The May consumer price index increased 8.6% year-over-year, its highest level since 1981, putting pressure on the stock market. In addition, the consumer sentiment fell sharply to a record-low reading of 50.2, down from a May reading of 58.4, flaming concerns about a potential recession in the U.S. economy. As the economy could see a more aggressive monetary policy tightening, the stock market is expected to remain extremely volatile.
Also, the 2-year Treasury yield, which is significantly sensitive to the Fed rate, has recently hit its highest level since 2007, trading above 3%. The S&P 500 is down nearly 19% from its record. However, this provides a golden buying opportunity for investors because many quality stocks are now trading at attractive valuations.
Keurig Dr Pepper Inc. (KDP) and ON Semiconductor Corporation (ON), which are set to replace IPG Photonics Corporation (IPGP) and Under Armour Inc. (UAA), respectively, in the S&P 500 before the open of trading on June 21, could be good additions to your portfolio. Their eligibility for getting added to the index indicates their fundamental strength and high liquidity.
Keurig Dr Pepper Inc. (KDP)
KDP operates as a beverage company internationally. It operates through Coffee Systems; Packaged Beverages; Beverage Concentrates; and Latin America Beverages segments. The company serves retailers, bottlers and distributors, restaurants, hotel chains, office coffee distributors, and end-use consumers.
On May 19, 2022, KDP announced that its board of directors had declared a regular quarterly cash dividend of $0.19 per share, payable in U.S. dollars, on the company's common stock. The regular quarterly dividend will be paid on July 15, 2022, to shareholders of record on July 1, 2022.
KDP’s net sales increased 6.1% year-over-year to $3.08 billion for the fiscal first quarter ended March 31, 2022. The company’s operating income grew 50.9% year-over-year to $966 million, while its net income came in at $585 million representing an 80% year-over-year increase. Also, its EPS came in at $0.41, up 78.3% year-over-year.
Analysts expect KDP’s EPS and revenue to increase 9.1% and 12.1% year-over-year to $0.48 and $3.55 billion, respectively, for the quarter ending September 30, 2022. Over the past month, the stock has declined 4.1% to close Friday’s trading session at $35.49.
KDP’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 different factors, each with its own weighting.
The stock has a B grade for Stability, Sentiment, and Quality. Within the B-rated Beverages industry, KDP is ranked #15 out of 36 stocks. Click here to see the additional POWR Ratings for KDP (Value, Momentum, and Growth).
ON Semiconductor Corporation (ON)
ON provides intelligent sensing and power solutions worldwide. Its intelligent power technologies enable the electrification of the automotive industry that allows for lighter and longer-range electric vehicles, empowers fast-charging systems, and propels sustainable energy. The company operates in three segments: Power Solutions Group, Advanced Solutions Group, and Intelligent Sensing Group.
On May 11, 2022, ON announced that global automotive innovator NIO Inc. (NIO) chose the latest VE-Trac Direct SiC power modules from onsemi for its next-generation electric vehicles. Simon Keeton, executive vice president and general manager of Power Solutions Group at ON, said, “We are rapidly expanding our SiC capacity and are uniquely positioned to address the growing EV market with supply assurance, performance, quality and tailored SiC end solutions."
ON’s revenues increased 31.3% year-over-year to $1.95 billion for the fiscal first quarter ended April 1, 2022. The company’s non-GAAP net income came in at $538.50 million, representing a 255.9% year-over-year increase. Also, its non-GAAP EPS came in at $1.22, up 248.6% year-over-year.
For the quarter ending June 30, 2022, analysts expect ON’s EPS and revenue to increase 100% and 24.2% year-over-year to $1.26 and $2.02 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 11.6% over the past month to close Friday’s trading session at $60.14.
ON’s POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to Buy in our proprietary rating system. It has an A grade for Growth.
Click here to see the additional POWR Ratings for ON (Stability, Momentum, Quality, Sentiment, and Value). ON is ranked #28 out of 95 stocks in the A-rated Semiconductor & Wireless Chip industry.
KDP shares were trading at $34.70 per share on Monday afternoon, down $0.79 (-2.23%). Year-to-date, KDP has declined -4.91%, versus a -20.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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