The Federal Reserve raised its short-term interest rates by a quarter-percentage point, bringing its benchmark rate to a new range of 4.5% to 4.75%, the highest since October 2007. While Fed Chairman Jerome Powell acknowledged reduced inflation, he also indicated that the central bank could execute a few more rate hikes to bring inflation down to its target of 2%.
“It would be very premature to declare victory, or to think that we’ve really got this,” said Powell. The disinflation process, he said, is in its early stages, but the “job is not fully done.”
Furthermore, the Labor Department reported last week that there were 517,000 jobs added to the economy in January, above the market estimate of 187,000. The jobs report coming in better than expected might encourage the Fed to raise interest rates more quickly to slow down inflation and temper economic expansion.
Such a robust employment report could indicate at least two 25-basis-point rate rises for the next meeting.
While resilient growth raises expectations that the economy could escape a recession this year, some economists warn that the Fed's continued rate hikes to tame inflation might harm economic growth. As a result, market volatility is anticipated to remain elevated in the near future.
Against this backdrop, it could be wise to add high-quality stocks AbbVie Inc. (ABBV), Cintas Corporation (CTAS), and Boyd Gaming Corporation (BYD) to your portfolio.
AbbVie Inc. (ABBV)
ABBV is a biopharmaceutical company engaged in developing, manufacturing, and commercializing medicines and therapies. Additionally, it discovers and develops antibody medicines that target difficult-to-drug disease-causing proteins, notably G protein-coupled receptors (GPCRs).
On January 10, 2023, ABBV and Anima Biotech partnered to discover and develop mRNA biology modulators for three targets across oncology and immunology.
The agreement would provide ABBV access to Anima’s superior technology platform and deep understanding of mRNA biology, strengthening its world-class capabilities in discovering and developing medications.
Also, on January 6, ABBV and Immunome, Inc. (IMNM), a clinical-stage biopharmaceutical firm, announced a global partnership and option agreement to discover up to 10 novel antibody-target pairings resulting from three specific tumor types using IMNM's Discovery Engine.
The strategy employed by IMNM holds the potential to unlock novel cancer biology and yield multiple therapeutic candidates. ABBV intends to utilize IMNM’s Discovery Engine to strengthen its existing oncology pipeline.
For the third quarter that ended September 30, 2022, ABBV’s net revenues increased 3.3% year-over-year to $14.81 billion, and its operating earnings grew 6.9% from the year-ago value to $4.60 billion. Also, the company’s net earnings and adjusted EPS stood at $4 billion and $3.66, up 24.3% and 29.3% year-over-year, respectively.
ABBV’s trailing-12-month EBITDA margin of 51.54% is significantly higher than the industry average of 3.91%, and its trailing-12-month gross profit margin of 69.83% is 26.3% higher than the 55.29% industry average.
The consensus revenue estimate of $58.28 billion for the fiscal year that ended December 2022 indicates a 3.9% year-over-year improvement. Likewise, the consensus EPS estimate of $13.77 for the same year reflects a growth of 8.5% year-over-year. Moreover, ABBV surpassed its consensus estimates in all four trailing quarters.
Shares of ABBV have gained 3.4% over the past six months to close the last trading session at $145.14.
ABBV’s POWR Ratings reflect its strong outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Quality and a B for Value and Growth. In the 172-stock Medical - Pharmaceuticals industry, it is ranked #8.
Beyond what we stated above, we also have ABBV’s ratings for Sentiment, Stability, and Momentum. Get all ABBV ratings here.
Cintas Corporation (CTAS)
CTAS offers corporate identity uniforms and related business services. Its segments include Uniform Rental and Facility Services; First Aid and Safety Services; and All Other. The company rents and services uniforms and other clothing. In addition, it provides services for first aid, safety, and fire protection.
Given CTAS’ strong performance to date and visibility in the second quarter of fiscal 2023, the company has raised its full-year revenue and earnings outlook. The company now expects revenue to come in the range of $8.67 billion to $8.75 billion, up from the prior guidance range of $8.58 billion to $8.67 billion.
Also, the company’s adjusted EPS is expected to range from $12.50 to $12.80 compared to the previous guidance range of $12.30 to $12.65. The improved financial outlook reflects higher-than-anticipated consumer demand and favorable price elasticities across segments.
