Concerns over Federal Reserve's tightening monetary policy to control surging inflation, the Ukraine-Russia war, and a potential economic slowdown have weighed on investor sentiment so far this year. Furthermore, several analysts believe that the Fed's hawkishness could dampen the economic recovery and eventually tip the economy into a recession. According to research from Moody's Analytics and a Wall Street Journal survey of economists, the odds of a recession are about 30%.
Furthermore, other market headwinds, such as rising energy oil prices, the Russia-Ukraine war, and aggravated supply chain disruptions are not expected to ease anytime soon and could keep the market volatile. However, amid the current market turbulence, a few companies have performed well and raised their full-year outlooks. Also, based on their solid growth attributes, they could gain significantly in the near term.
Given this backdrop, we think it could be wise to bet on the stocks of fundamentally sound companies Nordstrom, Inc. (JWN) and Synopsys, Inc. (SNPS).
Nordstrom, Inc. (JWN)
Headquartered in Seattle, Wash., JWN operates as a fashion retailer and offers apparel, shoes, beauty, accessories, and home goods for women, men, young adults, and children. It offers a range of brand name and private label merchandise through various channels, such as Nordstrom branded stores and online.
JWN raised its full-year outlook, stating momentum in its business, as shoppers visited the company's department stores to refresh their closets with designer brands and shoes. JWN now expects its fiscal 2022 revenue, including credit card sales, to be up 6% to 8%, compared with a prior range of up 5% to 7%. It forecasts earnings per share, excluding the impact of any share repurchase activity, in a range of $3.38 to $3.68, up from a prior range of $3.15 to $3.50.
For the first quarter, ending April 30, 2022, JWN's total revenues increased 18.6% year-over-year to $3.57 billion. Its net earnings amounted to $20.00 million, versus a $166.00 million net loss in the previous period. The company's EPS came in at $0.13 compared to a $1.05 loss per share in the prior-year quarter.
Analysts expect JWN's revenue to increase 8.5% year-over-year to $3.97 billion for the second quarter, ending July 31, 2022. The $0.82 consensus EPS estimate represents a 67% improvement year-over-year for the second quarter, ending July 31, 2022. Furthermore, it has an impressive earnings surprise history: it surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 13.2% in price year-to-date and 31% over the past three months.
JWN's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
The stock also has an A grade for Value and a B grade for Growth and Quality. Within the B-rated Fashion & Luxury Industry, it is ranked #17 of 68 stocks.
To see additional POWR Ratings for Stability, Sentiment, and Momentum for JWN, Click here.
Synopsys, Inc. (SNPS)
Headquartered in Mountain View, Calif., SNPS offers electronic design automation software products used to design and test integrated circuits. The company offers Fusion Design Platform, Verification Continuum Platform, and FPGA design products that are programmed to perform specific functions.
The company has revised its forecast for fiscal 2022. It expects earnings of $8.63 to $8.70 per share on revenue of $5 billion to $5.05 billion, versus Wall Street’s projections for full-year earnings of $7.90 per share on sales of $4.81 billion. "For fiscal 2022, we expect to grow annual revenue by approximately 20% and pass the $5 billion milestone, drive further operating margin expansion, grow earnings per share by more than 25%, and generate approximately $1.6 billion in operating cash flow," De Geus said.
Recently, SNPS announced an important expansion of its EDA data analytics portfolio with the introduction of Synopsys DesignDash design optimization solution. As a complementary product to SNPS' market-leading Digital Design Family and SNPS DSO.ai, the award-winning AI-driven design-space-optimization solution, SNPS DesignDash, is a comprehensive data-visibility and machine intelligence-guided design optimization solution that allows unmatched productivity in advanced SoC design.
For the second quarter, ending April 30, 2022, SNPS' total revenue increased 24.9% year-over-year to $1.28 billion. Its operating income improved 87.3% from its year-ago value to $363.70 million, while its non-GAAP net income amounted to $390.84 million, up 46.3% from its prior-year quarter. The company's non-GAAP EPS grew 47.1% year-over-year to $2.50.
The $2.00 consensus EPS estimate represents a 10.6% improvement year-over-year for the third quarter, ending July 31, 2022. Analysts expect SNPS' revenue to increase 15.1% year-over-year to $1.22 billion for the third quarter, ending July 31, 2022. Furthermore, the company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in all the trailing four quarters.
SNPS's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Quality and a B grade for Growth and Sentiment. Within the F-rated Software - Application industry, it is ranked #11 of 156 stocks.
In total, we rate SNPS on eight distinct levels. Beyond what we have stated above, we have also given SNPS grades for Value, Momentum, and Stability. Get all the SNPS ratings here.
Click here to check out our Software Industry Report for 2022
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JWN shares were trading at $26.02 per share on Thursday morning, up $0.42 (+1.64%). Year-to-date, JWN has gained 16.74%, versus a -12.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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