The stubbornly high inflation, despite its downward trajectory, and the bank failures have been taking a toll on the stock market lately. With an end to the market volatility not in sight, investing in The Coca-Cola Company (KO), Oracle Corporation (ORCL), Humana Inc. (HUM), and Gartner, Inc. (IT), which made many investors millionaires in the past, could be wise.
Before discussing why these stocks are well-positioned to generate solid returns in the long term, let’s see what’s affecting investor sentiment.
In February, the Consumer Price Index (CPI) rose 6% year-over-year and 0.4% sequentially, in line with analyst expectations. However, the monthly core inflation rose from 0.4% in January to 0.5% last month.
While inflation remains stubbornly high, last month’s jobs report showed that the nonfarm payrolls rose by 311,000, higher than analyst estimates of 225,000. As a result, the Fed is expected to be compelled to raise interest rates aggressively to achieve its 2% inflation target.
On the other hand, the recent bank failures spooked investors. The regulators are trying hard to restore stability to the financial markets. The crisis in the banking sector requires the Fed to opt for a smaller or no rate increase in its meeting next week. However, the Fed is expected to return to bigger rate hikes once this crisis eases.
Given the uncertainties, investing in KO, ORCL, HUM, and IT could be wise, as these stocks are well-positioned to deliver solid long-term returns.
Let’s take a closer look at what could influence their performance in the near term.
The Coca-Cola Company (KO)
Famous beverage company KO is engaged in manufacturing, marketing, and selling various non-alcoholic beverages worldwide. It provides sparkling soft drinks, enhanced water, juice, dairy, and syrups. In addition, it sells products under Coca-Cola, Diet Coke/Coca-Cola Light, Coca-Cola Zero Sugar, and Fanta brands.
KO is expected to pay a dividend of 46 cents to shareholders on April 3, 2023. It has increased its dividend for 62 consecutive years. Its annual dividend of $1.84 yields 3.05% on the current share price. The company’s dividend payouts have increased at a 3.4% CAGR over the past three years and a 3.5% CAGR over the past five years. Its four-year dividend yield is 3.05%.
In terms of the trailing-12-month gross profit margin, KO’s 58.14% is 84.3% higher than the 31.55% industry average. Likewise, its 31.42% trailing-12-month EBITDA margin is 169.9% higher than the industry average of 11.64%. Furthermore, the stock’s 3.45% trailing-12-month Capex/Sales is 8.3% higher than the industry average of 3.19%.
KO’s non-GAAP net operating revenues increased 7.7% year-over-year to $10.20 billion for the fourth quarter ended December 31, 2022. Its non-GAAP gross profit increased 6% year-over-year to $5.76 billion. The company’s non-GAAP operating income increased 10.9% from the prior-year quarter to $2.32 billion. Its non-GAAP net income and non-GAAP EPS came in at $1.94 billion and $0.45, respectively.
Analysts expect KO’s revenue and EPS for the quarter ending March 31, 2023, to increase 2.9% and 1% year-over-year to $10.81 billion and $0.65, respectively. It surpassed consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 2.1% to close the last trading session at $60.30.
KO’s POWR Ratings reflect solid prospects. The company has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Quality and a B for Stability and Sentiment. It is ranked #17 out of 36 stocks within the A-rated Beverages industry. Click here to see the other ratings of KO for Growth, Value, and Momentum.
Oracle Corporation (ORCL)
ORCL offers products and services that address enterprise information technology environments worldwide. The business provides Oracle application licenses, support services, and cloud-based industry solutions for a diverse range of industries. It also offers hardware products and other software choices relating to hardware.
On February 13, ORCL and Uber Technologies, Inc. (UBER) announced a seven-year strategic cloud partnership to help accelerate UBER’s innovation in bringing new products to the market and boosting profitability. This strategic partnership reflects Oracle Cloud infrastructure’s strong momentum and acceleration within the market versus other hyperscalers.
It is expected to pay a quarterly dividend of $0.40 per share on April 24, 2023. Its annual dividend of $1.60 yields 1.89% on the current share price. The company’s dividend payouts have increased at a 10.1% CAGR over the past three years and an 11% CAGR over the past five years. Its four-year dividend yield is 1.59%.
In terms of the trailing-12-month gross profit margin, ORCL’s 74.50% is 52.1% higher than the 48.97% industry average. Likewise, its 38.79% trailing-12-month EBITDA margin is 245.8% higher than the industry average of 11.22%. Furthermore, the stock’s 17.49% trailing-12-month levered FCF margin is 164.8% higher than the industry average of 6.61%.
