Although inflation is decreasing, fears of a possible recession still persist. Despite these worries, the quality stocks Brown & Brown(BRO), Graco(GGG), and Chemed(CHE) are poised to soar. They could be worth purchasing. Continue reading.
Stock market could remain under pressure due to recent banking crises and fears about an impending recession. Despite uncertainties, stocks with strong fundamentals like Brown & Brown, Inc., Graco Inc., and Chemed Corporation, (CHE), look set to soar. They could be well worth adding to your investment portfolio.
Before we dive deeper into these fundamentals, let's talk about what could make the stock market volatile over the next few months.
According to the latest economic data, inflation has moderated in April. The consumer price index (CPI), which is a measure of inflation, increased by 0.4% during the month. This was on par with the estimates. It also rose by 4.9% over the year, slightly less than the estimated 5%. This may have provided some optimism but inflation is still above the Fed's target of 2%.
In April, non-farm payrolls increased 253,000 more than analysts' estimates of 182,000. The Federal Reserve raised interest rates by 25 basis points last week.
Federal Open Market Committee hinted that it might pause rate increases, but officials are taking into consideration various factors when deciding how to proceed. The main factor is inflation data.
Although it's unclear whether the Fed is going to raise rates during its June meeting, the possibility of a recession still exists after the central banking staff predicted a "mild recession" later this year.
Mike Wilson, Morgan Stanley's strategist says that stocks will continue to drop as investors begin to realize that the economy either is headed towards a recession, or the Fed intends to keep rates high for longer. Stocks will remain volatile for the next few months due to the uncertainty surrounding the economy.
Let's talk about the fundamentals for the stocks featured.
Brown & Brown, Inc.
BRO sells and markets insurance products and services internationally, including in the United States, Canada and Ireland. It is divided into four segments: Retail; National Programs; Wholesale Brokerage and Services.
BRO announced on May 9, 2023 that it had acquired the assets of Brownlee Agency, Inc. This acquisition will boost BRO’s presence in Georgia. The acquisition will expand BRO's capabilities, adding specialized talents and product offerings in order to meet the demands of existing and new customers.
BRO's trailing-12 month EBIT margin of 26.84%, is 26.1% greater than the industry average of 21.30%. The 7.39% trailing-12 month Return on Total capital is 46.9% greater than the industry average of 5.04%. Its 5.13% Trailing-12-Month Return on Total Assets, is 356.5% greater than the 1.12% industry average.
BRO's total revenue for the first quarter ending March 31, 2023 increased by 23.6% over the prior-year quarter to $1.12 Billion. The company's net income increased by 6.9% to $235.50 millions from the previous quarter. Its adjusted net EPS was $0.84, which represents a 7.7% increase year-over-year.
BRO's revenue and EPS for the quarter ending 30 June 2023 are expected to grow by 15.9% and 18.4% respectively. These figures will be $0.59 and $993.996 million. The company has a history of surprising earnings, exceeding consensus estimates for EPS in three out of the last four quarters. The stock is up 15.1% for the year to date, closing at $65.49 in the last trading session.
BRO's POWR ratings reflect its strong fundamentals. The stock's overall rating is B, which is equivalent to a Buy rating in our proprietary system. The POWR ratings assess stocks based on 118 factors, each of which has its own weighting.
It is ranked second out of 14 stocks within the Insurance-Brokers industry. It also has a B-grade for Growth, Momentum and Sentiment. Also, we have given BRO ratings for Value and Stability. All BRO ratings are available here.
Graco Inc. (GGG)
GGG designs and manufactures systems and equipment that are used to measure, spray, dispense, and control fluid and powder materials. It is divided into three segments: the Industrial segment, the Process segment and the Contractor segment.
GGG's EBIT margin for the 12-month trailing period is 27.56%, which is 185.8% more than the industry average of 9.64%. The 22.44% net income margin for the trailing 12-month period is 249.4% more than the industry average of 6.42%. Its 19.20% Trailing-12-Month Return on Total Assets (ROTA) is 275.3% greater than the industry's average of 5.12%.
GGG's first-quarter net sales ended March 31, 2023 increased 7.2% over the previous year to $529.65 millions. The adjusted net income of the company increased by 27.5% over the past year to $126.60 millions. The adjusted net earnings per share (EPS) increased by 29.8% to $0.74.
GGG's earnings per share (EPS) and revenue are expected to grow 16.2% and 4.8% respectively, to $0.79 and $574.6 million for the quarter ending 30 June 2023. The company has a history of exceeding consensus earnings estimates. In the past year the stock gained 30.9%, closing the last trading day at $78.13.
GGG's POWR Ratings reflect its positive outlook. The stock is rated B overall, which translates to a Buy according to our proprietary rating system.
It is ranked 33rd out of 78 stocks within the A-rated industrial - machinery industry. It is rated B for Momentum. Stability. Sentiment. And Quality. Also, we have given GGG ratings for Value and Growth. All GGG ratings are available here.
Chemed Corporation (CHE)
CHE offers hospice and palliative services through a network consisting of doctors, nurses, social workers and clergy. The majority of its patients are located in the United States. The company is divided into two segments: VITAS, and RotoRooter.
CHE's EBITDA margin for the 12-month trailing period is 17.76%, which is 846.9% more than the industry average of 1.88%. The 1.58x asset turnover ratio for the trailing 12 months is 346.68% higher than industry average 0.35x. The industry average is negative 7.30%. Its trailing 12-month net income margin of 11.07% compares with the negative 7.30%.
CHE's first-quarter service revenues and sales increased by 5.6% over the previous year to $560.16 millions. The adjusted net income of the company increased marginally from year to year, reaching $72.87 millions. The adjusted net EPS for the quarter was $4.82. This represents a 0.6% increase from the previous year's quarter.
CHE's EPS for the quarter ending 30 June 2023 is expected to rise 5.9% and 5.1% year-over-year, to $5.09 million and $562.54 millions, respectively. The company has an impressive track record of earnings surprises, having exceeded consensus estimates for EPS in all four quarters since its founding. In the past nine-month period, the stock gained 13.9% and closed the last trading day at $551.74.
CHE's solid prospects are reflected in its POWR Ratings. Overall, it has a rating of B which is equivalent to a buy. It is ranked #14 out of 75 stocks within the Medical - Service industry.
It is rated B for Sentiment and Quality, as well as Stability. Click here to view the other ratings for CHE, including Growth, Value and Momentum.
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BRO shares traded at $65.16 a share in the morning of Thursday, a decrease of $0.43 (-0.66%). BRO shares have gained 14.81 % year-to-date compared to the S&P 500 benchmark index which has risen 7.73% during the same time period.
Malaika Alphonsus is the author
Malaika's love of writing and her interest in the financial markets led to a career as an investment researcher. She has a degree from the University of California, Berkeley in Economics and Psychology. Her goal is to help investors make informed decisions about their investments.