The central bank’s benchmark overnight lending rate currently sits in a target range of 3.75%-4.00%. Investors overwhelmingly expect a rate increase of 50 basis points at the Fed’s next policy meeting as inflation showed signs of cooling.
The Fed’s most aggressive monetary tightening campaign since the 1980s has so far had a fairly limited effect on demand overall. However, recent data shows that business activity contracted for a fifth month in November, and applications for unemployment benefits rose last week to a three-month high. This indicates that some more resilient parts of the economy have started to soften.
In addition, as debate broadened over the implications of the U.S. central bank’s rapid tightening of monetary policy, a substantial majority of policymakers at the Federal Reserve’s meeting early this month agreed it would “likely soon be appropriate” to slow the pace of interest rate hikes.
Given this backdrop, we think fundamentally strong stocks Pfizer Inc. (PFE), Flowers Foods, Inc. (FLO), and Xperi Inc. (XPER) might be worth owning as we head into 2023. These stocks are rated Strong Buy in our proprietary rating system.
Pfizer Inc. (PFE)
PFE discovers, develops, manufactures, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas. The company serves wholesalers, retailers, hospitals, clinics, government agencies, as well as disease control and prevention centers.
On November 4, PFE and BioNTech SE (BNTX) announced updated data from a Phase 2/3 clinical trial demonstrating a robust neutralizing immune response one month after a 30-µg booster dose of the companies’ Omicron BA.4/BA.5-adapted bivalent COVID-19 vaccine.
These data highlight the potential benefit of the bivalent vaccine for all populations regardless of previous SARS-CoV-2 infection. This marks a significant achievement for the companies in developing the Covid-19 vaccines.
On November 3, 2022, PFE’s investigational cancer immunotherapy, elranatamab, received Breakthrough Therapy Designation from the U.S. Food and Drug Administration (FDA) for treating people with relapsed or refractory multiple myeloma.
Chris Boshoff, M.D., Ph.D., Chief Development Officer, Oncology and Rare Disease, Pfizer Global Product Development, said, “This marks Pfizer’s twelfth FDA Breakthrough Therapy Designation in Oncology, a testament to our relentless commitment to developing transformational cancer medicines in areas of high unmet need.”
On September 22, PFE declared a quarterly dividend of $0.40 per share on its common stock, which was payable to shareholders on December 5. Its annual dividend of $1.60 yields 3.26% on current prices. The company’s dividend payouts have increased at a 5.5% CAGR over the past three years and a 5.7% CAGR over the past five years. The company has a record of 12 years of consecutive dividend growth.
In terms of forward EV/EBITDA, PFE is currently trading at 6.11x, which is 54.1% lower than the industry average of 13.31x. Its forward non-GAAP P/E multiple of 7.53 is 57.7% lower than the industry average of 17.79.
During the fiscal third quarter ended September 2022, PFE’s income from continuing operations improved 5.8% year-over-year to $8.65 billion. Its non-GAAP net income attributable to Pfizer Inc. common shareholders rose 39.7% year-over-year to $10.17 billion, while its non-GAAP EPS grew 40.2% year-over-year to $1.78.
Street expects PFE’s EPS for the current fiscal year ending December 2022 to be $6.46, indicating a 46.2% improvement year-over-year. The company’s revenue is likely to increase 23.2% year-over-year to $100.15 billion in the same year. Additionally, PFE has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 8.7% over the past month to close its last trading session at $48.8.
PFE’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PFE is rated an A in Value and a B in Growth, Sentiment, and Quality. Within the Medical – Pharmaceuticals industry, it is ranked #2 out of 162 stocks. Click here to see additional POWR Ratings for Stability and Momentum for PFE.
Flowers Foods, Inc. (FLO)
FLO is a producer and marketer of packaged bakery foods. The company offers fresh bread, buns, rolls, snack cakes, tortillas, frozen bread, and rolls. Its portfolio includes brands such as Nature’s Own, Dave’s Killer Bread (DKB), Wonder, Canyon Bakehouse, Tastykake, and Mrs. Freshley’s.
On November 18, FLO declared a quarterly dividend of $ 0.22 per share, an increase of 4.8%…