3 Stocks That Still Have Room to Run

The CPI data for October released earlier this month showed signs of a slowdown in inflation. In response to cooling inflation, the recently released minutes from the Federal Open Market Committee’s (FOMC) November meeting indicated agreement among Fed officials about slowing interest rate hikes soon.

With investors resetting their expectations for the pace of rate hikes by the Fed, the stock market rallied this month, with the S&P 500 climbing more than 2.6% over the past month and the Dow Jones gaining 3.7%. While the recent stock market rally seems to be on shaky ground, Deutsche Bank strategist Binky Chadha said the market rally isn’t over yet.

“We look for rates volatility to fall as the Fed slows the speed of hiking and as policy rates are closer to eventual terminal rates. We look for equity volatility to fall with rates volatility, for systematic strategies to raise equity exposure from extremely low levels and see the equity rally as having further to go,” Chadha stated in a note.

Moreover, according to veteran strategist Ed Yardeni, the stock market is expected to surge another 8% before year-end as the economy proves more resilient than most expect.

The growing optimism at Wall Street should help quality stocks Pfizer Inc. (PFE), Cisco Systems, Inc. (CSCO), and Raytheon Technologies Corp. (RTX) to soar in the near term.

Pfizer Inc. (PFE)

PFE discovers, develops, manufactures, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas. The company serves wholesalers, retailers, hospitals, clinics, government agencies, and disease control and prevention centers. 

On November 3, 2022, PFE’s investigational cancer immunotherapy, elranatamab, received Breakthrough Therapy Designation from the U.S. Food and Drug Administration (FDA) for treating people with relapsed or refractory multiple myeloma.

Chris Boshoff, M.D., Ph.D., Chief Development Officer, Oncology and Rare Disease, Pfizer Global Product Development, said, “This marks Pfizer’s twelfth FDA Breakthrough Therapy Designation in Oncology, a testament to our relentless commitment to developing transformational cancer medicines in areas of high unmet need.”

On October 20, PFE and Erasca, Inc. (ERAS), a clinical-stage precision oncology company, announced a clinical trial collaboration and supply agreement for the CDK4/6 inhibitor palbociclib (IBRANCE®). The co-developed trial aims to discover advanced treatment alternatives for colorectal cancer.

On September 22, PFE declared a quarterly dividend of $0.40 per share on its common stock, payable to shareholders on December 5. Its annual dividend of $1.60 yields 3.23% on the current price. The company’s dividend payouts have increased at a 5.5% CAGR over the past three years and a 5.7% CAGR over the past five years. The company has raised dividends for 13 consecutive years.

During the fiscal third quarter ended September 30, 2022, PFE’s income from continuing operations increased 5.8% year-over-year to $8.65 billion. Its non-GAAP net income attributable to Pfizer Inc. common shareholders rose 39.7% year-over-year to $10.17 billion, while its non-GAAP EPS grew 40.2% year-over-year to $1.78.

Analysts expect PFE’s EPS for the current fiscal year ending December 2022 to be $6.47, indicating a 46.4% improvement year-over-year. The company’s revenue is expected to increase 23.3% year-over-year to $100.21 billion. Additionally, PFE has topped its consensus EPS estimates in each of the trailing four quarters.

The stock has gained 5.4% over the past month to close its last trading session at $49.49. Wall Street analysts expect the stock to hit $52.00 in the near term, indicating a potential upside of 5.4%.

PFE’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

PFE is rated an A in Value and a B in Growth, Sentiment, and Quality. Within the Medical – Pharmaceuticals industry, it is ranked #2 out of 161 stocks. 

Click here to see additional POWR Ratings for Stability and Momentum for PFE. 

Cisco Systems, Inc. (CSCO)

CSCO manufactures and sells internet protocol-based networking and other products related to the communications and information technology industry. The company serves businesses, public institutions, governments, and service providers. 

On November 1, CSCO expanded its portfolio of specializations available through the company’s partner program. The six new specializations would focus on customer priorities and represent fast-growing market opportunities for the company and its partners.

On October 26, CSCO announced new features and capabilities for the reimagined Webex Customer Experience (CX) portfolio. The new capabilities are expected to deliver new omnichannel customer experiences.

