The major benchmark indexes outperformed yesterday after the Fed raised the interest rates by 50 basis points and announced that it would reduce its balance sheet from next month. The possibility of the central bank’s tighter monetary policy reducing the multi-decade high inflation generated investor optimism.
However, persistent geopolitical tensions, intensifying supply chain disruptions, and rising oil prices are expected to keep the stock market under immense pressure in the near term. Therefore, we think this could be an opportune time to invest in wide-moat stocks (or shares of companies with a unique competitive edge over peers) since they typically withstand tough times without significant detriment to their business.
Thus, we think wide-moat stocks Medtronic plc (MDT) and Emerson Electric Co. (EMR) could be great additions to one’s portfolio this month.
Medtronic plc (MDT)
Headquartered in Dublin, Ireland, MDT develops, manufactures, distributes, and sells device-based medical therapies to hospitals, physicians, clinicians, and patients internationally. It has four operating segments: Cardiovascular Portfolio; Neuroscience Portfolio; Medical-Surgical Portfolio; and Diabetes Operating Unit.
Last month, MDT and GE Healthcare announced a collaboration that emphasizes the different needs and demands for care at Ambulatory Surgery Centers (ASCs) and Office-Based Labs (OBLs). The collaboration enables customers to access extensive product portfolios, financial solutions, and exceptional service. "Our collaboration with Medtronic is one aspect of our efforts to strengthen efficiency, workflow, and clinical outcomes for ASCs and OBLs who work with GE Healthcare," said Jim Rapp, vice president of Interventional Imaging at GE Healthcare.
In March, MDT announced the first patient implants in its TITAN 2 pivotal study to assess the safety and efficacy of Medtronic's investigational implantable tibial neuromodulation (TNM) device in people with overactive bladder (OAB). The minimally invasive technology stimulates the posterior tibial nerve near the ankle, transmitting electrical impulses that regulate the neural activity of the bladder.
During the third quarter ending Jan. 28, 2021, MDT's net sales amounted to $7.76 billion. Its non-GAAP operating profit grew 5.5% year-over-year to $2.18 billion, while its non-GAAP net income increased 5.3% from its year-ago value to $1.85 billion. The company's non-GAAP EPS rose 6.2% from its prior-year quarter to $1.37.
Analysts expect MDT's revenue to increase 3.1% year-over-year to $8.44 billion for the fourth quarter, ending April 30, 2022. The $1.57 consensus EPS estimate for the same period represents a 4.3% improvement year-over-year. Furthermore, it has an impressive earnings history as it surpassed the consensus EPS estimate in all the trailing four quarters. The stock has gained 7.6% over the past year and 1.6% over the past month.
MDT'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.
The stock also has a B grade for Value and Stability. Within the Medical - Devices & Equipment industry, it is ranked #20 of 158 stocks.
To see additional POWR Ratings for Growth, Sentiment, Momentum, and Quality for MDT, click here.
Click here to checkout our Healthcare Sector Report for 2022
Emerson Electric Co. (EMR)
EMR in Ferguson, Mo., designs and manufactures technology and engineering products for industrial, commercial, and consumer markets worldwide. The company has two operational segments: Automation Solutions, which offers measurement and analytical instrumentation, industrial valves and equipment, and process control software and systems. Commercial and Residential Solutions segments, which offers residential and commercial heating and air conditioning products.
For the second quarter, ending March 31, 2022, EMR's net sales increased 8% year-over-year to $4.79 billion. Its net earnings increased 20% from its year-ago value to $674 million, while the EPS rose 22% from its prior-year quarter to $1.13. The company’s cash and cash equivalent stood at $6.93 billion for the quarter ending March 31, 2022.
Analysts expect EMR's revenue to increase 8.6% year-over-year to $5.10 billion for the third quarter, ending June 30, 2022. The $1.30 consensus EPS estimate during the third quarter, ending June 30, 2022, represents a 19.4% improvement year-over-year. In addition, it has an impressive earnings history; it surpassed the consensus EPS estimate in all the trailing four quarters.
EMR'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. EMR has also rated a B grade for Stability, Sentiment, and Stability. It is ranked #18 of 191 stocks within the Industrial – Equipment industry.
In total, we rate EMR on eight distinct levels. To see additional POWR Ratings for Growth, Value, and Momentum for EMR, click here.
Click here to check out our Industrial Sector Report for 2022
MDT shares were trading at $104.20 per share on Thursday afternoon, down $1.63 (-1.54%). Year-to-date, MDT has gained 1.33%, versus a -12.72% 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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