With the Fed expected to keep rates higher throughout this year, the odds of the economy tipping into a recession are rising. Amid ongoing macroeconomic uncertainties, investors may consider buying companies with reliable performance over the years for solid long-term returns. To that end, Pfizer (PFE), Johnson & Johnson (JNJ), Sysco (SYY), and Overseas Shipholding (OSG) could be ideal investments now. Read on….
The stock market witnessed heightened volatility last year due to lingering macroeconomic and geopolitical headwinds. While inflation cooled for two consecutive months, minutes from the Federal Reserve’s December meeting show that policymakers expect to continue increasing rates in 2023 and keep them higher for ‘some time’ until the 2% inflation target is met.
Bloomberg’s monthly survey shows that economists placed a 70% probability for the US economy to tip into a recession this year, citing slashing demand forecasts and cutting inflation projections in the wake of the Fed’s aggressive rate hikes. Also, the head of the International Monetary Fund (IMF), Kristalina Georgieva, warned that 2023 would be a tough year, expecting one-third of the global economy to be in recession.
With the potential recessionary pressures, the labor market is expected to slow down over the coming months. December showed some signs of cooling labor demand, with an addition of 223,000 jobs, down from an addition of 256,000 jobs in November. Also, by the end of 2023, the unemployment rate is expected to rise to 4.5% with the slowing economy.
Given an uncertain macroeconomic backdrop, investing in fundamentally sound and stable stocks Pfizer Inc. (PFE), Johnson & Johnson (JNJ), Sysco Corporation (SYY), and Overseas Shipholding Group, Inc. (OSG) could be wise for solid long-term returns.
Pfizer Inc. (PFE)
PFE discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. The company serves wholesalers, retailers, hospitals, clinics, government agencies, pharmacies, individual provider offices, and disease control and prevention centers.
On December 19, 2022, PFE and LianBio (LIAN), a biotechnology company dedicated to providing innovative medicines to patients in China and other Asian markets, announced that PFE opted into the right to develop and commercialize sisunatovir, a respiratory syncytial virus (RSV) therapeutic candidate, in Mainland China, Hong Kong, Macau, and Singapore.
This ongoing collaboration of PFE with LianBio has the potential to reach more patients and boost the company’s revenue streams.
On November 3, 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. This is yet another significant achievement for PFE in the field of oncology.
For the third quarter ended October 2, 2022, PFE’s United States segment revenues came in at $13.85 billion, up 97.3% year-over-year. Its income from continuing operations grew 5.8% from the year-ago value to $8.65 billion.
The company’s non-GAAP net income came in at $10.17 billion, up 39.7% year-over-year. Also, its non-GAAP EPS came in at $1.78, up 40.2% year-over-year.
PFE has raised dividends for 12 consecutive years. Its dividend payouts have increased at a 5.7% CAGR over the past five years. Its current dividend yield is 3.39%, and its four-year average yield is 3.63%.
Analysts expect PFE’s revenue for the fiscal year (ended December 2022) to increase 23.5% year-over-year to $100.39 billion. The company’s EPS for the same period is estimated to grow 46.5% year-over-year to $6.47. Moreover, the company has surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past month, the stock has declined 8.6% to close the last trading session at $47.62.
PFE’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PFE has an A grade for Value and a B for Growth and Quality. Within the Medical – Pharmaceuticals industry, it is ranked #6 out of 164 stocks. Click here for the additional POWR Ratings for Momentum, Stability, and Sentiment for PFE.
Johnson & Johnson (JNJ)
JNJ researches, develops, manufactures, and sells various products in the healthcare field worldwide. The company operates through three segments: Consumer Health; Pharmaceutical; and Medical Devices.
In December 2022, JNJ acquired Abiomed Inc. (ABMD), a world leader in breakthrough heart, lung, and kidney support technologies. Joaquin Duato, CEO of JNJ, said, “This acquisition marks another important step on Johnson & Johnson’s path to accelerating growth in our MedTech business and delivering innovative medical technologies to more people around the world.”
In the third quarter of fiscal 2022, JNJ reported sales of $23.79 billion, a 1.9% increase year-over-year, while sales from the Pharmaceutical segment increased 2.6% from the year-ago value to $13.21 billion. The company’s net earnings rose 21.6% year-over-year to $4.46 billion. Also, its EPS grew 22.6% year-over-year to $1.68.
JNJ has a record of increasing dividends for 60 consecutive years. It pays a $4.52 per share dividend annually, which translates to a 2.57% yield on the current price. Its four-year average dividend yield is 2.60%. Its dividend payouts have grown at a 5.9% CAGR over the past three years and a 6% CAGR over the past five years.
