Rising geopolitical tensions surrounding the Ukraine-Russia war have worsened the already distressed global supply chain, contributing to U.S. inflation hitting a 40-year high. The Fed's continuing attempts to combat the inflationary pressures by raising interest rates and reducing the size of its balance sheet are expected to pump the brakes on the U.S. economy.
The negative GDP in the first quarter of 2022, rising supply disruptions due to extended COVID-19 lockdowns in China, and high energy prices have further fueled the economy's chances of slipping into recession. According to JPMorgan CEO Jamie Dimon, the Fed's chances of controlling inflation without instigating a recession stand only at 33%.
Given the possibility of the economy witnessing a recession, we think it could be wise to invest in stocks that have the potential to remain resilient and offer stable returns. To that end, we believe quality stocks Archer-Daniels-Midland Company (ADM), Shell plc (SHEL), Anthem, Inc. (ANTM), and Otter Tail Corporation (OTTR) could be good additions to one’s portfolio now.
Archer-Daniels-Midland Company (ADM)
ADM in Chicago, procures, transports, stores, processes, and merchandises agricultural commodities, products, and ingredients worldwide. The company has three operational segments, Ag Services and Oilseeds; Carbohydrate Solutions; and Nutrition. It acquires, stores, cleans, and transports agricultural raw materials, such as oilseeds, corn, wheat, milo, oats, and barley.
Last month, ADM announced that it would invest approximately $300 million to considerably expand its Decatur, Ill., alternative protein production since the company continues to amplify its capacity to meet strong demand growth. ADM should further improve its alternative protein capabilities by opening a new, state-of-the-art Protein Innovation Center in Decatur.
For the first quarter, ending March 31, 2022, ADM's revenues increased 25.2% year-over-year to $23.65 billion. Its gross profit grew 23% from its year-ago value to $1.90 billion, while its adjusted net earnings improved 38.2% from its prior-year quarter to $1.08 billion.
Analysts expect ADM's revenue to increase 9.4% year-over-year to $25.08 billion for the second quarter, ending June 30, 2022. The $1.62 consensus EPS estimate for the second quarter, ending June 30, 2022, represents a 22.2% improvement year-over-year. And it has an impressive earnings history; it surpassed the consensus EPS estimate in each of the trailing four quarters.
The company's shares have surged 32.3% in price year-to-date and 52.1% over the past nine months.
ADM's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
The stock also has a B grade for Growth, Value, and Sentiment. Within the Agriculture industry, it is ranked #5 of 32 stocks.
To see additional POWR Ratings for Quality, Stability, and Momentum for ADM, click here.
Shell plc (SHEL)
Headquartered in London, SHEL is an energy and petrochemical company that does business in Europe, Asia, Oceania, Africa, the United States, and the Rest of the Americas. The company operates through Integrated Gas; Upstream; Marketing; Chemicals and Products; and Renewables and Energy Solutions segments.
SHEL's revenue amounted to $84.20 billion during the first quarter, ending March 31, 2022. Its adjusted EBITDA increased 64.4% year-over-year to $19.03 billion, while its adjusted earnings grew 182.3% from the year-ago value to $9.13 billion. Its adjusted EPS increased 185.7% from the prior-year quarter to $1.20.
The $3.23 consensus EPS estimate for the fourth quarter, ending Dec. 31, 2022, represents 94.6% year-over-year growth. Analysts expect its revenue to increase 49.1% year-over-year to $389.79 billion for its fiscal 2022. The stock has gained 31.2% in price year-to-date and 38.2% over the past nine months.
SHEL'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 an A grade for Momentum and a B for Sentiment. Within the B-rated Energy - Oil & Gas industry, it is ranked #17 of 97 stocks.
In total, we rate SHEL on eight distinct levels. Beyond what we have stated above, we have also given SHEL grades for Growth, Stability, Value, and Quality. Get all the SHEL ratings here.
Anthem, Inc. (ANTM)
ANTM in Indianapolis, Ind., and its subsidiaries function as a health benefits company in the United States. Commercial and Specialty Business, Government Business, IngenioRx, and Other are the company’s four operational segments. The company provides a spectrum of network-based managed care health benefit plans to large and small groups, individuals, Medicaid, and Medicare markets.
Recently, ANTM announced the completion of its acquisition of Integra Managed Care, a Managed Long-Term Care Plan in New York that assists adults with long-term care needs and disabilities live safely and independently in their own homes. Felicia Norwood, Executive Vice President of Anthem's Government Business Division, said, "Anthem and Integra's shared commitment to deliver high quality, comprehensive whole-health care across communities throughout New York ensures that our members will continue to receive the care and support services that they have come to expect."
During the first quarter, ending March 31, 2022, ANTM's revenue increased 17.6% year-over-year to $38.10 billion. Its adjusted net income grew 16% from the year-ago value to $2.02 billion, while its adjusted EPS amounted to $8.25, up 17.7% from its prior-year quarter. The company's cash and cash equivalent stood at $6.16 billion for the three months ended March 31, 2022.
The $7.75 consensus EPS estimate for the second quarter, ending June 30, 2022, represents 10.2% year-over-year growth. Analysts expect revenue to increase 14.3% year-over-year to $38.04 billion for the same period. In addition, it has an impressive earnings history; it surpassed the consensus EPS estimate in each of the trailing four quarters.
The stock has soared 9.4% in price year-to-date and 34.6% over the past nine months.
It is no surprise that ANTM has an overall A rating, which equates to Strong Buy in our POWR Ratings system. ANTM has a B grade for Sentiment, Stability, and Quality. Among the 10 stocks in the B-rated Medical - Health Insurance industry, it is ranked #1.
Click here to see the additional POWR Ratings for ANTM (Growth, Value, and Momentum).
Otter Tail Corporation (OTTR)
OTTR and its subsidiaries engage in electric utility, manufacturing, and plastic pipe businesses in the United States. The Fergus Falls, Minn., company's Electric segment produces, transmits, distributes, and sells electric energy in Minnesota, North Dakota, and South Dakota; and operates as a participant in the Midcontinent Independent System Operator, Inc. markets.
In the first quarter, ending March 31, 2022, OTTR's total operating revenue increased 43.3% year-over-year to $374.90 million. Its operating income grew 122.4% from its year-ago value to $98.30 million, while its net income amounted to $72.00 million, up 137.4% from its prior-year quarter. The company's EPS has improved 136% year-over-year to $1.72.
Analysts expect OTTR's revenue to increase 15.5% year-over-year to $330.00 million for the second quarter, ending June 30, 2022. The $1.35 consensus EPS estimate for the second quarter, ending June 30, 2022, represents a 33.7% improvement year-over-year. Furthermore, it has an impressive earnings history; it surpassed the consensus EPS estimate in each of the trailing four quarters. The stock has gained 32% in price over the past year.
OTTR'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 Growth, Stability, and Sentiment. Within the Utilities – Domestic industry, it is ranked #2 of 64 stocks.
In total, we rate OTTR on eight distinct levels. Beyond what we have stated above, we have also given OTTR grades for Value, Momentum, and Quality. Get all the OTTR ratings here.
ADM shares fell $0.26 (-0.29%) in premarket trading Friday. Year-to-date, ADM has gained 32.82%, versus a -13.33% 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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