For the fiscal third quarter ended February 28, 2023, ORCL’s net revenue increased 17.9% year-over-year to $12.40 billion. Its adjusted operating income grew 7.7% from the year-ago period to $5.19 billion. The company’s non-GAAP net income increased 9% year-over-year to $3.38 billion. In addition, its non-GAAP EPS came in at $1.22, representing an increase of 8% year-over-year.
For the quarter ending May 31, 2023, ORCL’s EPS and revenue are expected to increase 2.7% and 15.9% year-over-year to $1.58 and $13.72 billion, respectively. It surpassed Street EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 23.5% to close the last trading session at $84.82.
ORCL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
It has a B grade for Stability and Sentiment. Within the Software – Application industry, it is ranked #32 out of 133 stocks. To see the additional ratings of ORCL for Growth, Value, Momentum, and Quality, click here.
Humana Inc. (HUM)
HUM is a health and well-being company that operates in the Insurance and CenterWell segments. The Insurance segment consists of Medicare benefits marketed to individuals or directly through group Medicare accounts. The CenterWell segment represents its payor-agnostic healthcare offerings, including pharmacy dispensing, provider, and home services.
On February 23, 2023, HUM announced that it would be exiting the Employer Group Commercial Medical Products business, which includes all fully insured, self-funded, and Federal Employee Health Benefit medical plans, as well as associated wellness and rewards programs.
HUM’s President and CEO Bruce D. Broussard said, “This decision enables Humana to focus resources on our greatest opportunities for growth and where we can deliver industry-leading value for our members and customers.”
HUM is expected to pay a quarterly dividend of $0.885 per share on April 28, 2023. Its annual dividend of $3.54 yields 0.72% on the current share price. The company’s dividend payouts have increased at a 12.7% CAGR over the past three years and a 14.5% CAGR over the past five years. Its four-year dividend yield is 0.65%.
In terms of the trailing-12-month net income margin, HUM’s 3.02% compares to the negative 5.99% industry average. Likewise, its 4.95% trailing-12-month EBITDA margin is 47.8% higher than the industry average of 3.35%. Furthermore, the stock’s 2.12x trailing-12-month asset turnover ratio is 525.3% higher than the industry average of 0.34x.
HUM’s revenues for the fourth quarter ended December 31, 2022, increased 6.6% year-over-year to $22.44 billion. The company’s adjusted consolidated pretax income increased 58.4% year-over-year to $263 million. Its adjusted EPS came in at $1.62, representing an increase of 30.6% year-over-year.
Analysts expect HUM’s EPS and revenue for the quarter ending March 31, 2023, to increase 16.3% and 10.5% year-over-year to $9.35 and $26.49 billion, respectively. It surpassed Street EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 16.8% to close the last trading session at $494.38.
HUM’s POWR Ratings reflect solid prospects. It has an overall rating of A, which translates to Strong Buy in our proprietary rating system.
It is ranked #2 out of 10 stocks in the A-rated Medical – Health Insurance industry. It has a B grade for Growth, Value, and Sentiment. Click here to see the other ratings of HUM for Momentum, Stability, and Quality.
Gartner, Inc. (IT)
IT operates as a global research and advisory company. The firm operates through its three broad segments: Research, Conferences, and Consulting.
In terms of the trailing-12-month gross profit margin, IT’s 69.07% is 41% higher than the 48.97% industry average. Likewise, its 14.75% trailing-12-month net income margin is 410.8% higher than the industry average of 2.89%. Furthermore, the stock’s 15.88% trailing-12-month levered FCF margin is 140.4% higher than the industry average of 6.61%.
For the fiscal fourth quarter ended December 31, 2022, IT’s total revenues increased 15.2% year-over-year to $1.50 billion. The company’s adjusted net income rose 18.3% over the prior-year quarter to $296.70 million. In addition, its adjusted EPS came in at $3.70, representing an increase of 23.7% year-over-year. Also, its adjusted EBITDA increased 37.5% year-over-year to $421.30 million.
For the quarter ending March 31, 2023, IT’s revenue is expected to increase 9.1% year-over-year to $1.38 billion. Its EPS for fiscal 2024 is expected to increase 16% year-over-year to $10.94. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 36.5% to close the last trading session at $305.95.
IT's strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
Within the A-rated Outsourcing – Tech Services industry, it is ranked first out of 9 stocks. It has an A grade for Quality and a B for Sentiment. To see the other ratings of IT for Growth, Value, Momentum, and Stability, click here.
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KO shares fell $0.14 (-0.23%) in premarket trading Friday. Year-to-date, KO has declined -4.65%, versus a 2.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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