The Fed will likely raise interest rates by 75 basis points this month to fight the multi-decade high inflation. While the increasing odds of a recession are expected to keep the stock market under pressure, resilient consumer spending, a steady unemployment rate, and better-than-expected corporate earnings should restore investors’ confidence.
Although the benchmark indexes are expected to witness several relief rallies, they may not return to a bull market soon. Therefore, it could be wise to scoop up quality stocks trading at attractive prices to benefit from their rebound in the long run.
Investors’ interest in quality stocks is evident from Invesco S&P 500 Quality ETF’s (SPHQ) 4.1% gains over the past week versus the SPDR S&P 500 Trust ETF’s (SPY) 3.8% returns.
Strong profitability and solid revenue and earnings growth prospects should help Mueller Industries, Inc. (MLI), Marathon Oil Corporation (MRO), QUALCOMM Incorporated (QCOM), and Valero Energy Corporation (VLO) gain significantly in the long run. So, these stocks could be wise additions to your portfolio now.
Mueller Industries, Inc. (MLI)
MLI manufactures and sells copper, brass, aluminum, and plastic products, through its Piping Systems, Industrial Metals, and Climate segments internationally. Its products are used in plumbing and HVACR-related piping systems and OEM applications in building construction, appliance, defense, energy, and automotive industries.
For its fiscal 2022 second quarter ended June 25, 2022, MLI’s net sales increased 13.6% year-over-year to $1.15 billion. The company’s operating income came in at $268.87 million, representing a 70.4% year-over-year improvement.
Its net income came in at $206.55 million, up 89.8% from the prior-year period. MLI’s EPS came in at $3.65, representing a 90.1% rise from the year-ago period. As of June 25, 2022, the company had $202.50 million in cash and cash equivalents.
Analysts expect an EPS estimate of $8.95 for fiscal 2022 ending December 31, 2022, indicating a rise of 8% from the prior-year period. The consensus revenue estimate of $4.11 billion for the same fiscal year represents a 9% year-over-year improvement.
MLI’s 51% trailing-12-month ROE is 254.9% higher than the 14.4% industry average. The company’s trailing-12-month ROA of 32.3% is 525.7% higher than the industry average of 5.2%. The stock has gained 18.2% over the past week to close the last trading session at $61.86.
MLI’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to 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 a B grade for Quality. Click here to see the additional ratings for MLI’s Value, Growth, Sentiment, Momentum, and Stability.
MLI is ranked #8 of 36 stocks in the A-rated Industrial - Manufacturing industry.
Marathon Oil Corporation (MRO)
MRO is an independent international energy company that explores, produces, and markets crude oil and condensate natural gas products, such as liquefied natural gas and methanol. It also owns and operates 32 central gathering and treating facilities, and the Sugarloaf gathering system, a 42-mile natural gas pipeline through Karnes and Atascosa Counties.
MRO’s total revenues and other income for its fiscal 2022 first quarter ended March 31, 2022, increased 63.7% year-over-year to $1.75 billion. The company’s income from operations came in at $805 million, indicating a 588% year-over-year improvement.
Its adjusted net income came in at $749 million, up 351.2% from the year-ago period. MRO’s adjusted EPS came in at $1.02, indicating a 385.7% year-over-year improvement. As of March 31, 2022, the company had $681 million in cash and cash equivalents.
The consensus EPS estimate of $4.88 for fiscal 2022 ending December 31, 2022, represents a 210.8% rise from the prior-year period. It surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
Analysts expect MRO’s revenue to be 7.88 billion for the same fiscal year, indicating a 44.2% year-over-year improvement. The company’s EPS is expected to grow at an 11% rate per annum over the next five years.
MRO’s 19.5% trailing-12-month ROE is 84.2% higher than the 10.6% industry average. The company’s trailing-12-month ROA margin of 12% is 238.5% higher than the industry average of 3.5%. The stock has gained 10.3% over the past week to close the last trading session at $22.52.
MRO’s POWR Ratings reflect this promising outlook. The stock has an overall B grade, equating to Buy in our proprietary rating system.
It has an A grade for Momentum and Quality. Click here to see the additional ratings for MRO’s Growth, Sentiment, Value, and Stability.
