). Social & Scientific Systems, Inc. will manage multidisciplinary domestic and international studies with diverse study designs of varying sizes and complexities.
This will help DLHC expand its partnership with DCEG in the long run and help discover the genetic and environmental determinants of cancer and find new approaches to preventing the disease.
DLHC’s revenue for its fiscal 2022 second quarter ended March 31, 2022, increased 76.7% year-over-year to $108.70 million. The company’s income from operations came in at $10.25 million, indicating a 121.9% rise from the prior-year period.
Its net income came in at $7.18 million for the quarter, up 179.6% from the year-ago period. DLHC’s EPS rose 163.2% year-over-year to $0.50. As of March 31, 2022, the company had $359 million in cash.
The consensus EPS estimate of $1.52 for fiscal 2022 ending September 30, 2022, indicates a 102.7% year-over-year improvement. It surpassed Street EPS estimates in three of the trailing four quarters.
Analysts expect DLHC’s revenue to be $395.50 million for the same fiscal year, representing a 60.7% rise from the prior-year period. Its EPS is expected to grow at a 15.5% rate per annum over the next five years.
The stock’s 6.95x forward EV/EBITDA is 33% lower than the 10.38x industry average. In terms of forward Price/Sales, DLHC is trading at 0.55x, 57.2% lower than the 1.29x industry average.
DLHC’s EBIT growth of 101% over the past year, 367% above the industry average of 21.6%. Its ROE growth of 102.2% is 577.2% higher than the 15.1% industry average.
Its 29.4% trailing-12-month ROE is 104% higher than the 14.4% industry average. The company’s trailing-12-month ROTC of 14.1% is 104.5% higher than the industry average of 6.9%. Over the past week, the stock has gained 7% to close the last trading session at $17.07.
DLHC’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
It has an A grade for Growth, Value, and Sentiment and a B for Quality. Click here to see the additional ratings for DLHC’s Stability and Momentum.
DLHC is ranked #2 of 85 stocks in the B-rated Industrial - Services industry.
Friedman Industries, Incorporated (FRD)
FRD engages in steel processing, pipe manufacturing and processing, and the steel and pipe distribution businesses. The company operates in two segments: Coil and Tubular.
On May 2, 2022, FRD announced the acquisition of two high-quality, strategically located facilities from Plateplus, Inc., a hot-rolled steel coil, sheet, and plate supplier from five steel service centers. This would position FRD as a leading North American steel service center with highly efficient freight access, wide market reach, and processing capabilities.
For its fiscal 2022 first quarter ended May 31, 2022, FRD’s net sales increased 52.6% year-over-year to $75.09 million. The company had $2.60 billion in cash and cash equivalents as of March 31, 2022.
The stock’s 2.66x trailing-12-month EV/EBITDA is 62.2% lower than the 7.04x industry average. In terms of trailing-12-month Price/Sales, FRD is trading at 0.22x, 81.7% lower than the 1.18x industry average.
FRD’s forward EBIT growth of 81.1% over the past year, 163.9% above the industry average of 30.7%. Its 19.4% trailing-12-month ROE is 45.1% higher than the 13.4% industry average. The company’s trailing-12-month ROTC of 21.5% is 191.1% higher than the industry average of 7.4%. Over the past week, the stock has gained 11.8% to close the last trading session at $9.27.
FRD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
It has an A grade for Growth, Value, and Momentum and a B for Quality. Click here to see the additional ratings for FRD (Stability and Sentiment).
FRD is ranked #9 of 33 stocks in the A-rated Steel industry.
ICL Group Ltd (ICL)
Headquartered in Tel Aviv, Israel, ICL produces and markets fertilizers, specialty minerals, and chemicals worldwide. It operates through Industrial Products; Potash; Phosphate Solutions; and Innovative Ag Solutions segments and sells them through marketing companies, agents, and distributors.
On July 19, 2022, ICL and ag-biotech company PlantArcBio, Ltd. (PLNT) announced the development of a novel bio-stimulant technology platform, which uses RNAi technology to maximize a plant's natural yield increase mechanisms without any genetic modification while having a minimal impact on the environment.
In early-stage canola field trials, the platform has significantly increased seed weight per hectare for canola crops, and ICL and PlantArcBio are planning larger-scale field trials in 2022. This technology should gain widespread reach across the markets in the coming months.
For its fiscal 2022 second quarter ended June 30, 2022, ICL’s sales grew 78.1% year-over-year to $2.88 billion. The company’s gross profit came in at $1.54 billion, indicating a 170% rise from the year-ago period. Its operating income came in at $1.14 billion for the quarter, representing a 364.7% year-over-year improvement.
ICL’s net income came in at $585 million, up 290% from the prior-year period. Its EPS increased 300% year-over-year to $0.44. As of June 30, 2022, the company had $426 million in cash and cash equivalents.
The consensus EPS estimate of $1.90 for fiscal 2022 ending December 31, 2022, represents a 197.5% rise from the prior-year period. Analysts expect the company’s revenue to be $10.35 billion for the same fiscal year, indicating a 48.8% rise from the year-ago period.
The stock’s 3.41x forward EV/EBITDA is 44.7% lower than the 6.16x industry average. In terms of forward Price/Cash Flow, ICL is trading at 4.98x, 26.5% lower than the 6.78x industry average.
ICL’s EBIT growth of 249.3% over the past year, 711.4% above the industry average of 30.7%. Its ROE growth of 256.7% is 1884.1% higher than the 12.9% industry average.
Its 36.4% trailing-12-month ROE is 172.3% higher than the 13.4% industry average. The company’s trailing-12-month ROTC of 22.6% is 206.1% higher than the industry average of 7.4%. Over the past week, the stock has lost 2.3% to close the last trading session at $8.95.
ICL’s POWR Ratings reflect its solid prospects. It has an overall A rating, which equates to Strong Buy in our proprietary rating system.
The stock has an A grade for Growth and a B for Value and Quality. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for ICL’s Stability, Sentiment, and Momentum here.
ICL is ranked #1 of 33 stocks in the Agriculture industry.
ABT shares were trading at $108.84 per share on Friday afternoon, down $1.52 (-1.38%). Year-to-date, ABT has declined -21.74%, versus a -12.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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