While robust labor markets and retail sales indicate resilience in the economy, this will keep inflation elevated, compelling the Fed to raise rates higher and keep them elevated for longer. This is going to cause markets to go through significant volatility. Amid this, it could be wise to buy fundamentally strong stocks Autodesk, Inc. (ADSK), Forrester Research, Inc. (FORR), and Bridgestone Corporation (BRDCY) with your tax refund for solid risk-adjusted returns.
After witnessing a slowdown from the 2022 peak, inflation showed signs of increasing again this year. The Consumer Price Index (CPI) grew 0.5% month-over-month in January and 6.4% year-over-year, surpassing economists’ expectations of 0.4% and 6.2%, respectively. Eugenio Aleman, a chief economist at Raymond James, said, “It’s clear that the Federal Reserve has more to do in order to continue to slow down inflation.”
While strong retail sales and employment numbers in January reflect economic resilience, they will likely underscore the Fed’s resolve to keep increasing rates to cool demand to rein in inflation. Retail sales surged by 3% in January, the biggest gain in almost two years. Also, the labor market remained robust, with employers adding 517,000 jobs in January, while the unemployment rate fell to 3.4%.
Fed minutes warn of more interest rate hikes to bring inflation down to the central bank’s 2% target. Goldman Sachs and Bank of America expect the Fed to increase rates three more times this year. Both banks lifted their estimates for Fed fund rates to the 5.25%-5.5% range after stronger-than-expected economic data.
While the Fed’s potential interest rate hikes could keep the stock market highly volatile in the near term, investors shouldn’t shy away from buying quality stocks ADSK, FORR, and BRDCY with their tax refunds to ensure solid risk-adjusted returns.
Autodesk, Inc. (ADSK)
ADSK provides 3D design, engineering, and entertainment software and services worldwide. The company offers AutoCAD Civil 3D, BIM 360, AutoCAD, and AutoCAD LT, among other software and tools.
On February 23, 2023, Andrew Anagnost, ADSK’s president, and CEO, said, “As we deliver next-generation technology and services to our customers, the pace of transformation within and between the industries we serve will accelerate, generating large new growth opportunities for Autodesk.”
“We started seeing the shift towards connected digital workflows in the cloud in product design and manufacturing, then in architecture, followed by building engineering, and more recently construction. And we are now seeing growing momentum with owners,” he added.
For the fiscal 2023 fourth quarter ended January 31, 2023, ADSK’s total net revenue increased 8.8% year-over-year to $1.32 billion, and its gross profit grew 8.6% year-over-year to $1.19 billion. The company’s non-GAAP income from operations was $479 million, an increase of 13.8% year-over-year.
Furthermore, the company’s non-GAAP net income per share was $1.86, up 24% year-over-year. Its free cash flow increased 26.1% from the year-ago value to $903 million.
Analysts expect ADSK’s EPS and revenue for the fiscal year (ending January 2024) to increase 9.4% and 8.4% year-over-year to $7.26 and $5.43 billion, respectively. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters.
Additionally, the company’s EPS and revenue for the next fiscal year (ending January 2025) are expected to grow 15.8% and 12% from the prior year to $8.40 and $6.08 billion, respectively. Shares of ADSK have gained 7.2% over the past nine months to close the last trading session at $192.53.
ADSK’s POWR Ratings reflect this positive outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
ADSK is ranked #12 of 137 stocks in the Software – Application industry. It has an A grade for Quality and a B for Growth.
We have also given ADSK grades for Sentiment, Value, Momentum, and Stability. Get all ADSK ratings here.
Forrester Research, Inc. (FORR)
FORR is an independent research and advisory firm. Its segments include Research; Consulting; and Events. The company delivers content such as future trends, predictions, and market forecasts. It also provides consulting services, including strategy designing, business case building, and technology vendor selection.
On January 23, 2023, FORR introduced Forrester Decisions for Partner Ecosystem Marketing, the next generation of Forrester Decisions for Channel Marketing service. Partner Ecosystem Marketing service would aid marketing leaders in developing, enabling, and engaging their partners to boost revenue growth and foster customer loyalty. This launch should strategically benefit the company.
For the fourth quarter that ended December 31, 2022, FORR’s revenue from the Research and Events segment increased by 3% and 43.2% from the year-ago values to $92.19 million and $7.19 billion, respectively. Moreover, the company’s total revenues grew 2.4% year-over-year to $136.89 million.
In addition, as of December 31, 2022, the company’s outstanding debt stood at $50 million, compared to $75 million as of December 31, 2021.
The consensus revenue estimate of $556.91 million for the fiscal year ending December 2024 indicates a 5.4% year-over-year improvement. Likewise, the consensus EPS estimate of $2.67 for the same year reflects a 14.1% rise from the prior year. Also, the company surpassed its consensus EPS in all four trailing quarters, which is impressive.
The stock has declined 5.6% over the past three months to close the last trading session at $33.37.
FORR’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has a Quality grade of A and a Value grade of B. It has topped the 106-stock Financial Services (Enterprise) industry.
Beyond what we stated above, we also have FORR’s ratings for Stability, Growth, Sentiment, and Momentum. Get all FORR ratings here.
Bridgestone Corporation (BRDCY)
Headquartered in Tokyo, Japan, BRDCY primarily manufactures and sells tires and rubber products worldwide. The company operates through two segments, Tires, and Diversified Products.
On December 19, 2022, Thai Bridgestone Co., Ltd. (TBSC), a subsidiary of BRDCY, announced that it had installed solar rooftop panels to directly power the tire production process in its Nong Khae plant in Saraburi province. The company’s largest solar rooftop panel, with a total capacity of 9.95 MWp, is expected to cut 97,500 tons in total CO2 emissions over the next 15 years.
Also, on November 18, BRDCY announced an investment of approximately $190 million to renovate and expand its tire manufacturing plant located in Heredia, Costa Rica. This investment would help the company extend its facilities, increase its production capacity up to 36% by 2026, and add more than 160 new permanent jobs.
BRDCY’s revenue increased 26.6% year-over-year to ¥4.11 trillion ($30.11 billion) for the fiscal year that ended December 31, 2022. The company’s gross profit rose 21% year-over-year to ¥1.59 trillion ($11.65 billion). Its adjusted operating profit grew 22.4% year-over-year to ¥482.60 billion ($3.54 billion), while its profit before tax was ¥423.50 billion ($3.10 billion), up 12.2% year-over-year.
Analysts expect BRDCY’s revenue and EPS for the fiscal year (ending December 31, 2023) to increase 322.9% and 21.87% year-over-year to $31.01 billion and $1.82, respectively. Furthermore, the company’s revenue and EPS for fiscal 2024 are expected to grow 2.6% and 8.4% year-over-year to $31.82 billion and $1.97, respectively.
The stock has gained 2.2% over the past month to close the last trading session at $18.97.
BRDCY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It also has an A grade for Stability and Quality and a B for Growth.
BRDCY is ranked #3 of 61 stocks in the A-rated Auto Parts industry. Click here for additional BRDCY’s Momentum, Value, and Sentiment ratings.
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ADSK shares were unchanged in premarket trading Monday. Year-to-date, ADSK has gained 3.03%, versus a 3.65% 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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