The Fed is expected to launch another outsized rate hike in November as it tries to bring the multi-decade high inflation under control. As a direct consequence of the Fed’s aggressive monetary policy tightening, demand is slowing. The economy contracted for two consecutive quarters, indicating a weakening economy.
Despite strong macroeconomic headwinds, there is a resurgence of optimism among investors this corporate earnings season. The decent start might signal that the economy is in a better state than anticipated. “3Q and 4Q earnings should confirm fundamentals remain anchored in resilient labor market and Covid reopening,” said Dubravko Lakos-Bujas, JPMorgan’s head of global macro research.
Hence, we think investors should load up on fundamentally solid stocks, Pfizer Inc. (PFE) and The Kroger Co. (KR), which are currently trading under $50.
Pfizer Inc. (PFE)
PFE discovers, develops, manufactures, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas. The company serves wholesalers, retailers, hospitals, clinics, government agencies, as well as disease control and prevention centers.
On October 13, PFE and BioNTech SE ADR (BNTX) announced positive early data from a Phase 2/3 clinical trial of Omicron BA.4/BA.5 -adapted bivalent COVID-19 vaccine. Upon the completion of the trials, if the companies receive approval, it should boost their revenues.
On October 5, PFE announced the completion of its acquisition of Global Blood Therapeutics, Inc. (GBT), a biopharmaceutical company involved in the discovery, development, and delivery of life-changing treatments for patients with sickle cell disease (SCD). This acquisition reinforces PFE’s commitment to SCD and should help address critical needs.
PFE’s revenue increased 46.8% year-over-year to $27.74 billion in the second quarter ended July 3. Its income from continuing operations grew 69.6% from the year-ago value to $9.88 billion, while its adjusted income improved 93.5% year-over-year to $11.66 billion. The company’s adjusted earnings per common share increased 92.5% from its year-ago value to $2.04.
The consensus EPS estimate of $1.35 for the fiscal quarter ending December 2022 indicates a 25.1% improvement year-over-year. Analysts expect its revenue to rise 4.2% year-over-year to $24.84 billion for the same quarter. PFE beat the consensus EPS estimates in all four trailing quarters, which is impressive.
The stock has gained 6.7% over the past year to close the last trading session at $44.09.
PFE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
PFE is also rated an A in Value and a B in Quality. In the 161-stock Medical - Pharmaceuticals industry, PFE is ranked #11.
Click here to access additional POWR Ratings for Growth, Momentum, Sentiment, and Stability for PFE.
The Kroger Co. (KR)
KR, a retailer in the United States, operates combination food and drug stores, multi-department stores, marketplace stores, and price impact warehouses. The company also manufactures and processes food products for sale in its supermarkets and online. It also sells fuel through 1,613 fuel centers.
On October 18, KR officially opened its newest Customer Fulfillment Center (CFC) in Romulus, Michigan. The CFC will leverage advanced robotics technology and creative solutions to redefine the customer experience in the greater Detroit area. This should be strategically beneficial for the company.
In the same month, KR and Albertsons Companies (ACI) announced a definitive merger agreement to expand its customer reach and improve proximity to deliver fresh and affordable food to approximately 85 million households with a premier omnichannel experience. The new combined company should drive profitability and deliver superior value to its shareholders.
KR’s sales increased 9.3% year-over-year to $34.64 billion in the fiscal second quarter ended August 13. Its operating profit came in at $954 million, up 13.7% year-over-year. The company’s adjusted EBITDA grew 10.9% from the year-ago value to $7.63 billion, while its adjusted EPS improved 12.5% year-over-year to $0.90.
Street expects KR’s revenue for the fiscal year ending January 2023 to come in at $148.32 billion, indicating an increase of 7.6% year-over-year. The company’s EPS is expected to grow 10.9% year-over-year to $4.08 in the same period. The company surpassed the consensus EPS estimates in all four trailing quarters.
KR has gained 10.1% over the past year to close the last trading session at $43.16.
It’s no surprise that KR has an overall A rating which translates to a Strong Buy in our POWR Ratings system. It also has a B grade in Quality, Growth, and Value. It is ranked #9 of 38 stocks in the A-rated Grocery/Big Box Retailers industry.
Beyond what is stated above, we’ve also rated KR for Momentum, Stability, and Sentiment. Get all KR ratings here.
PFE shares were trading at $42.96 per share on Wednesday afternoon, down $1.13 (-2.56%). Year-to-date, PFE has declined -25.52%, versus a -21.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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