Non-farm payrolls in the United States increased by 517,000 in January, surpassing December’s gain of 260,000 and crushing the Dow Jones estimate of 187,000.
However, aggressive interest rate hikes during the previous year have left markets so shaken and warped that an otherwise welcome employment data released by the Labor Department brought the recent rally to an abrupt end while triggering a potential relapse into a fresh bout of volatility.
Hence, while the unemployment rate slipping to its lowest level since 1969 bodes well for the economy, market participants are concerned that it might induce the Federal Reserve to push interest rates further than expected.
With the recent data echoing Jerome Powell’s concern that the labor market “remains extremely tight” and is still “out of balance,” the Fed may double down on its efforts to keep inflation in check while reducing the size of its balance sheet.
With the Central Bank’s fight against inflation likely to entail the risk of broad-based asset price deflation, shares of fundamentally strong businesses Pfizer Inc. (PFE), Verizon Communications Inc. (VZ), and AT&T Inc. (T) have courted attention on the Street and seem investment worthy at this point of time.
Pfizer Inc. (PFE)
As a world-renowned research-based biopharmaceutical company, PFE discovers, develops, manufactures, sells, and distributes biopharmaceutical products, such as medicines, vaccines, and other therapies. The company operates through two segments: Biopharma and PC1.
On January 6, PFE announced that the U.S. Food and Drug Administration (FDA) accepted for priority review a supplemental Biologics License Application (sBLA) for its 20-valent pneumococcal conjugate vaccine candidate (20vPnC) for the prevention of invasive pneumococcal disease (IPD).
Priority Review designation by the FDA reduces the standard sBLA review period by four months. If approved, this can help expand the protection for the vulnerable pediatric population affected by the disease.
On December 21, 2022, PFE announced that the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA) had accepted its regulatory submissions for Etrasimod for individuals living with moderately to severely active ulcerative colitis (UC). In addition to UC, it is being investigated for various immuno-inflammatory diseases.
On December 9, PFE announced its regular quarterly dividend of $0.41 per share of common stock, payable March 3, 2023, to holders of record at the close of business on January 27, 2023. The first-quarter 2023 cash dividend will be Pfizer’s 337th consecutive quarterly dividend.
PFE pays a dividend of $1.64 per share annually, translating to a yield of 3.72% at the current price. This compares favorably to the 4-year average dividend yield of 3.63%. The company’s dividend payouts have increased at 5.5% CAGR over the past five years.
During the fiscal year 2022, due to contributions from Paxlovid and Comirnaty, which offset a 7% reduction due to foreign exchange, PFE increased its revenues by 23.4% year-over-year to a record $100.33 billion. Ten medicines or vaccines that generated revenues of more than $1 billion each helped the company achieve this feat.
PFE’s income from continuing operations during the previous fiscal year increased 39.8% year-over-year to $31.40 billion. The company’s adjusted income also increased more than 62% year-over-year to $37.72 billion, or $6.58 per share.
PFE’s trailing 12-month gross profit margin of 65.90% is higher than the industry average of 55.26%. Also, the company’s trailing-12-month EBITDA margin and net income margin of 43.42% and 31.27% comfortably exceed the industry averages of 3.91% and negative 5.84%, respectively.
Excluding its COVID-19 products, PFE expects a strong topline growth of 7% to 9% during the current fiscal. Moreover, it has an impressive earnings surprise history as it has topped the consensus EPS estimates in each of the trailing four quarters.
The stock has registered an average 10-day volume of 27.89 million and has dipped 11.6% over the past six months to close the last trading session at $44.06. In terms of its forward P/E, PFE is trading at 12.26x, 39.4% lower than the industry average of 20.24x.
PFE’s steady prospects are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
PFE has an A grade for Value and a B for Quality. It is ranked #23 of 171 stocks in the Medical – Pharmaceutical industry.
Click here for additional POWR Ratings for PFE’s Growth, Stability, Sentiment, and Momentum.
Verizon Communications Inc. (VZ)
VZ offers communication, information, and entertainment products and services to consumers, businesses, and governmental agencies. The company provides wireless and wireline communications services and products in the United States through Consumer Group and Business Group segments.
On February 1, VZ paid its quarterly dividend of $0.65 per share. The company pays $2.61 annually as dividends, which translates to a yield of 6.29% at the current price, better than the 4-year average dividend yield of 4.71%. Dividend payouts have grown for 18 consecutive years. Over the past five years, its dividend payouts have grown at a 2.06% CAGR.
On November 30, 2022, VZ announced its partnership with Wipro Limited (WIT) to accelerate the network modernization and cloud transformation journey for businesses. This will enable VZ to help WIT transition its customers from legacy cycles of deploying hardware, applications, and services to an automated, self-healing, and highly secure network service environment.
