The U.S stocks have been witnessing sharp declines on rising concerns over multi-decade high inflation and the prospects of higher interest rates. Steve Sosnick, the chief strategist at Interactive Brokers, said, “don’t be fooled” by short rallies, as the recent increases were just a part of the market where “volatility works in both directions.”
The Federal Reserve is expected to raise interest rates by 0.75 percentage points at its July policy meeting this week. However, U.S. Treasury Secretary Janet Yellen said that U.S. economic growth is slowing. She acknowledged the risk of a recession but said that given the robust employment rates, a downturn was not inevitable.
In addition, according to FactSet, as of Friday, about 21% of companies in the S&P 500 reported earnings, and out of those, nearly 70% beat analysts’ expectations.
Amid the market volatility, quality stocks Adams Resources & Energy, Inc. (AE), Friedman Industries, Incorporated (FRD), and GeoPark Limited (GPRK) have been showing solid momentum. Since these stocks are expected to maintain their momentum regardless of market conditions, it could be wise to invest in them. They are rated Strong Buy in our POWR Ratings system.
Adams Resources & Energy, Inc. (AE)
AE is primarily involved in the marketing, transportation, terminalling, and storing of various crude oil and natural gas basins in the United States. The company has three operational segments: Crude Oil Marketing, Transportation and Storage; Tank truck Transportation of Liquid Chemicals, Pressurized Gases, Asphalt, and Dry Bulk; and Pipeline Transportation, Terminalling and Storage of Crude Oil.
For the first quarter ending March 31, 2022, AE’s total revenue increased 137.9% year-over-year to $774.25 million. Its operating earnings grew 111.6% from its prior-year quarter to $8.15 million, while its net income grew $116.9 million from its year-ago value to $6.09 million. The company’s EPS improved 110.6% from its year-ago value to $1.39.
The consensus EPS estimate of $3.46 for December 2022 represents a 25.8% improvement year-over-year. The stock has gained 18% year-to-date and 1.2% over the past six months.
AE's POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock also has an A grade for Momentum and Value and a B for Quality. Within the B-rated Energy - Oil & Gas industry, it is ranked #1 of 97 stocks.
Click here to see additional POWR Ratings for Stability, Sentiment, and Growth for AE.
Friedman Industries, Incorporated (FRD)
FRD is involved in steel processing, pipe manufacturing and processing, and the steel and pipe distribution businesses in the United States. It has two operational segments, Coil and Tubular. The Coil segment is involved in converting steel coils into a flat sheet and plate steel cut to customer specifications and reselling steel coils. The Tubular segment manufactures line and oil country pipes and pipes for structural applications.
In May, FRD acquired two high-quality, strategically located facilities from Plateplus, Inc., making FRD a leading North American steel service center with an expanded geographic presence, scale, and processing capabilities. In addition to the facilities acquired, Friedman also acquired the steel inventory and customer relationships at two additional Plateplus locations.
FRD's net revenue increased 126.2% year-over-year to $285.23 million for the fiscal year ended March 31, 2022. Its earnings from operations grew 79.7% from its prior-year quarter to $28.26 million, while its net earnings improved 23.1% from its year-ago value to $14.07 million. The company’s EPS rose 25.2% year-over-year to $2.04. The stock has gained 3% over the past month.
FRD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Growth and Momentum and a B for Quality. Within the A-rated Steel industry, it is ranked #9 of 33 stocks.
In total, we rate FRD on eight different levels. Beyond what we've stated above, we have also given FRD grades for Value, Sentiment, and Stability. Get all the FRD ratings here.
GeoPark Limited (GPRK)
Headquartered in Bogotá, Colombia, GPRK is engaged in developing and producing oil and gas reserves in Chile, Colombia, Brazil, Argentina, and Ecuador. As of December 31, 2021, the company had working or economic interests in 42 hydrocarbons blocks.
In May, GPRK announced its plan to redeem the $45,000,000 aggregate principal amount of its 6.500% senior notes due 2024. According to the terms of the Indenture, the Notes will be redeemed at a redemption price equal to 103.250% of the principal amount of the Notes redeemed, plus accrued and unpaid interest and additional amounts to, but excluding the redemption date.
In the second quarter ending March 31, 2022, GPRK’s revenue increased 70% year-over-year to $249.15 million. Its operating profit grew 268.8% from its year-ago value to $58.64 million, while its profit came in at $31.00 million compared to a loss of $10.34 million in the previous period. The company's EPS stood at $0.51, compared to a loss per share of $0.17 in the prior-year quarter.
The consensus EPS estimate of $4.48 for fiscal 2022 represents a 324.6% year-over-year growth. Analysts expect revenue to increase 67.9% year-over-year to $278.00 million for the second quarter ending June 2022. The company’s shares have surged 2.2% year-to-date.
It is no surprise that GPRK has an overall A rating, equating to Strong Buy in our POWR Ratings system. GPRK has an A grade for Momentum and a B for Value and Quality. In the A-rated Foreign Oil & Gas industry, it is ranked #3 of 42 stocks
Click here to see the additional POWR Ratings for GPRK (Growth, Stability, and Sentiment).
AE shares were trading at $31.23 per share on Monday afternoon, down $0.04 (-0.13%). Year-to-date, AE has gained 13.84%, versus a -16.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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