The Federal Reserve’s latest interest rate hike by 75 basis points to control the soaring inflation has fueled investors’ concerns over the economy slipping into a recession. This has pushed major benchmark indexes to witness record declines last week.
Although the stock market is expected to remain under pressure for quite some time, many quality stocks are currently trading at attractive prices. Sound fundamentals and favorable industry trends should help these stocks deliver solid returns in the long run.
Our proprietary POWR Ratings system has upgraded Group 1 Automotive, Inc. (GPI), Eli Lilly and Company (LLY), nVent Electric plc (NVT), Primo Water Corporation (PRMW), and Sanmina Corporation (SANM) to ‘Strong Buy’ last week. So, these stocks could be solid additions to one’s portfolio.
Group 1 Automotive, Inc. (GPI)
GPI participates in the automotive retail industry and operates in the United States, the U.K., and Brazil. The company sells new and used cars, light trucks, and related parts, as well as service and insurance contracts, offers automotive maintenance and repair services, and arranges related vehicle financing through its dealerships.
For its fiscal 2022 first quarter ended March 31, 2022, GPI’s total revenues increased 30.1% year-over-year to $3.84 billion. The company’s gross profit came in at $724.70 million, representing a 50.6% rise from the prior-year period.
GPI’s non-GAAP operating income came in at $263.70 million, up 74.3% from the year-ago period. While its non-GAAP net income increased 81.5% year-over-year to $184.60 million, its non-GAAP EPS increased 96.2% to $10.81. As of March 31, 2022, the company had $16.60 million in cash and cash equivalents.
The consensus EPS estimate of $42.30 for its fiscal 2022 ending December 31, 2022, represents a 15.5% year-over-year improvement. It surpassed the consensus EPS estimates in each of the four trailing quarters, which is impressive.
Analysts expect the company’s revenue to reach $16.45 billion for the same fiscal year, indicating a 22% rise from the prior-year period. GPI’s EPS is expected to grow at an 11.4% rate per annum over the next five years. Over the past year, the stock has gained 11.8% and closed Friday’s trading session at $166.39.
GPI’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has an A grade for Value and a B grade for Growth and Quality. Click here to see the additional ratings for GPI’s Stability, Sentiment, and Momentum. GPI is ranked #5 of 24 stocks in the B-rated Auto Dealers & Rentals industry.
Eli Lilly and Company (LLY)
With a market capitalization of $295.61 billion, LLY develops and markets pharmaceutical products for humans and animals worldwide. The company’s products are focused on diabetes, oncology, immunology, neuroscience, and other therapies.
LLY’s revenue for its fiscal 2022 first quarter ended March 31, 2022, increased 14.8% year-over-year to $7.81 billion. The company’s operating income came in at $2.40 billion, indicating a 108.1% rise from the prior-year period.
Its non-GAAP net income came in at $2.37 billion for the quarter, up 61.9% from the year-ago period. LLY’s non-GAAP EPS rose 62.7% year-over-year to $2.62. As of March 31, 2022, the company had $2.46 billion in cash and cash equivalents.
Analysts expect the company’s EPS to hit $7.94 for its fiscal 2022 ending December 31, 2022, representing a 7.4% rise from the prior-year period. The consensus revenue estimate of $27.78 billion for the same fiscal year represents an 8.4% year-over-year improvement.
Its EPS is expected to grow at a rate of 10.5% per annum over the next five years. Over the past year, the stock has gained 30.9% to close Friday’s trading session at $290.90.
LLY’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. It has a B grade for Sentiment, Growth, Stability, and Quality.
Click here to see the additional ratings for LLY’s Value and Momentum. LLY is ranked #14 of 167 stocks in the Medical - Pharmaceuticals industry.
nVent Electric plc (NVT)
Based in London, the U.K., NVT designs, manufactures, markets, installs, and services electrical connection and protection products worldwide. The company operates through Enclosures; Electrical & Fastening Solutions; and Thermal Management segments.
It serves the energy, industrial, infrastructure, and commercial and residential sectors and markets its products through electrical distributors, data center contractors, OEMs, and maintenance contractors.
For its fiscal 2023 first quarter ended April 30, 2022, NVT’s revenues increased 26.6% year-over-year to $694.70 million. The company’s gross profit came in at $247.30 million, representing an 18.3% year-over-year improvement.
