The stock market correction earlier this year caused some fundamentally sound stocks to plummet in price. This volatility can be attributed to increased geopolitical tensions between Russia and the U.S. amid the Russian-Ukraine war, and 40-year high inflation rates. Nevertheless, the environment has caused many high-quality stocks to trade at cheap valuations relative to their earnings and long-term growth potential.
Considering soaring inflation currently, which might wreak havoc on the growing economy, investors are looking for stability and thus are investing heavily in value stocks. Such stocks can withstand high inflation and perform relatively well in uncertain periods. Value stocks are also known for returning more cash to their shareholders in the form of dividends. Investors’ interest in value stocks is evidenced by the Vanguard Value ETF’s (VTV) 11.4% gains over the past year.
Since the stock market has been highly uncertain, we think it is advisable to add quality undervalued stocks Bristol-Myers Squibb Company (BMY), McKesson Corporation (MCK), and AGCO Corporation (AGCO) to one’s portfolio, given their strong upside potential.
Bristol-Myers Squibb Company (BMY)
New York City’s BMY develops, licenses, manufactures, markets, and sells biopharmaceutical products worldwide. The company provides products for oncology, cardiovascular, fibrotic, neuroscience, and immunology diseases. Its products include Revlimid, Eliquis, Opdivo, Orencia, Sprycel, Yervoy, Reblozyl, Zeposia, and Breyanzi. BMY sells its products to wholesalers, distributors, hospitals, pharmacies, retailers, and government agencies.
Last month, BMY announced that the U.S. Food and Drug Administration (FDA) and European Medicines Agency (EMA) had validated its type II variation application for Opdivo (nivolumab) with chemotherapy for the neoadjuvant treatment for resectable non-small cell lung cancer. The EMA’s approval is expected to accelerate BMY’s business growth.
In its fiscal year 2021 fourth quarter, ended Dec. 31, 2021, BMY's total revenues increased 8.3% year-over-year to $11.99 billion. Its gross profit improved 9% from the prior-year period to $9.63 billion. Its net earnings attributable to BMY rose 22.2% year-over-year to $4.07 billion. And the company's earnings per share rose 25.3% year-over-year to $1.83.
The $11.41 billion consensus revenue estimate for its fiscal year 2022 first quarter, ended March 31, 2022, represents 3% growth from the same period in 2021. The $1.93 consensus EPS estimate for the to-be-reported quarter indicates an 11.1% year-over-year rise. It is no surprise that BMY has surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock gained 18.4% in price year-to-date and 16.9% over the past year and closed Friday's trading session at $73.82.
BMY's POWR Ratings reflect this promising outlook. It has an overall A grade, which equates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
BMY has a grade of A for Value and B for Growth and Quality. Within the Medical - Pharmaceutical industry, it is ranked #2 of 173 stocks.
To see additional POWR Ratings (Stability, Momentum, and Sentiment) for BMY, click here.
Click here to checkout our Healthcare Sector Report for 2022
McKesson Corporation (MCK)
MCK offers healthcare supply chain management, community oncology and specialty care, retail pharmacy, and healthcare information solutions in the U.S. and internationally. The Irving, Tex., company operates through four segments: U.S. Pharmaceutical, International, Medical-Surgical Solutions, and Prescription Technology Solutions.
Last December, MCK agreed to sell its Austrian business to Quadrifolia Management GmbH. “Today’s transaction marks another milestone in advancing McKesson’s intent to streamline the portfolio and prioritize investments in areas where we have deep expertise and are central to our long-term growth strategy. We are making good progress in executing our strategy to exit Europe and continue to evaluate suitable exit alternatives for our businesses in Norway and Denmark,” stated Brian Tyler, CEO of MCK.
MCK's revenues increased 9.6% year-over-year to $68.61 billion in its fiscal year 2022 third quarter, ended Dec. 31, 2021. Its gross profit grew 8.8% year-over-year to $3.43 billion. The company's operating income grew 104% year-over-year to $298 million, and MCK’s adjusted earnings and adjusted earnings per share came in at $944 million and $6.15, respectively, registering an increase of 27.4% and 33.7% from the prior-year period.
Analysts expect MCK's revenue for its fiscal year 2022 fourth quarter, ended March 31, 2022, to come in at $63.7 billion, representing a 7.7% rise year-over-year. The Street expects the company's EPS for the to-be-reported quarter to come in at $6.05, representing a 19.8% increase year-over-year. MCK has surpassed the consensus EPS estimates in each of the trailing four quarters.
MCK stock has improved 23.5% in price year-to-date and 23.7% over the past three months. It closed Friday's trading session at $307.00.
MCK’s POWR Ratings reflect a strong outlook. The stock has an overall rating of A, which translates to Strong Buy in our POWR Ratings system.
MCK has a grade of A for Value and B for Stability and Growth. It is ranked #4 of 84 stocks in the Medical - Services industry.
Click here to see MCK’s POWR Ratings for Momentum, Sentiment, and Quality.
Click here to checkout our Healthcare Sector Report for 2022
AGCO Corporation (AGCO)
AGCO in Duluth, Ga., designs, manufactures, and distributes agricultural equipment and precision ag technology worldwide. The company provides horsepower, utility, and compact tractors for crop production, soil cultivation, seeding, land leveling, and commercial hay operations. In addition, it offers drying and handling equipment systems, seed-processing systems, application equipment, and planting equipment.
AGCO's net sales increased 16.1% year-over-year to $3.16 billion in its fiscal 2021 fourth quarter, ended Dec. 31, 2021. AGCO’s gross profit improved 14.6% year-over-year to $682.70 million. Its income from operations rose 48.3% year-over-year to $264 million. The company’s net income increased 109.2% from its year-ago value to $283.30 million. Its net income per common share attributable to AGCO rose 110.7% year-over-year to $3.75.
The $2.65 million consensus revenue estimate for its fiscal year 2022 first quarter, ended March 31, 2022, represents 11.6% growth from the same period in 2021. The company has an impressive earnings surprise history; it has surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of AGCO increased 24.7% in price year-to-date and 23.4% over the past three months. It closed Friday's trading session at $144.72.
AGCO's strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, which equates to Buy in our proprietary rating system.
It has a grade of A for Value. Within the Agriculture industry, it is ranked #7 of 30 stocks.
To see additional POWR Ratings (Growth, Momentum, Stability, Quality, and Sentiment) for AGCO, click here.
What To Do Next?
If you would like to see more top value stocks, then you should check out our free special report:
What makes these stocks great additions to any portfolio?
First, because they are all undervalued companies with exciting upside potential.
But even more important, is that they are all top Buy rated stocks according to our coveted POWR Ratings system. Yes, that same system where top-rated stocks have averaged a +37.99% annual return.
Click below now to see these 7 stellar value stocks with the right stuff to outperform in the coming months.
BMY shares were trading at $73.78 per share on Monday afternoon, down $0.04 (-0.05%). Year-to-date, BMY has gained 20.25%, versus a -3.66% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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