While concerned over the Fed’s hawkish stance have kept the stock market under pressure, some analysts expect the market to rebound later this year and into 2023, following the trend of mid-term election years. Therefore, investors may consider buying fundamentally solid stocks Microsoft (MSFT), UnitedHealth Group (UNH), and Walmart (WMT). Keep reading….
The unemployment rate increased to 3.7% in August. On the other hand, nonfarm payrolls rose by 3,15,000 jobs despite the macro uncertainties. And the Fed is expected to announce another 50 or 75 bps hike in September.
However, the latest job report has driven some optimism. Michael Arone, the chief investment strategist at State Street Global Advisors, said, “This report supports the Fed’s ability to engineer a soft landing. Markets like it.”
According to Bank of America Corporation (BAC) analysts, markets typically rebound after a September slump, but stocks tend to rally even more in midterm-election years. So, the market might see a rebound later this year and into 2023.
Microsoft Corporation (MSFT)
MSFT develops, licenses, and supports software, services, devices, and solutions worldwide. The company operates in three segments: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing.
On August 9, 2022, MSFT and Barclays Bank PLC (Barclays) announced their joint agreement by which Barclays Microsoft Teams as its collaboration platform. MSFT has been benefitting significantly as digital collaboration accelerated over the past two years.
Also, on July 20, 2022, MSFT and Oracle Corporation (ORCL) announced the general availability of ORCL Database Service for MSFT Azure.
Corey Sanders, corporate vice president, MSFT Cloud for Industry and Global Expansion, said, “Microsoft and Oracle have a long history of working together to support the needs of our joint customers, and this partnership is an example of how we offer customer choice and flexibility as they digitally transformed with cloud technology.”
MSFT’s total revenue increased 12.4% year-over-year to $51.87 billion for the fourth quarter ended June 30, 2022. Its net income increased marginally year-over-year to $16.74 billion, while its EPS came in at $2.23, up 2.8% year-over-year.
For 2023, analysts expect MSFT’s revenue to be $220.82 billion, representing an 11.4% year-over-year rise. In addition, the company’s EPS is expected to grow by 15.4% per annum for the next five years. It surpassed EPS estimates in three of the trailing four quarters. MSFT’s shares have lost marginally intraday to close the last trading session at $253.25.
MSFT’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assesses stocks by 118 different factors, each with its weighting.
Also, the stock has a B grade for Stability and Quality. Within the Software – Business industry, it is ranked #10 out of 54 stocks. Click here for MSFT’s additional POWR Ratings for Growth, Value, Momentum, and Sentiment.
UnitedHealth Group Incorporated (UNH)
UNH operates as a diversified health care company in the United States. It operates through four segments: UnitedHealthcare; OptumHealth; OptumInsight; and OptimRx. UNH provides a full range of health benefits, simplifying the health care experience and delivering access to high-quality care.
On July 15, 2022, Andrew Witty, UNH’s CEO, said, “Customers are responding as we build on our five growth pillars, enabling us to move into the second half of 2022 with strong momentum serving ever more people more deeply.”
UNH’s total revenues increased 12.6% year-over-year to $80.33 billion in the second quarter ended June 30, 2022. Its adjusted net income came in at $5.29 billion, up 17.7% year-over-year, while its adjusted EPS came in at $5.57, up 18.5% year-over-year.
Street expects UNH’s revenue to increase 12% year-over-year to $322.02 billion in 2022. Its EPS is estimated to grow 14.4% per annum for the next five years. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 22.4% to close the last trading session at $517.68.
UNH has an overall A rating, equating to a Strong Buy in our proprietary rating system. It has a B grade for Growth, Stability, Sentiment, and Quality.
Walmart Inc. (WMT)
WMT engages in the operation of retail, wholesale, and other units worldwide. The company operates through three segments: Walmart US; Walmart International; and Sam’s Club. The company operates around 10,500 stores and various e-commerce websites under 46 banners in 24 countries.
On August 30, 2022, WMT began recruiting Canada-based sellers to join its flagship US Marketplace and serve a growing base of more than 120 million online shoppers monthly. The company is focusing on growing its US and Canada marketplaces and investing heavily in new tools and services for sellers.
WMT’s total revenues came in at $152.86 billion for the second quarter that ended July 31, 2022, up 8.4% year-over-year. Its net income came in at $5.15 billion, up 20.4% year-over-year. Also, its EPS came in at $1.88, up 23.7% year-over-year.
WMT’s revenue is expected to increase 4.8% year-over-year to $600.17 billion in 2023. Its EPS is estimated to grow 6% per annum for the next five years. Moreover, it surpassed EPS estimates in three of the four trailing quarters. Over the past month, the stock has gained 4.6% to close the last trading session at $132.34.
WMT’s overall A rating translates to a Strong Buy in our POWR Ratings system. It has a B grade for Growth, Stability, Sentiment, and Quality.
MSFT shares were trading at $253.69 per share on Wednesday morning, up $0.44 (+0.17%). Year-to-date, MSFT has declined -24.08%, versus a -16.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master’s degree in economicsshe helps investors make informed investment decisions through her insightful commentaries.