The S&P 500 closed in the correction territory on Tuesday, as the escalating tension between U.S. and Russia over Ukraine soured market sentiment at the start of the holiday-shortened week. The Dow Jones Industrial Average slid 482.57 points to 33,596.61, the S&P 500 fell 1% to 4,304.76, and the Nasdaq Composite declined 1.2% to 13,381.52. In addition, the CBOE Volatility Index (^VIX) rose 4.5% intraday yesterday.
However, corporate earnings appear to be in a good position. According to the FactSet earnings season update, released on February 11, the number of S&P 500 companies beating EPS estimates is above the five-year average. The index reported more than 30% earnings growth for the fourth straight quarter and more than 45% earnings growth for the full year.
The mega-cap stocks, NVIDIA Corporation (NVDA), Walmart Inc. (WMT), and Cisco Systems, Inc. (CSCO), handily beat earnings estimates last week. Hence, we think these names might be solid additions to one’s watchlist.
NVIDIA Corporation (NVDA)
NVDA is a visual computing company operating worldwide under Graphics and Compute & Networking segments. The Santa Clara, Calif.-based company offers GeForce GPUs for gaming and PCS, GeForce NOW gaming streaming devices, and data center platforms and systems for AI. It has a market capitalization of $582.88 billion.
On February 16, Jaguar Land Rover announced the formation of a multi-year strategic partnership with NVDA to jointly develop and deliver next-generation automated driving systems and AI-enabled services and experiences for its customers. NVDA should stand to benefit from this partnership.
On January 4, NVDA unveiled more than 160 gaming and Studio GeForce®-based laptop designs, as well as a new desktop and laptop GeForce RTX® GPUs and technologies. The new products and designs might add to the company’s revenue stream.
For the fiscal fourth quarter, ended January 30, NVDA’s revenue increased 52.8% year-over-year to $7.64 billion. Its non-GAAP income from operations rose 76% from the prior-year quarter to $3.68 billion. Its non-GAAP net income and non-GAAP net income per share improved 71.2% and 69.2%, respectively, from the same period in the prior year to $3.35 billion and $1.32, respectively. The company’s adjusted EPS beat the $1.22 consensus estimate by 8.2%.
Analysts expect NVDA’s EPS to increase 41.8% year-over-year to $1.29 for its fiscal quarter ending April 2022, while the Street expects its revenue to rise 43.3% from the prior-year period to $8.11 billion. Also, NVDA has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 62.9% in price over the past year and 12.4% over the past six months to close yesterday’s trading session at $233.90.
NVDA has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
NVDA has a Sentiment grade of A and a Growth and Quality grade of B. In the 97-stock Semiconductor & Wireless Chip industry, it is ranked #58. The industry is rated A. Click here to see the additional POWR Ratings for NVDA (Value, Momentum, and Stability).
Click here to checkout our Semiconductor Industry Report for 2022
Walmart Inc. (WMT)
WMT in Bentonville, Ark., is an industry giant that engages in retail, wholesale, and other unit businesses globally. The company operates through the three broad segments of Walmart U.S.; Walmart International; and Sam’s Club. It has a $378.50 billion market capitalization.
On February 17, WMT announced an annual $2.24 per share dividend for its fiscal year 2023, which indicates an increase of approximately 2% from the $2.20 per share for the previous fiscal year. The dividends are expected to be paid out in quarterly installments and reflect positively on the company’s ability in cash generation.
On January 27, Sam’s Club, a WMT division, and membership warehouse club, announced the chain-wide, national roll-out of Inventory Scan, which is expected to be added to its existing fleet of robot scrubbers. Todd Garner, VP of In Club Product Management at Sam’s Club, said, “This intelligence allows us to proactively manage our clubs in an efficient manner. Inventory Scan assures items are available and easy to locate in the club, freeing up time for our associates to focus on members and the shopping experience they deserve.”
WMT’s total revenues increased 0.5% year-over-year to $152.87 billion in its fiscal fourth quarter, ended January 31. Its operating income improved 7.3% from the same period last year to $5.89 billion. Its adjusted EPS rose 10.1% from the prior-year quarter to $1.53, surpassing Street’s EPS estimate of $1.50 by 2%.
The Street $6.75 EPS estimate for fiscal 2023 indicates a 4.5% year-over-year increase. And the Street’s $589.71 billion revenue estimate for the same year reflects a 3% rise from the same period the prior year. Moreover, WMT has topped consensus EPS estimates in each of the trailing four quarters.
WMT’s stock has gained 2.2% in price over the past five days to close yesterday’s trading session at $136.45.
It is no surprise that WMT has an overall A rating, which translates to Strong Buy in our POWR Rating system. WMT has a Value, Stability, and Quality grade of B. In the 39-stock Grocery/Big Box Retailers industry, it is ranked #12. The industry is rated A. To see the additional POWR Rating for Growth, Momentum, and Sentiment for WMT, click here.
Click here to checkout our Retail Industry Report for 2022
Cisco Systems, Inc. (CSCO)
CSCO in San Jose, Calif., is a multinational corporation that operates in communications and Information Technology, designing, manufacturing, and selling Internet Protocol-based networking and related products. It sells its services directly to consumers and through distributors. The company has a $237.45 billion market capitalization.
On February 15, CSCO, an official technology partner for NFL, announced that it had designed, implemented, and operated the end-to-end security platform for the NFL’s enterprise network at Super Bowl LVI, thereby enabling 100 percent up-time during the game. It was also reported that the NFL would be working with CSCO to build a repeatable and portable security platform and playbook for future League events. This might prove to be beneficial for the company.
On February 3, CSCO unveiled new innovations designed to power hybrid work. These innovations might add to the company’s revenue stream, especially since organizations in recent years have amped up their plans for supporting hybrid models of work.
For its fiscal second quarter, ended January 29, CSCO’s total revenue increased 6.4% year-over-year to $12.72 billion. Its non-GAAP net income improved 5.5% year-over-year to $3.55 billion, while its non-GAAP EPS came in at $0.84, indicating a 6.3% increase from the same period the prior year. It also beat the analysts’ expected $0.81 EPS by 3.7%.
The $0.92 consensus EPS estimate for the quarter ending July 2022 reflects a 9.5% year-over-year increase. And the $13.89 billion consensus revenue estimate for the same period reflects a 5.9% increase from the prior-year period. Furthermore, CSCO has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 23.9% in price over the past year and 3.8% over the past five days to close yesterday’s trading session at $56.30.
This promising outlook is reflected in CSCO’s POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. CSCO has a Quality grade of A and a Stability grade of B. In the 56-stock Technology – Communication/Networking industry, it is ranked #6.
In addition to the POWR Ratings we have stated above, one can see CSCO ratings for Growth, Value, Momentum, and Sentiment here.
NVDA shares rose $3.22 (+1.38%) in premarket trading Wednesday. Year-to-date, NVDA has declined -20.47%, versus a -9.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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