The Ukraine-Russia war, the Fed's plans for more aggressive interest rate hikes later this year to combat inflation, and deepening supply chain disruptions continue to dampen investors' sentiment. According to the New York Fed's survey in March, consumers could witness inflation hitting 6.6% over the next year.
However, April is historically the best month of the year for the S&P 500, making it an opportune time to invest in quality stocks. Also, the U.S. unemployment rate has fallen to 3.6% from 3.8%, with nonfarm payrolls increasing by 431,000.
Given the current market scenario, we think it could be prudent to invest in fundamentally sound stocks Zoetis Inc. (ZTS), Accenture plc (ACN), Micron Technology, Inc. (MU), and QUALCOMM Incorporated (QCOM), which are down more than 20% year-to-date. Their strong growth prospects and high-profit margins position them well to rebound in the near term.
Zoetis Inc. (ZTS)
ZTS discovers, develops, manufactures, and commercializes animal health medicines, vaccines, and diagnostic products internationally. It commercializes products primarily across species, including livestock, such as cattle, swine, poultry, fish, sheep; and companion animals comprising dogs, cats, and horses.
In January, ZTS announced that the U.S. Food and Drug Administration (FDA) had approved Solensia to control the pain of osteoarthritis (O.A.) in cats, assisting to improve their mobility, comfort, and overall well-being. Solensia, as a once-monthly injection administered in the veterinary clinic, keeps OA pain from disrupting the unique bond cats share with their humans.
During the fourth quarter ended December 31, 2021, ZTS' revenue increased 8.9% year-over-year to $1.97 billion. The non-GAAP gross profit grew 11.9% from its year-ago value to $1.37 billion, while its non-GAAP net income attributable to ZTS amounted to $474 million, up 8.2% from its prior-year quarter. The company's non-GAAP EPS rose 9.9% year-over-year to $1.00.
Analysts expect ZTS' revenue to increase 6.1% year-over-year to $1.99 billion for the first quarter ending March 2022. The consensus EPS estimate of $1.31 during the second quarter ending June 2022 represents a 10.1% improvement year-over-year. Moreover, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters.
The stock has plunged 21.1% year-to-date. However, it has gained 20.4% over the past year.
ZTS' POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ZTS has also rated an A grade for Quality and a B for Stability and Sentiment. Within the Medical – Pharmaceuticals industry, it is ranked #16 of 173 stocks.
To see additional POWR Ratings for Growth, Value, and Momentum for ZTS, click here.
Accenture plc (ACN)
Headquartered in Dublin, Ireland, ACN is a professional services company that provides strategy and consulting, interactive, and technology and operations services worldwide. The company offers application services, including agile transformation, DevOps, application modernization, enterprise architecture, software, quality engineering, and many other related services.
Recently ACN agreed to acquire Avieco, one of the largest U.K. sustainability consultancies. Upon the close of the deal, this acquisition will utilize ACN's scale and expertise in helping companies across a broad range of sectors to understand, manage and improve their sustainability performance, and create sustainable value for their stakeholders. Also, this acquisition will help strengthen ACN's Sustainability Value Promise to fix sustainability into everything the company does to create business value and sustainable impact for everyone it serves.
This month ACN made a strategic investment, through Accenture Ventures, in Titan Space Technologies, an orbital compute platform that provides real-time monitoring and neural engine capabilities to speed up the next generation of scientific technology innovations for enterprises, such as adaptive immune response, carbon capture and biomedical applications.
ACN's revenue increased 24.5% year-over-year to $15.05 billion for the second quarter ending February 28, 2022. The operating income grew 24.7% from its year-ago value to $2.06 billion, while its net income attributable to ACN improved 13.5% from its prior-year quarter to $1.63 billion. The company's EPS rose 13.9% year-over-year to $2.54.
The consensus EPS estimate of $2.84 for the third quarter ending May 2022 represents an 18.3% improvement year-over-year. Analysts expect ACN's revenue to increase 20.9% year-over-year to $16.04 billion in the third quarter ending May 2022. In addition, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters.
The stock has declined 21.1% year-to-date and 13.8% over the past year.
