5 Value Stocks to Reinforce Your Portfolio in Q2 2022
Due to concerns over the possibility of aggressive interest rate increases and the consequences of a prolonged Ukraine-Russia war, current market volatility has caused many quality stocks to trade at...
Due to concerns over the possibility of aggressive interest rate increases and the consequences of a prolonged Ukraine-Russia war, current market volatility has caused many quality stocks to trade at attractive valuations. For example, fundamentally sound stocks Lockheed Martin (LMT), HCA Healthcare (HCA), FedEx (FDX), Enterprise Products (EPD), and Walgreens Boots Alliance, Inc. (WBA) are currently trading at discounts to their peers and hold solid upside potential. So, we think it could be wise to add them to one's portfolio now. Read on.
The stock market has been experiencing a difficult phase due to investors' concerns about the multi-decade high inflation, the consequences of the Ukraine-Russia war, and the possibility of aggressive interest rate increases later this year. However, the CBOE Volatility Index (VIX) has declined significantly since its peak in the second week of this month, indicating an easing of uncertainty in the market.
The market's volatility has led to many quality stocks to now trade at reasonable valuations. And since value stocks typically perform well in high-inflation periods, it could be an opportune time to invest in quality stocks that currently look undervalued. Investors' interest in value stocks is evident in the SPDR Portfolio S&P 500 Value ETF's (SPYV) 3.7% returns over the past month.
Fundamentally sound stocks Lockheed Martin Corporation (LMT), HCA Healthcare, Inc. (HCA), FedEx Corporation (FDX), Enterprise Products Partners L.P. (EPD), and Walgreens Boots Alliance, Inc. (WBA) are currently trading at discounts to their peers. Given the solid upside potential of these stocks, we think it could be wise to add them to one's portfolio now.
Lockheed Martin Corporation (LMT)
LMT in North Bethesda, Md., is a security and aerospace company that researches, designs, develops, manufactures, integrates, and sustains technology systems, products, and services internationally. It has four operating segments: Aeronautics; Missiles and Fire Control; Rotary and Mission Systems; and Space.
In January, LMT leaders announced that the LMXT, a strategic tanker aircraft, would be manufactured in Mobile, Alabama, and Marietta, Georgia. LMXT, which was launched in September 2021, is LMT's offering for the U.S. Air Force's KC-Y "Bridge Tanker" Program competition. The LMXT presents a new phase in LMT's 60-plus year history of producing and delivering tanker and large aircraft for the U.S. Air Force, U.S. Marine Corps, U.S. Navy, and multiple operators across the globe.
Also in January, LMT, Amazon (AMZN), and Cisco (CSCO) collaborated to integrate unique human-machine interface technologies into NASA's Orion spacecraft, offering an opportunity to learn how future astronauts could benefit from far-field voice technology, AI, and tablet-based video collaboration. The Callisto, an innovative technology demonstration, will be integrated into NASA's Orion spacecraft for the Artemis I agency's uncrewed mission to the Moon and back to Earth.
LMT's net sales increased 4.1% year-over-year to $17.73 billion for the fourth quarter ended Dec. 31, 2021. Its operating profit grew 7.3% from its year-ago value to $2.46 billion, while its net earnings increased 14.3% year-over-year to $2.05 billion. Its EPS rose 17.1% from its year-ago value to $7.47.
In terms of forward non-GAAP P/E, LMT is trading at 16.61x, which is 7.6% lower than the 17.97x industry average. Also, in terms of its forward EV/EBIT, the stock is currently trading at 15.40x, which is 3.7% lower than the 15.99x industry average.
Analysts expect its revenue to increase 3.2% year-over-year to $16.53 billion for the third quarter for its fiscal year ending Sept. 30, 2022. The company's EPS is expected to grow 1.6% year-over-year to $6.62 in the second quarter, ending June 30, 2022. In addition, the company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 25.2% in price year-to-date and 26.4% over the past six months.
LMT's 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 distinct factors, each with its own weighting.
LMT is also rated a B grade for Value and Quality. Within the Air/Defense Services industry, it is ranked #4 of 73 stocks.
To see additional POWR Ratings for Growth, Sentiment, Stability, and Momentum for LMT, click here.
HCA Healthcare, Inc. (HCA)
HCA and its subsidiaries provide health care services in the United States. The Nashville, Tenn.-based company operates general and acute care hospitals that offer medical and surgical services, including inpatient care, intensive care, cardiac care, diagnostic and emergency services, and outpatient services.
In January, HCA announced its plan to build five new full-service hospitals in Texas to assist the state in meeting the growing need for healthcare services. Sam Hazen, chief executive officer of HCA Healthcare, stated, "Communities across Texas are undergoing a rapid increase in population, and the addition of these new hospitals will help our existing network meet the increasing need for healthcare services."