The company’s operating income came in at $90.10 million, up 12.1% from the prior-year period. NVT’s adjusted net income came in at $84.50 million, indicating a 15.1% rise from the prior-year period. Its adjusted EPS increased 16.3% year-over-year to $0.50. The company had cash and cash equivalents of $51.10 million as of March 31, 2022.
Analysts expect NVT’s EPS to improve 29.2% year-over-year to $2.21 for its fiscal 2022 ending December 31, 2022. It surpassed the consensus EPS estimates in each of the trailing four quarters.
The consensus revenue estimate of $2.77 billion for the same fiscal year represents a 12.4% rise from the prior-year period. The company’s EPS is expected to grow at a 9.3% rate per annum over the next five years. Over the past year, the stock has gained 0.7% to close Friday’s trading session at $30.81.
NVT’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system. It has a B grade for Quality, Sentiment, and Stability.
In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for NVT’s Momentum, Growth, and Value here. NVT is ranked #9 of 92 stocks in the C-rated Industrial - Equipment industry.
Primo Water Corporation (PRMW)
PRMW provides water directly to consumers and water filtration services in North America and Europe. The company offers bottled water, premium spring, sparkling and flavored water, mineral water, filtration equipment, coffee, water dispensers, and self-service drinking water. It serves residential customers, small and medium-sized businesses, and regional and national corporations and retailers.
For its fiscal 2022 first quarter ended April 2, 2022, PRMW’s net revenue increased 10% year-over-year to $526.10 million. The company’s gross profit came in at $299.60 million for the quarter, up 13.3% from the prior-year period.
Its operating income came in at $15.30 million, representing a 16.8% rise from the prior-year period. While its adjusted net income increased 49.5% year-over-year to $13.90 million, its adjusted EPS increased 50% to $0.09. As of April 2, 2022, the company had $98 million in cash and cash equivalents.
Analysts expect the company’s EPS to improve 12.5% year-over-year to $0.63 for fiscal 2022 ending December 31, 2022. The consensus revenue estimate of $2.17 billion for the quarter, representing a 4.5% rise from the prior-year period. PRMW’s EPS is expected to grow at a 16.8% rate per annum over the next five years. Over the past year, the stock has lost 24.3% to close Friday’s session at $12.62.
PRMW’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, equating to Strong Buy in our proprietary rating system.
The stock has an A grade for Growth and a B for Sentiment and Quality. Click here to see the additional ratings for PRMW (Momentum, Value, and Stability). The stock is ranked #5 of 35 stocks in the A-rated Beverages industry.
Sanmina Corporation (SANM)
SANM provides integrated manufacturing solutions, components, products and repair, logistics, and after-market services worldwide. The company specializes in circuit fabrication, system assembly, integration, and high-end enclosures and cabling and offers its expertise in new product introduction, manufacturing, and design and fabrication of complex interconnect products.
It primarily offers its products and services to OEMs in the industries of the industrial, medical, defense, aerospace, automotive, communications networks, and cloud solutions.
SANM’s fiscal 2022 second-quarter net sales increased 12.5% year-over-year to $1.70 billion. The company’s gross profit came in at $152.45 million, indicating a 6.5% year-over-year improvement. Its non-GAAP operating income came in at $95.25 million for the quarter, representing an 11.6% rise from the year-ago period.
SANM’s non-GAAP net income came in at $73.17 million, up 8.5% from the prior-year period. Its non-GAAP EPS increased 12.9% year-over-year to $1.14. As of April 2, 2022, the company had $559.89 million in cash and cash equivalents.
Analysts expect SANM’s EPS to be $4.55 for fiscal 2022 ending September 30, 2022, representing a 14.6% year-over-year improvement. It surpassed Street EPS estimates in three of the trailing four quarters.
The consensus revenue estimate of $7.44 billion in the same fiscal year represents a 10.2% year-over-year improvement. Over the past year, the stock has lost 1.7% to close Friday’s trading session at $39.46.
SANM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system. It has a B grade for Quality.
Click here for the additional ratings for SANM’s Value, Growth, Sentiment, Stability, and Momentum. SANM is ranked #7 of 82 stocks in the C-rated Technology - Services industry.
GPI shares were trading at $166.39 per share on Monday afternoon, up $7.20 (+4.52%). Year-to-date, GPI has declined -14.43%, versus a -22.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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