Analysts expect JNJ’s revenue to increase 1.4% year-over-year to $95.05 billion in the fiscal year ended December 2022. The company’s EPS for the same year is expected to grow 2.5% year-over-year to $10.05. Also, it surpassed the consensus EPS estimates in all four trailing quarters.
Furthermore, the company’s revenue and EPS for the next fiscal year 2023 are expected to grow 2.7% and 3.3% year-over-year to $97.63 billion and $10.38, respectively. Over the past year, the stock has gained 1.2% to close the last trading session at $175.16.
JNJ’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall A rating indicates a Strong Buy in our proprietary rating system.
JNJ has an A grade for Stability and a B for Quality, Sentiment, and Value. In the Medical – Pharmaceuticals industry, it is ranked #3 out of 164 stocks.
Click here to access additional POWR Ratings for Growth and Momentum for JNJ.
Sysco Corporation (SYY)
SYY engages in the marketing and distribution of various food and related products, primarily to the food service or food-away-from-home industry worldwide. It operates through segments, including U.S. Foodservice Operations; International Foodservice Operations; SYGMA; and Other.
On November 11, SYY received its first series-produced battery electric Freightliner eCascadia, which is a zero-emission Class 8 truck. SYY’s senior vice president of corporate affairs and chief communications officer, Neil Russell, stated that the addition is a significant milestone in the company’s climate journey as it works toward electrifying 35% of its U.S. fleet by 2030.
SYY’s non-GAAP gross profit increased 17.3% year-over-year to $3.48 billion for the fiscal 2023 first quarter ended October 1, 2022. Its adjusted EBITDA increased 7.5% year-over-year to $916.86 million.
The company’s non-GAAP net earnings increased 14.6% year-over-year to $492.60 million. Also, its non-GAAP EPS increased 16.9% from the prior-year period to $0.97.
The company has raised its dividend for seven consecutive years. Over the last five years, SYY’s dividend payouts have grown at a 7.5% CAGR. Its four-year average dividend yield is 2.41%, and its annual dividend of $1.96 per share translates to a 2.47% yield. It is expected to pay a quarterly dividend of $0.49 per share on January 27, 2023.
Analysts expect SYY’s EPS and revenue for the quarter ending December 31, 2022, to increase 47.9% and 13.9% year-over-year to $0.84 and $18.58 billion, respectively. Shares of SYY have gained 4.7% over the past five days to close the last trading session at $79.96.
SYY’s financial strength and solid growth outlook are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Growth and a B for Value and Stability. SYY is ranked #5 out of 83 stocks within the B-rated Food Makers industry.
We have also given SYY grades for Momentum, Sentiment, and Quality. Get all SYY ratings here.
Overseas Shipholding Group, Inc. (OSG)
OSG is the owner and operator of a fleet of oceangoing vessels engaged in transporting crude oil and petroleum products in the U.S. flag trade. The company serves independent oil traders, refinery operators, and government entities.
On December 8, OSG announced that it had exercised options to extend its six bareboat charter agreements with American Shipping Company ASA for an additional three-year term commencing in December 2023. With these extensions, seven vessels will continue to lease from AMSC, six with maturity dates aligned to end in December 2026 and one with a maturity of 2025.
On November 15, SYY’s Board of Directors announced the purchase of $5 million shares of the company’s common stock from Cyrus Capital at $2.86 per share for a total of $14,300,000. The price paid in this share purchase equates to an enterprise value of roughly 4.5 times the expected adjusted EBITDA for 2022, an implied valuation considered quite attractive for OSG.
OSG’s shipping revenues increased 30.9% year-over-year to $123.60 million for the third quarter that ended September 30, 2022. Its adjusted EBITDA was $42.30 million, an increase of $30.10 compared with the third quarter of 2021. The company’s net income came in at $13.25 million, compared to a net loss of $16.01 million in the year-ago period.
In addition, the company’s EPS came in at $0.15, compared to a loss per share of $0.18 in the prior-year period.
Shares of OSG have gained 56.9% over the past six months and 73.3% over the past six months, closing the last trading session at $2.21.
OSG’s POWR Ratings reflect its solid growth prospects. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
OSG has an A grade for Quality and Momentum. It has a B grade for Growth and Value. In the 46-stock A-rated Shipping industry, it is ranked first. Click here to see OSG’s rating for Stability and Sentiment.
PFE shares rose $0.12 (+0.25%) in premarket trading Wednesday. Year-to-date, PFE has declined -7.06%, versus a 2.13% 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.