Also in January, HCA announced its acquisition of MD Now Urgent Care, a network of 59 urgent care centers in Florida. The transaction will significantly augment HCA Healthcare's range as one of the nation's leading critical care providers, currently operating more than 170 clinics across 19 markets. MD Now is the largest urgent care provider in Florida. This addition of MD Now Urgent Care will help HCA to enhance its already strong capabilities in a rapidly growing state by providing convenient outpatient care options for our patients.
For the fourth quarter, ending Dec. 31, 2021, HCA's revenue increased 5.4% year-over-year to $15.06 billion. Its net income increased 27.2% from its year-ago value to $1.81 billion, while its adjusted EBITDA grew 1% from its year-ago value to $3.15 billion. The company's EPS rose 39.2% from the prior-year quarter to $5.75.
In terms of forward non-GAAP P/E, HCA is trading at 14.08x, which is 33.7% lower than the 21.24x industry average. Also, in terms of its forward P/S, the stock is currently trading at 1.30x, which is 75.5% lower than the 5.33x industry average.
The $4.30 consensus EPS estimate for the first quarter, ending March 31, 2022, represents a 3.9% improvement year-over-year. Analysts expect HCA's revenue to increase 5.9% year-over-year to $14.79 billion in the first quarter, ending March 31, 2022. Furthermore, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has surged 38.4% in price over the past year and 27.8% over the past nine months.
HCA'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, Value, and Stability. In the Medical – Hospitals industry, it is ranked #1 of 13 stocks.
In total, we rate HCA on eight distinct levels. Beyond what we have stated above, we have also given HCA grades for Momentum, Growth, and Sentiment. Get all the HCA ratings here.
FedEx Corporation (FDX)
FDX in Memphis, Tenn., offers transportation, e-commerce, and business services internationally. The company's FedEx Express segment offers express transportation, small-package ground delivery, and freight transportation services; the FedEx Ground segment provides day-certain delivery services to businesses and residences, whereas the FedEx Freight segment offers less-than-truckload freight transportation services.
Recently, FDX's subsidiary, FedEx Office, a leading provider of convenient, state-of-the-art printing, packing, and shipping services, announced an alliance with Notarize, a leading online notarization provider, to launch FedEx Office Online Notary. The new service will make convenient, fully-digital notarization services available to the millions of Americans who require personal or professional documents notarized annually.
In January, FDX and Microsoft Corp. (MSFT) announced the next solution as part of their multi-year collaboration to transform commerce, supply chains, and logistics. This partnership should enable FedEx and Microsoft to bring together FED's network intelligence with capabilities from Microsoft Dynamics 365 to introduce a cross-platform "logistics as a service" for retailers, merchants, and brands.
For the third quarter, ended Feb. 28, 2022, FDX's total revenue increased 10% year-over-year to $23.64 billion. Its total operating income grew 32% from its year-ago value to $1.33 billion, while its net income improved 24.7% year-over-year to $1.11 billion. Its EPS rose 27.3% from its prior-year quarter to $4.20.
In terms of forward EV/S and P/S, FDX's 0.96x and 0.64x, respectively, are lower than the 1.78x and 1.43x industry averages. Furthermore, its 11.15x forward non-GAAP P/E is 37.9% lower than the 17.97x industry average.
Analysts expect FDX's revenue to increase 8.5% year-over-year to 24.51 billion for its fourth quarter, ending May 31, 2022. The $6.84 consensus EPS estimate for its fourth quarter, ending May 31, 2022, represents a 36.5% improvement year-over-year. The company's shares have soared 3.5% in price over the past month.
It is no surprise that FDX has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has a B grade for Value, Momentum, and Quality. Among the 17 stocks in the A-rated Air Freight & Shipping Services industry, it is ranked #5.
Click here to see the additional POWR Ratings for FDX (Stability, Sentiment, and Growth).
Enterprise Products Partners L.P. (EPD)
EPD offers midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products. NGL Pipelines & Services, Crude Oil Pipelines & Services, Natural Gas Pipelines & Services, and Petrochemical & Refined Products Services are the four operational segments of the Houston, Tex.-based company.
In January, EPD announced that one of its affiliates completed a $3.25 billion acquisition of Navitas Midstream Partners, LLC. This purchase gives EPD a foothold in natural gas gathering, treating, and processing in the core of the Midland Basin of the Permian. Navitas Midstream's assets, which accompany EPD's presence in the Delaware Basin, include approximately 1,750 miles of pipelines and more than 1 billion cubic feet per day of cryogenic natural gas processing capacity.