On October 5, VZ bagged a new Enterprise Infrastructure Solutions (EIS) contract, worth $1.58 billion over the next ten years, to modernize the global communications infrastructure and provide IT services for each of the Department of State’s (DOS) U.S. embassies, consulates, and other key locations totaling to around 260 around the globe.
During the fourth quarter of the fiscal year 2022 ended December 31, VZ’s total consolidated operating revenue grew 3.5% year-over-year to $35.25 billion, driven by service, other revenue, and equipment revenue.
During the same period, VZ’s adjusted EBITDA came in at $11.7 billion, while its net income increased 41.4% year-over-year to $6.70 billion. Its adjusted quarterly EPS came in at $1.19.
VZ’s trailing-12-month gross profit margin of 56.79% is 12.9% higher than the industry average of 50.32%. The company’s trailing-12-month EBITDA and net income margins of 34.76% and 15.53% also compare favorably to the industry averages of 19.26% and 3.94%, respectively.
For the fiscal year ending December 31, 2023, VZ’s revenue is expected to increase marginally to $137.88 billion, while its EPS is expected to come in at $4.69. Both revenue and EPS are expected to increase by 1.1% and 2.1% during the next fiscal to $139.44 billion and $4.79, respectively.
VZ’s stock registered an average 10-day trading volume of 22.70 million and has gained 5.2% over the past month to close the last trading session at $41.51. In terms of its forward P/E, VZ is trading at 8.85x, 47% lower than the industry average of 16.69x.
VZ’s overall POWR Rating of B equates to a Buy in our proprietary rating system. It also has a B grade for Stability and Quality.
VZ is ranked #4 of 19 stocks in the Telecom – Domestic industry.
Click here to see the additional ratings of VZ for Value, Momentum, Sentiment, and Growth.
AT&T Inc. (T)
T is a global provider of telecommunications, media, and technical services worldwide. The company operates through two segments: Communications; and Latin America. Its offerings include wireless communications, data/broadband, Internet services, video services, local exchange services, long-distance services, telecommunications equipment, managed networking, and wholesale services.
On February 1, T paid its quarterly dividend of $0.28 per share on the company’s common shares; Series A dividend of $312.50 per preferred share, or $0.3125 per depositary share; and Series C dividend of $296.875 per preferred share, or $0.296875 per depositary share.
T pays $1.11 as dividends annually, which translates to a yield of 5.60% at the current price, comparable to the four-year average dividend yield of 6.96%.
On December 23, 2022, T and BlackRock Inc. (BLK), through its subsidiary BlackRock Alternatives, announced the signing of a definitive agreement to form a joint venture, Gigapower, LLC, to operate a commercial fiber platform.
As a result of this collaboration, Gigapower will serve customers outside of T’s traditional 21-state wireline service footprint with fiber access technologies in innovative and efficient ways. At the same time, T will leverage its nationwide wireless sales capabilities to sell fiber to customers in Gigapower territories.
On December 6, T’s COO Jeff McElfresh indicated that the company expects full-year capital investment in the $24 billion range to meet the growing demand for core connectivity while meeting full-year 2022 guidance for free cash flow in the $14 billion range.
For its fiscal 2022 fourth quarter, which ended December 31, 2022, despite lower Business Wireline revenues, T’s revenues from continuing operations increased 0.8% year-over-year to $31.34 billion due to higher Mobility, Mexico, and Consumer Wireline revenues.
During the same period, T’s adjusted operating income increased 12.9% year-over-year to $5.65 billion, while its adjusted EBITDA increased 7.9% year-over-year to $10.23 billion. The company’s adjusted EPS increased 8.9% year-over-year to $0.61.
T’s trailing-12-month gross profit and EBITDA margins of 57.89% and 33.9% compare favorably to the respective industry averages of 50.32% and 19.26%.
T’s revenue for the fiscal ending December 2023 is expected to increase 1.5% year-over-year to $122.59 billion, while its EPS is expected to come in at $2.45. Street expects both revenue and EPS to increase by 1.2% and 2.3% during the following fiscal year, to come in at $124.11 billion and $2.51, respectively. It has also impressed by surpassing the consensus EPS estimates in each of the trailing four quarters.
T’s stock has registered an average 10-day trading volume of 40.44 million and has gained 7.6% over the past month to close the last trading session at $19.83. In terms of its forward P/E, T is trading at 8.09x, 51.5% lower than the industry average of 16.69x.
T is ranked #7 of 19 stocks in the Telecom – Domestic industry. Click here to access all POWR Ratings of T.
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PFE shares were trading at $43.89 per share on Monday morning, down $0.17 (-0.39%). Year-to-date, PFE has declined -13.56%, versus a 7.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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