Since last year, the Federal Reserve has been trying to fight inflation with its restrictive monetary policy. February’s CPI data revealed that inflation rose 6% over the prior year, still much too high for its comfort level. With the Federal Reserve committed to tackling inflation, interest rates are likely to be raised higher than previously anticipated.
The stock market is expected to remain under pressure amid fears of a looming recession. In this scenario, investors could look to buy fundamentally strong stocks Marathon Petroleum Corporation (MPC), Centene Corporation (CNC), and Boyd Gaming Corporation (BYD).
Before discussing why these stocks are screaming buys, let’s see what’s currently affecting investor sentiment.
Along with the high inflation, the jobs market continues to remain tight. The nonfarm payrolls rose by 311,000, higher than analyst estimates of 225,000 in February. Investor sentiments have also got affected by the recent bank insolvencies, leading to rising recession possibilities.
The precarious situation of the financial sector means that the Fed is expected to go ahead with a smaller rate hike. While the economic uncertainty is expected to keep the stock market under pressure, it could be wise to buy fundamentally strong stocks MPC, CNC, and BYD.
Let’s take a closer look at their fundamentals.
Marathon Petroleum Corporation (MPC)
MPC operates as an integrated downstream energy company primarily in the United States. It operates in two segments, Refining & Marketing; and Midstream.
On March 8, 2023, MPC announced the acquisition of a 49.9% interest in LF Bioenergy, an emerging producer of renewable natural gas (RNG), from Cresta Fund Management. MPC's senior vice president of Strategy and Business Development, Dave Heppner, believes that this RNG transaction demonstrates MPC’s commitment to lower carbon investments.
This platform will create the opportunity for further integration and advances MPC's goal to lower the carbon intensity of its operations and the products it offers.
In terms of forward non-GAAP P/E, MPC’s 6.25x is 20.1% lower than the 7.82x industry average. Its 0.55x forward EV/Sales is 67.9% lower than the 1.70x industry average. Likewise, its 5.67x forward EV/EBIT is 20.8% lower than the 7.16x industry average.
For the fiscal fourth quarter that ended December 31, 2022, MPC’s total revenues and other income increased 12.6% year-over-year to $40.09 billion. The company’s adjusted net income attributable to MPC increased 291.9% year-over-year to $3.11 billion.
Its adjusted EBITDA from continuing operations increased 107.6% year-over-year to $5.80 billion. In addition, its adjusted EPS came in at $6.65, representing a 411.5% increase from the prior-year quarter.
MPC’s EPS for the quarter ending March 31, 2023, is expected to increase 279.2% year-over-year to $5.50. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 67.2% to close the last trading session at $125.16.
MPC’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the B-rated Energy - Oil & Gas industry, it is ranked #2 out of 90 stocks. The stock has an A grade for Momentum and Quality and a B for Growth and Sentiment. Click here to see the additional POWR Ratings of MPC for Value and Stability.
Centene Corporation (CNC)
CNC operates as a multi-national healthcare enterprise that provides programs and services to under-insured and uninsured individuals. It operates through two segments, Managed Care and Specialty Services.
On January 23, 2023, CNC announced that it had completed the divesture of Magellan Specialty Health to Evolent Health, Inc. CNC’s CEO Sarah London said, “We are pleased to reach another significant milestone in our ongoing portfolio review and value creation plan.”
“With the close of this transaction, we look forward to launching our national strategic partnership with Evolent and expanding our relationship with Magellan Specialty Health to ensure our members and providers have access to a broad and integrated portfolio of value-based specialty solutions,” he added.
In terms of forward non-GAAP P/E, CNC’s 9.90x is 47.3% lower than the 18.80x industry average. Its 0.32x forward EV/Sales is 91.5% lower than the 3.71x industry average. Likewise, its 8.27x forward EV/EBITDA is 36.6% lower than the 13.03x industry average.
CNC’s total revenues increased 14.7% year-over-year to $144.55 billion for the fiscal year that ended December 31, 2022. The company’s adjusted net earnings rose 10.6% year-over-year to $3.36 billion.
Its net cash provided by operating activities increased 48.9% year-over-year to $6.26 billion. In addition, its adjusted EPS came in at $5.78, representing a 12.2% increase from the prior-year quarter.
CNC’s EPS for the quarter ending March 31, 2023, is expected to increase 15.6% year-over-year to $2.12. The company has a creditable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
Over the past month, the stock has fallen 13.5% to close the last trading session at $63.19.
It is no surprise that CNC has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. Within the A-rated Medical - Health Insurance industry, it is ranked #3 out of 10 stocks. The stock has a B grade for Value and Quality.
In total, we rate CNC on eight different levels. Beyond what we stated above, we have also given CNC grades for Growth, Momentum, Stability, and Sentiment. Get all CNC ratings here.
Boyd Gaming Corporation (BYD)
BYD operates as a multi-jurisdictional gaming company in several states across the US. It operates through three segments: Las Vegas Locals, Downtown Las Vegas, and Midwest & South.
In terms of forward non-GAAP P/E, BYD’s 10.13x is 26.4% lower than the 13.76x industry average. Its 7.79x forward Price/Cash Flow is 9.7% lower than the 8.62x industry average. Likewise, its 10.55x forward EV/EBIT is 18.3% lower than the 12.90x industry average.
On November 1, 2022, BYD announced the completion of the acquisition of Pala Interactive LLC and its subsidiaries. This should bolster its capabilities.
BYD’s total revenues increased 4.9% year-over-year to $922.92 million for the fourth quarter that ended December 31, 2022. The company’s adjusted EBITDA increased by 3.8% from the prior-year period to $333.27 million.
Its adjusted earnings increased 17.8% year-over-year to $181.76 million. Additionally, its adjusted EPS came in at $1.72, representing a 27.4% increase from the year-ago period.
BYD's EPS and revenue for the quarter ending March 31, 2023, are expected to increase 5.3% and 2.1% year-over-year to $1.47 and $878.61 million, respectively. The company has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
Over the past nine months, the stock has gained 20% to close the last trading session at $60.13.
BYD’s POWR Ratings reflect solid prospects. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
Within the Entertainment - Casinos/Gambling industry, it is ranked #3 of 30 stocks. In addition, it has an A grade for Quality and a B for Value. We have also given BYD grades for Growth, Momentum, Stability, and Sentiment. Get all BYD ratings here.
What To Do Next?
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What gives these stocks the right stuff to become big winners, even in this brutal stock market?
First, because they are all low-priced companies with the most upside potential in today’s volatile markets.
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MPC shares were trading at $123.82 per share on Friday morning, down $1.34 (-1.07%). Year-to-date, MPC has gained 7.01%, versus a 2.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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