Recessionary concerns and the Fed’s hawkish policy measures to combat high inflation are expected to extend the market correction. However, certain Dow Jones constituents with solid financials and bright growth prospects have been outperforming the benchmark index. So, Verizon (VZ) and Amgen (AMGN) could be solid investments now.
Since the beginning of 2022, the concerns about the Federal Reserve’s tighter monetary policy to combat high inflation and the Russia-Ukraine war have weighed heavily on investors and pushed the benchmark indices into correction territory. Furthermore, the better-than-expected May employment report fueled the Fed’s commitment to raising interest rates to bring down the inflationary pressure. The Dow Jones Industrial Average (DJIA) index plunged nearly 10% year-to-date.
Even though the market equities enjoyed an uneven rally over the past few weeks, the cyclical DJIA index is expected to decline further amid increasing recession odds. Most CFOs expect the Dow Jones to fall below 30,000, registering a decline of over 18% from its current level. Despite its dim performance and outlook, there are quality stocks with improving fundamentals and solid growth prospects which are outperforming the Dow Jones index.
Verizon Communications Inc. (VZ)
VZ provides communications, technology, information, and entertainment products and services worldwide. The company operates through two segments: Consumer; and Business. It offers postpaid and prepaid service plans, wireless equipment, wireless-enabled internet devices, and residential fixed connectivity solutions. Also, it provides network connectivity products, data security services, and more.
On May 25, VZ collaborated with AWS to offer 5G mobile edge computing in more U.S. metro areas, including Nashville, TN, and Tampa, FL. Using Version 5G Edge with AWS Wavelength, developers and businesses can build and deploy latency-sensitive applications for use cases such as immersive VR gaming, video distribution, and autonomous vehicles. This collaboration is expected to boost the company’s market reach and revenues.
On May 18, VZ allocated $97.90 million to its local capital spending to meet the increasing demand due to the recent pandemic-related increase in population in Texas. “We are committed to delivering the very best possible network experience to our customers, including those who are permanently changing locations to Texas and other places. We revised our forecasting models and are pouring additional capital into the state to grow our coverage and capacity to meet the increased demands,” said Kyle Malady, EVP, and President, Global Networks and technology.
VZ’s consolidated operating revenues increased 2.1% year-over-year to $33.55 billion in the fiscal 2022 first quarter ended March 31, 2022. Its consolidated adjusted EBITDA amounted to $12.03 billion. In addition, the company’s current assets and total assets came in at $35.58 billion and $365.72 billion, respectively, as of March 31, 2022.
Analysts expect VZ’s EPS to grow 3.1% year-over-year to $5.57 for its fiscal year 2023, ending December 31, 2022. The $139.60 billion consensus revenue estimate for the next year represents a 2% rise from the previous year. Furthermore, the company has topped the consensus EPS estimates in each of the trailing four quarters.
VZ’s shares have increased 5.7% over the past month and closed yesterday’s trading session at $51.55.
VZ’s POWR Ratings reflect this promising outlook. It has an overall grade of B, equating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
VZ has a grade of B for Stability. Within the Telecom – Domestic industry, it is ranked #4 of 21 stocks. To see additional POWR Ratings (Value, Quality, Momentum, Growth, and Sentiment) for VZ, click here.
Amgen Inc. (AMGN)
AMGN develops, manufactures, and delivers human therapeutics worldwide. The company focuses on areas including bone health, cardiovascular disease, inflammation, and neuroscience areas. AMGN’s products include Neulasta, Enbrel, Prolia, Xgeva, Otezla, Aranesp, Kyprolis, and Repatha. It serves healthcare providers, including physicians, dialysis centers, hospitals, and pharmacies.
This week, AMGN announced that the U.S. Food and Drug Administration (FDA) approved RIABNI™ (rituximab-arrx), a biosimilar to Rituxan®, for adults with moderate to severely active rheumatoid arthritis (RA). The company’s fully integrated portfolio of innovative and biosimilar medicines for inflammatory diseases might boost its business growth and profitability.
In the fiscal 2022 first quarter ended March 31, 2022, AMGN’s total revenues increased 5.7% year-over-year to $6.24 billion. The company’s non-GAAP operating income grew 9.6% year-over-year to $3.14 billion. AMGN’s non-GAAP net income rose 9% from the prior-year quarter to $2.34 billion. Also, the company’s non-GAAP earnings per share came in at $4.25, up 14.9% year-over-year.
The $27.22 billion consensus revenue estimate for the fiscal year 2023, ending December 2023, represents a 3.8% improvement from the last year. Analysts expect AMGN’s EPS for the same year to increase 9.2% year-over-year to $19.06. The company has an impressive revenue and earnings history as it has topped the consensus revenue estimates in three of the trailing four quarters and the consensus EPS estimates in each of the trailing four quarters.
Over the past six months, AMGN has gained 15.5% to close yesterday’s trading session at $245.48. Also, its year-to-date gain translates to 8.3%.
AMGN’s POWR Ratings reflect a strong outlook. The company has an overall rating of A, which translates as Strong Buy in our proprietary rating system.
AMGN has a grade of A for Quality and B for Growth and Stability. Among the 400 stocks in the Biotech industry, it is ranked #4. Click here for the additional POWR Ratings for Sentiment, Momentum, and Value for AMGN.
VZ shares were trading at $50.85 per share on Friday afternoon, down $0.09 (-0.18%). Year-to-date, VZ has gained 0.25%, versus a -17.35% 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.