ACN's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Quality, Sentiment, and Stability. In the A-rated Outsourcing - Tech Services industry, it is ranked #3 of 10.
In total, we rate ACN on eight different levels. Beyond what we've stated above, we have also given ACN grades for Growth, Momentum, and Value. Get all the ACN ratings here.
Micron Technology, Inc. (MU)
M.U. designs, manufactures, and sells memory and storage products worldwide and operates through four segments: Compute and Networking Business Unit, Mobile Business Unit, Storage Business Unit, and Embedded Business Unit. It provides memory and storage technologies that comprise DRAM products, NAND products, and NOR memory products.
Last month, MU announced that it is sampling the world's first vertically-integrated 176-layer NAND solid-state drive (SSD) for the data center. The Micron 7450 SSD with NVMeTM delivers quality-of-service (QoS) latency at or below two milliseconds (ms), a wide capacity range, and the broadest set of available form factors to meet the requirements of the most demanding data center workloads.
For the second quarter, which ended March 3, 2022, MU's non-GAAP revenue increased 24.9% year-over-year to $7.79 billion. The non-GAAP operating income grew 118.8% year-over-year to $2.75 billion, while its non-GAAP net income increased 116.7% from the year-ago value to $2.44 billion. The company's non-GAAP EPS rose 118.4% from the prior-year quarter to $2.14.
Analysts expect MU's revenue to increase 17.3% year-over-year to $8.71 billion for the third quarter ending May 2022. The consensus EPS estimate of $2.46 for the third quarter indicates a 31.1% improvement year-over-year. In addition, the company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters.
The stock has declined 22.7% year-to-date. However, it has gained 4.1% over the past six months.
It is no surprise that MU has an overall A rating, which equates to Strong Buy in our POWR Ratings system. MU has an A grade for Value and a B for Sentiment and Growth. Within the A-rated Semiconductor & Wireless Chip industry, it is ranked #3 of 96 stocks.
Click here to see the additional POWR Ratings for MU (Stability, Quality, and Momentum).
QUALCOMM Incorporated (QCOM)
QCOM is involved in developing and commercializing foundational technologies for the wireless industry worldwide. It operates through three segments, Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI).
Recently, QCOM announced that it had completed its acquisition of Arriver from SSW Partners, improving Qualcomm Technologies' capabilities to deliver open, fully integrated, and competitive Advanced Driver Assistance System (ADAS) solutions to automakers and Tier-1 suppliers at scale. Under this acquisition, Qualcomm Technologies will incorporate Arriver's Computer Vision, Drive Policy, and Driver Assistance assets into its leading Snapdragon Ride Platform portfolio.
In February, QCOM and First announced their partnership to engage and empower future innovators. QCOM invests in developing tomorrow's workforce through STEM (science, technology, engineering, math) to stay at the forefront of innovation. QCOM has provided education technology, funded youth programs, and promoted the importance and access of STEM engagement.
In the first quarter ended, December 26, 2021, the non-GAAP revenue of QCOM increased 30% year-over-year to $10.70 billion. The operating income grew 45.8% from its year-ago value to $3.86 billion, while the non-GAAP net income increased 46.9% from its prior period to $3.69 billion. The company's non-GAAP EPS rose 48.8% year-over-year to $3.23.
The $2.92 consensus EPS estimate for the second quarter ending March 2022 indicates 53.6% year-over-year growth. Analysts expect the company’s revenue to increase 33.8% year-over-year to $10.60 billion for the same quarter. Also, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters.
The stock is down 26% year-to-date. However, it has surged 8.3% over the past six months.
QCOM's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR rating system. The stock also has a B grade for Growth, Value, and Sentiment. Within the Semiconductor & Wireless Chip industry, it is ranked #2.
In total, we rate QCOM on eight different levels. Beyond what we've stated above, we have also given QCOM grades for Quality, Stability, and Momentum. Get all the QCOM ratings here.
ZTS shares were trading at $188.75 per share on Tuesday afternoon, down $3.75 (-1.95%). Year-to-date, ZTS has declined -22.53%, versus a -7.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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