Furthermore, on October 12, CSCO and tech giant Microsoft Corporation (MSFT) announced their partnership where CSCO and MSFT Teams will be able to run natively on CSCO Room and Desk devices, and CSCO will be a partner in the Certified for MSFT Teams program in the first half of 2023. Through this partnership, CSCO is helping drive interoperability and is meeting its customers’ needs.

For the fiscal 2023 first quarter ended October 29, 2022, CSCO’s revenue increased 5.7% year-over-year to $13.63 billion. Its non-GAAP gross margin increased by 3.1% from the prior-year quarter to $8.58 billion. Its operating income was $3.54 billion, up 3% year-over-year. The company’s non-GAAP net income and non-GAAP EPS rose 2.1% and 4.9% year-over-year to $3.55 billion and $0.86, respectively.

CSCO pays a $1.52 per share dividend annually, which translates to a 3.16% yield on the current share price. Its four-year dividend yield is 2.97%. The company’s dividend payouts have grown at a CAGR of 3.1% over the past three years and 6% over the past five years. It paid a quarterly dividend of $0.38 on October 26, 2022.

The consensus EPS estimate of $3.55 for the current fiscal year (ending June 2023) indicates a 5.6% year-over-year improvement. Likewise, the consensus revenue estimate for the same year of $54.49 billion reflects a rise of 5.7% from the prior year. Furthermore, the company’s EPS and revenue for the next year are expected to increase 8.1% and 4% year-over-year to $3.83 and $56.67 billion, respectively.

Also, CSCO has surpassed the consensus EPS estimates in all four trailing quarters, which is impressive.

The stock has gained 6.9% over the past month to close its last trading session at $44.39. Furthermore, Wall Street analysts expect the stock to hit $54.50 in the near term, indicating a potential upside of 12.9%.

CSCO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to Buy in our proprietary rating system.

CSCO has a grade of A for Quality and a B for Stability. In the 48-stock Technology - Communication/Networking industry, it is ranked #3.

Click here to see the additional POWR Ratings for CSCO (Growth, Value, Momentum, and Sentiment).

Raytheon Technologies Corp. (RTX)

RTX is an aerospace and defense company that provides systems and services for commercial, military, and government customers. It operates through four segments: Collins Aerospace Systems; Pratt & Whitney; Intelligence & Space; and Raytheon Missiles & Defense.

On October 12, RTX’s Board of Directors declared a dividend of 55 cents ($0.55) per share of RTX common stock, payable on December 15, 2022. The company has paid cash dividends on its common stock every year since 1936. It pays a $2.20 per share dividend annually, which translates to a 2.27% yield on the current share price. Its four-year dividend yield is 2.41%.

The company’s dividend payouts have grown at a CAGR of 5.3% over the past three years and 4.8% over the past five years.

On October 11, RTX Ventures, the venture capital arm of RTX, made a minority investment in electric propulsion system company H55 to drive the development of electric aviation solutions. This investment might advance electric propulsion technologies for clean and efficient air mobility applications.

RTX’s net sales increased 4.6% year-over-year to $16.95 billion for the fiscal 2022 third quarter ended September 30, 2022. The company’s operating profit grew 10.2% from the prior-year period to $1.48 billion. Its income from continuing operations before income taxes came in at $1.64 billion, up 10.9% year-over-year.

Analysts expect RTX’s revenue for the fiscal year (ending December 2022) to increase 4.4% year-over-year to $67.19 billion. The company’s EPS for the current year is expected to increase 11.2% year-over-year to $4.75. Moreover, the company has topped the consensus EPS estimates in each of the trailing four quarters.

Shares of RTX have gained 3.7% over the past month and 17.5% over the past year to close the last trading session at $97.43. Moreover, Wall Street analysts expect the stock to hit $104.00 in the near term, indicating a potential upside of 7.3%.

RTX’s fundamental strength and strong outlook are reflected in its POWR Ratings. The stock’s overall B rating translates to a Buy in our POWR Ratings system. It has a grade of A for Growth and a B for Stability and Sentiment.

In the Air/Defense Services industry, it is ranked #8 of 74 stocks. Click here for RTX’s additional POWR Ratings for Value, Quality, and Momentum.

PFE shares rose $0.01 (+0.02%) in premarket trading Wednesday. Year-to-date, PFE has declined -13.47%, versus a -15.82% rise in the benchmark S&P 500 index during the same period.

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.

More...