During the fourth quarter, which ended December 31, 2021, EPD's revenue increased 61.4% year-over-year to $11.37 billion. Its operating income grew 98.2% year-over-year to $1.40 billion, while its net income increased 191% to $1.06 billion. The company's EPS rose 213.3% from the prior-year quarter to $0.47.
In terms of forward EV/Sales, EPD's 1.78x, is 25.1% lower than the 2.37x industry average. Furthermore, its 1.18x forward P/S is 25.5% lower than the 1.59x industry average.
The consensus EPS estimate of $0.55 for the second quarter, ending June 30, 2022, represents a 7.8% improvement year-over-year. Analysts expect EPD's revenue to increase 8.6% year-over-year to $9.94 billion in the first quarter, ending March 31, 2022. In addition, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 16.3% year-to-date and 18.1% over the past three months.
EPD'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 Value and Sentiment. In the A-rated MLPs - Oil & Gas industry, it is ranked #11 of 35 stocks.
In total, we rate EPD on eight distinct levels. Beyond what we have stated above, we have also given EPD grades for Quality, Stability, and Growth. Get all the EPD ratings here.
Walgreens Boots Alliance, Inc. (WBA)
WBA functions as a pharmacy-led health and beauty retail company through its two operating segments, the United States segment, which sells prescription drugs and an assortment of retail products, including health, wellness, beauty, personal care, consumable, and general merchandise; and the International segment which sells prescription drugs; and health and wellness, beauty, personal care. WBA is headquartered in Deerfield, Ill.
This month, WBA and Village MD announced plans to open three new Village Medical at Walgreens primary care practices in the Southern New Hampshire area by summer 2022. Integrating Village MD's expertise in primary care and WBA's expertise in pharmacy and community presence should enable more patient accessibility and a comprehensive and convenient healthcare experience.
In the first quarter, ended Nov. 30, 2021, WBA's sales increased 7.8% year-over-year to $33.90 billion. The gross profit grew 14.2% from its year-ago value to $7.57 billion, while its net earnings amounted to $3.58 billion compared to a $308.00 million net loss in the prior-year quarter. The company's EPS came in at $4.13, versus a $0.36 loss per share in the prior-year period.
In terms of forward non-GAAP P/E, WBA is currently trading at 9.40x, which is 50.1% lower than the 18.85x industry average. Furthermore, its forward P/S of 0.31x is 76% lower than the industry average of 1.27x.
Analysts expect WBA's revenue to increase 1.6% year-over-year to $33.29 billion for its second quarter, ending Feb. 28, 2022. The $1.39 consensus EPS estimate for the second quarter, ending Feb. 28, 2022, represents a 10.2% improvement year-over-year. In addition, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 2.4% in price over the past month.
It is no surprise that WBA has an overall B rating, which equates to Buy in our POWR Ratings system. WBA has a B grade for Value. Among the four stocks in the A-rated Medical - Drug Stores industry, it is ranked #2.
Click here to see the additional POWR Ratings for WBA (Stability, Momentum, Quality Sentiment, and Growth).
What To Do Next?
If you would like to see more top value stocks, then you should check out our free special report:
What makes these stocks great additions to any portfolio?
First, because they are all undervalued companies with exciting upside potential.
But even more important, is that they are all top Buy rated stocks according to our coveted POWR Ratings system. Yes, that same system where top-rated stocks have averaged a +37.99% annual return.
Click below now to see these 7 stellar value stocks with the right stuff to outperform in the coming months.
LMT shares fell $12.98 (-2.92%) in premarket trading Tuesday. Year-to-date, LMT has gained 22.39%, versus a -2.91% 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.
The post 5 Value Stocks to Reinforce Your Portfolio in Q2 2022 appeared first on StockNews.com
Entrepreneur Editors' Picks
Formerly Enslaved Black Man Nearest Green Taught Jack Daniel Everything He Knew About Whiskey. Today, the Founder of Uncle Nearest Premium Whiskey Celebrates His Legacy.
Leadership Lessons From the Exclusive Creativity School That 'Packs 5 Years Learning Into 5 Days'
3 Expert-Backed Strategies for Staying Calm in Times of Confrontation
The CEO of Wayfair Has Helped Revolutionize Digital Shopping for 20 Years. Here's How He Handles Rocky Economic Conditions.
This Founder Went to Prison When He Was 15 Years Old. That's Where He Came Up With the Idea for a Company Now Backed By John Legend.
3 Signs You're Letting Pride Get in the Way of Being Successful
Chip and Joanna Gaines and Shonda Rhimes Found Incredible Success By Using This One Entrepreneurial Strategy. Here's How You Can Too.