Better-than-expected corporate earnings and persistently high inflation rates may be enough to convince the Fed to continue with its aggressive rate hikes, dampening market sentiment. As market volatility will continue for the foreseeable future, it may be wise to buy fundamentally strong stocks Comcast (CMCSA) and Energy Transfer (ET) and hold them forever. Read more….
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While the markets seem temporarily tense better-than-expected revenues and easing of the unrest in the UKthe latest inflation data will worry investors. Higher-than-expected employment and inflation reports are expected to keep the Fed on track to respond with a fourth consecutive 75bp rate hike at its meeting next month. The stock market is therefore likely to remain under pressure.
“If you’re in the throes of a bear market, and to see meaningful moves higher for stocks, you also need to see a big move in the bond markets. you need yields to fall meaningfully”, said Michael Antonelli, director and market strategist at Baird. However, with continued macroeconomic headwinds, US Treasury yields have risen.
With a soft landing for the economy increasingly looking like an unlikely scenario, markets are expected to witness increased volatility in the coming months. Therefore, piling up stocks of companies with fundamental strength, pricing power, attractive dividend records and long-term growth would be the best strategy to generate stable returns.
That’s why we think it might be wise to buy fundamentally solid stocks, Comcast Corporation (CMCSA) and Energy Transfer LP (ET), and hold them forever.
Comcast Corporation (CMCSA)
CMCSA is a global media and technology company. It works through three segments: Cable communication; Media; studios; amusement parks; and Heaven.
On September 21, 2022, CMCSA announced that it is partnering with Samsung to deliver 5G Radio Access Network (RAN) solutions that can be used to enhance 5G connectivity for Xfinity Mobile and Comcast Business Mobile customers in Comcast service areas. The company expects this to seamlessly deliver more next-generation applications and services to its customers.
On September 14, CMCSA announced an extension of its share repurchase authorization to a total of $20.0 billion, with $9 billion in share repurchases to date. This demonstrates the company’s financial strength and commitment to increasing shareholder value.
On July 28, CMCSA announced its quarterly dividend of $0.27 per share on the company’s common stock, payable on October 26, 2022. The company pays $1.08 annually in dividends, which translates into a return of 3 .5% at the current price. This compares favorably with the 4-year average dividend yield of 2.02%.
CMCSA’s dividend payments have grown at a CAGR of 11.7% over the past five years.
For the second quarter of fiscal year 2022 ended June 30, CMCSA’s revenue increased 5.1% year-over-year to $30.02 billion. During the same period, the company adjusted EBITDA increased 10.1% year-over-year to $9.83 billion, while adjusted net income increased 14.3% year-over-year to $4.51 billion. As a result, adjusted earnings per share grew 20.2% year-over-year to $1.01.
Analysts expect CMCSA’s revenue to grow 4.5% year-over-year to $121.57 billion in its current fiscal year ending December 31, 2022, while earnings per share are expected to grow 11% year-over-year to USD 3.59 for the same period. The company also has an impressive earnings history, exceeding consensus EPS estimates in each of its four lagging quarters.
The stock is up 7.2% in the past five days to close out its latest trading session at $30.75.
CMCSAs POWR ratings reflect the promising outlook. It has an overall rating of A, which equates to a strong buy in our proprietary rating system. The POWR Ratings are calculated taking into account 118 different factors, with each factor being optimally weighted.
It has a grade of B for Value and Quality. CMCSA tops the list of nine stocks in the Entertainment – TV and Internet Service Providers industry.
click here for the additional POWR ratings for growth, momentum, stability and sentiment for CMCSA.
Energy transfer LP (ET)
ET owns and operates a portfolio of energy assets in the United States. The company sells natural gas to utility companies, independent power plants, local distribution and industrial end users.
On August 24, 2022, ET announced that its subsidiary, Energy Transfer LNG Export, LLC, has entered into a 20-year LNG Sale and Purchase Agreement (SPA) with Shell NA LNG LLC related to its Lake Charles LNG project. Under the agreement, Energy Transfer LNG will supply Shell with 2.1 million tonnes of LNG per year (mtpa). This SPA is expected to boost the company’s revenue streams.
On August 19, ET paid a quarterly dividend of $0.23 per share. The company pays out $0.92 annually in dividends, which translates to a 7.86% return on its current price. The average 4-year return is an impressive 10.45%. The company’s payout ratio is 60.6% and its dividends have increased at a CAGR of 1.9% over the past ten years.
In addition, ET announced the completion of the sale of its 51% stake in Energy Transfer Canada ULC (Energy Transfer Canada). The company expects that the sale of these assets will enable it to further reduce its balance sheet and reallocate capital within its footprint in the United States.
During the second quarter of fiscal 2022 ending June 30, 2022, ET’s revenue grew 71.8% year over year to $25.95 billion. Operating income grew 32.3% year-over-year to $2.11 billion. The company’s adjusted EBITDA was $3.23 billion, up 23.4% year over year.
In addition, the company’s net income attributable to partners and net income per common unit were $1.33 billion and $0.39, up 111.8% and 95%, respectively, from the same period last year.
Analysts expect ET’s revenue and earnings per share for the fourth quarter of the current fiscal year (ending December 2022) to increase 29.5% and 37.5% year-over-year to $24.16 billion and $0.38. The company has surpassed consensus EPS estimates in three of its lagging four quarters.
Shares of ET are up 35.4% since the start of the year to close out the last trading session at $11.79.
ET’s strong performance and stable outlook has earned it an overall rating of B, which equates to a buy in our POWR Ratings system. It has an A grade for Momentum and a B grade for Value.
ET is number 32 out of 94 stocks in the B rating Energy Oil & Gas industry.
In addition to what has been discussed above, we have also provided ET figures for sentiment, growth, quality and stability. Get access to all ET ratings here.
CMCSA shares were flat after trading hours on Wednesday. Year-to-date, the CMCSA is down -38.02%, compared to a -21.52% increase in the benchmark S&P 500 index over the same period.
About the author: Santanu Roy
Fascinated by the traditional and evolving factors influencing investment decisions, Santanu decided to pursue a career as an investment analyst. Before moving to investment research, he was a process officer at Cognizant. With a master’s degree in business administration and a fundamental approach to analyzing companies, he aims to help private investors identify the best long-term investment opportunities.
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