The Nasdaq Composite added 10.7% in January, marking its best monthly performance since July 2022. Despite the macroeconomic headwinds, it has gained 15.3% year-to-date.
In addition, retail sales rose far more than expected in January as consumers persevered despite rising inflation pressures. The Commerce Department reported on Wednesday that advance retail sales for the month increased by 3%, compared with expectations for a rise of 1.9%.
Moreover, US GDP rose at a 2.9% annualized pace in the fourth quarter of 2022, while economists surveyed by Dow Jones had expected a reading of 2.8%.
Goldman Sachs CEO David Solomon recently said that the odds that the U.S. economy can avoid a deep recession this year have improved. Solomon said, “I think it’s going to be, you know, a twisty, turn-y kind of road to navigate through this and get to the other side, but I think the chance of a softer landing feels better now than it felt six to nine months ago.”
Given this backdrop, fundamentally strong Nasdaq stocks Cisco Systems, Inc. (CSCO), Cintas Corporation (CTAS), and Coca-Cola Consolidated, Inc. (COKE) might be solid buys now.
Cisco Systems, Inc. (CSCO)
CSCO designs, manufactures, and sells Internet Protocol-based networking and other communications and information technology products. In addition, it provides infrastructure platforms, including networking technologies for switching, routing, wireless, and data center products.
On February 7, 2023, CSCO introduced powerful new cloud management tools for industrial IoT applications, simplified dashboards to converge IT and OT operations, and flexible network intelligence to see and secure all industrial assets. With these innovations, the company should provide greater network visibility and control.
On February 16, CSCO declared a quarterly dividend of $0.39 per common share, a 3% increase over the previous quarter's dividend, to be paid on April 26, 2023.
While it has a four-year average annual dividend yield of 2.99%, its annual dividend of $1.56 yields 3.19% at the current price level. Its dividend payouts have increased at a 2.8% CAGR over the past three years and a 5.6% CAGR over the past five years. CSCO has a record of 11 years of consecutive dividend growth.
CSCO’s total revenue increased 6.9% year-over-year to $13.59 billion for the fiscal second quarter that ended January 28, 2023. Non-GAAP net income came in at $3.64 billion, representing a 2.6% year-over-year increase, while its non-GAAP EPS came in at $0.88, up 4.8% year-over-year.
The consensus EPS estimate of $0.90 for the third quarter ending April 2023 represents a 3.6% improvement year-over-year. The consensus revenue estimate of $13.64 billion for the same quarter indicates a 6.3% increase from the prior-year quarter. The company has an excellent earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.
CSCO’s trailing-12-month net income margin of 22% is 639.2% higher than the 2.98% industry average. Moreover, its trailing-12-month EBIT margin of 26.97% is 373.9% higher than the 5.69% industry average.
It has gained 7.9% over the past three months to close the last trading session at $48.45.
CSCO’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Quality and a B for Stability. Within the B-rated Technology – Communication/Networking industry, it is ranked #3 out of 48 stocks.
To access additional ratings of CSCO for Growth, Value, Momentum, and Sentiment, click 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.
CNTAS’ annual dividend of $4.60 yields 1.03% at the current price level. Its dividend payouts have increased at a 19.9% CAGR over the past three years and a 22.1% CAGR over the past five years. CSCO has raised its dividends for 11 consecutive years. It has a four-year average annual dividend yield of 1.01%.
During 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.
Also, 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.
Analysts expect CTAS’ revenue to increase 11.1% year-over-year to $8.73 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 $12.74. Furthermore, CTAS surpassed its consensus EPS and revenue estimates in all four trailing quarters, which is impressive.
CTAS’s trailing-12-month gross profit margin of 46.50% is 59.6% higher than the industry average of 29.13%. Its trailing-12-month EBITDA margin of 23.73% is 81.6% higher than the 13.07% industry average.
The stock has gained 18.9% over the past nine months to close the last trading session at $444.63.
CTAS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
CTAS has an A grade for Quality and a B for Sentiment. Within the B-rated Outsourcing – Business Services industry, it is ranked #11 of 41 stocks.
Beyond what we stated above, we also have CTAS’ ratings for Growth, Value, Momentum, and Stability. Get all CTAS ratings here.
Coca-Cola Consolidated, Inc. (COKE)
COKE and its subsidiaries manufacture, market, and distribute nonalcoholic beverages, primarily products of The Coca-Cola Company (KO) in the United States. It distributes products for various other beverage brands, including Dr. Pepper and Monster Energy.
COKE has a four-year average annual dividend yield of 0.32%, and its annual dividend of $2.00 yields 0.39% at the current price level. Its dividend payouts have increased at a 7.7% CAGR over the past three years.
COKE’S net sales for its fiscal 2022 third quarter ended September 30, 2022, increased 11.7% year-over-year to $1.63 billion. The company’s adjusted net income came in at $138.76 million, representing a 46.8% year-over-year improvement. Its adjusted EPS grew 46.8% from the prior-year quarter to $14.81.
COKE’s trailing-12-month ROCE of 38.94% is 275.8% higher than the industry average of 10.36%. Its asset turnover ratio of 1.72x is 108.5% higher than the industry average of 0.82x.
Over the past three months, the stock has gained 13.7% to close the last trading session at $526.49.
It’s no surprise COKE has an overall A rating, equating to Strong Buy in our proprietary rating system.
It has an A grade for Growth and a B for Value, Stability, Quality, and Sentiment. COKE is ranked first among 37 stocks in the B-rated Beverages industry.
In addition to the POWR Ratings grades we have just highlighted, one can see COKE’s Momentum rating here.
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CSCO shares were unchanged in premarket trading Thursday. Year-to-date, CSCO has gained 2.51%, versus a 8.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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