MRO is ranked #22 of 97 stocks in the B-rated Energy - Oil & Gas industry.
QUALCOMM Incorporated (QCOM)
QCOM is a multinational semiconductor and telecommunications equipment company that develops and delivers products and services based on code-division multiple access (CDMA) technology used in digital wireless communications equipment and satellite ground stations.
It operates through three segments: Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL), and Qualcomm Strategic Initiatives (QSI).
On July 19, 2022, QCOM unveiled the latest additions to its suite of premium wearable platforms, Snapdragon W5+ Gen 1 and Snapdragon W5 Gen 1. With highly integrated packaging, these platforms advance ultra-low power based on 4nm process technology and deliver breakthrough performance with extended battery life and premium user experiences.
Moreover, these will help manufacturers scale, differentiate, and develop products faster in the continuously growing and segmenting wearables industry.
For its fiscal year 2022 second quarter, QCOM’s non-GAAP revenues ended March 27, 2022, increased 40.8% year-over-year to $11.16 billion. The company’s non-GAAP operating income came in at $4.37 billion, up 63.7% from the year-ago period.
Its non-GAAP net income came in at $3.66 billion, representing a 67.6% rise from the prior-year period. QCOM’s non-GAAP EPS was $3.21, indicating a 69% year-over-year improvement. As of March 27, 2022, the company had $7.17 billion in cash and cash equivalents.
The consensus EPS estimate of $12.54 for fiscal 2022 ending September 30, 2022, indicates a 46.8% year-over-year improvement. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.
Analysts expect QCOM’s revenue to be $44.33 billion for the same fiscal year, representing a 32.5% rise from the prior-year period. Its EPS is expected to grow at a 14.3% rate per annum over the next five years.
QCOM’s 107.6% trailing-12-month ROE is 1403.1% higher than the 7.2% industry average. The company’s trailing-12-month ROA margin of 25.2% is 742.2% higher than the industry average of 3%. The stock has gained 2.4% over the past week to close the last trading session at $147.37.
QCOM’s POWR Ratings reflect its solid prospects. The stock has an overall A grade, which equates to Strong Buy in our proprietary rating system.
The stock has a B grade for Growth and Quality. In addition to the POWR Ratings grades we have just highlighted, one can see QCOM’s Value, Sentiment, Momentum, and Stability ratings here.
QCOM is ranked #9 of 95 stocks in the B-rated Semiconductor & Wireless Chip industry.
Valero Energy Corporation (VLO)
VLO owns petroleum refineries and ethanol plants and manufactures and sells transportation fuels and petrochemical products through its Refining, Renewable Diesel, and Ethanol segments internationally.
It sells conventional, premium, reformulated gasoline, low-sulfur and ultra-low-sulfur diesel, CARB diesel, jet fuels, blendstocks, asphalts, petrochemicals, lubricants, lube oils, and natural gas liquids.
For its fiscal 2022 first quarter ended March 31, 2022, VLO’s revenues increased 85.2% year-over-year to $38.54 billion. The company’s operating income came in at $1.38 billion, versus a loss of $666 million in the year-ago period.
VLO’s adjusted net income came in at $944 million, compared to a loss of $666 million in the prior-year period. Its adjusted EPS came in at $2.31, versus a $1.64 loss per share in the year-ago period. It had cash and cash equivalents of $2.64 billion as of March 31, 2022.
VLO’s 13.8% trailing-12-month ROE is 30.3% higher than the 10.6% industry average. The company’s trailing-12-month ROA margin of 4.2% is 18.8% higher than the industry average of 3.5%. The stock has gained 7.9% over the past week to close the last trading session at $108.74.
VLO’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, equating to Buy in our proprietary rating system.
The stock has an A grade for Momentum and a B for Quality and Growth. Click here to see the additional ratings for VLO’s Sentiment, Value, and Stability.
VLO is ranked #9 in the B-rated Energy - Oil & Gas industry.
MLI shares were trading at $62.49 per share on Wednesday afternoon, up $0.63 (+1.02%). Year-to-date, MLI has gained 6.21%, versus a -16.14% 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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