For the fiscal 2023 second quarter that ended November 30, 2022, CTAS’ total revenue increased 13.1% year-over-year to $2.17 billion, and its operating income grew 16.7% from the year-ago value to $444.93 million. The company’s income before income taxes stood at $416.36 million, representing a rise of 15.9% year-over-year.
Furthermore, CTAS’ net income rose 10.1% from the prior year’s period to $324.29 million, while its EPS came in at $3.12, up 13% year-over-year.
The stock’s trailing-12-month gross profit margin of 46.50% is 60% higher than the industry average of 29.06%. Moreover, its trailing-12-month EBITDA margin of 23.73% is 81.7% higher than the 13.06% industry average. And the stock’s net income margin of 15.35% is 138.8% higher than the industry average of 6.43%.
Analysts expect CTAS’ revenue to increase 11% year-over-year to $8.72 billion for the fiscal year ending May 2023. The company’s EPS for the current year is expected to rise 12.9% from the previous year to $12.73. Furthermore, CTAS surpassed its consensus estimates in all four trailing quarters, which is impressive.
The stock has gained 4.1% over the past six months and 16.6% over the past year to close the last trading session at $443.07.
CTAS’ promising fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system.
CTAS has an A grade for Quality and a B for Sentiment and Stability. Within the B-rated Outsourcing - Business Services, it is ranked #9 of 41 stocks.
In addition to the POWR Ratings I’ve just highlighted, you can see CTAS ratings for Growth, Value, and Momentum here.
Boyd Gaming Corporation (BYD)
BYD is a multi-jurisdictional gaming company. It operates through three segments, Las Vegas Locals; Downtown Las Vegas; and Midwest & South. The company manages 28 gaming entertainment facilities. It also owns and runs a travel agency.
On February 3, 2023, BYD and the Las Vegas Raiders announced a partnership, designating BYD's 10 Las Vegas Valley casinos as the Raiders' and Allegiant Stadium's Official and Exclusive Local Casinos.
BYD would benefit from prominent branding and signage as an Allegiant Stadium Founding Partner at the stadium. The company would also serve as a presenting partner for one Raiders home game each year, which should further strengthen its brand.
Moreover, on November 1, 2022, BYD successfully acquired Pala Interactive LLC and its subsidiaries for a total net cash consideration of $170 million. The acquisition of Pala Interactive gives BYD access to the technology, products, and industry knowledge it needs to establish a successful regional online casino business.
The acquisition would also strengthen BYD's current land-based operations and broaden its client base nationwide.
BYD’s total revenues increased 4.9% year-over-year to $922.92 million for the fourth quarter that ended December 31, 2022. The company’s operating income increased 14.2% year-over-year to $247.64 million. Its adjusted EBITDA rose 3.8% year-over-year to $333.27 million.
In addition, BYD’s adjusted earnings and EPS came in at $181.76 million and $1.72, representing an increase of 17.8% and 27.4% year-over-year, respectively.
BYD’s trailing-12-month gross profit margin of 51.94% is 46.7% higher than the industry average of 35.41%. Likewise, its trailing-12-month EBITDA margin of 36.03% is 224.3% higher than the 11.11% industry average, while its net income margin of 17.98% is 256.3% higher than the industry average of 5.05%.
Analysts expect BYD’s revenue to increase 1.7% year-over-year to $875.76 million for the first quarter ending March 2023. The company’s EPS for the ongoing quarter is expected to rise 5.8% from the previous year’s quarter to $1.48. Also, BYD surpassed its consensus EPS in all four trailing quarters.
Shares of BYD have gained 20.3% over the past six months to close the last trading session at $66.45.
BYD’s POWR Ratings reflect its solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
BYD has an A grade for Quality and a B for Value and Sentiment. Within the Entertainment - Casinos/Gambling industry, it is ranked #3 of 30 stocks.
To see additional POWR Ratings for Growth, Stability, and Momentum for BYD, click here.
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ABBV shares were trading at $145.59 per share on Wednesday afternoon, up $0.45 (+0.31%). Year-to-date, ABBV has declined -9.06%, versus a 7.66% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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