Worries over the Federal Reserve’s aggressive monetary policy tightening have driven an intense sell-off in the stock market of late. As a result, many quality stocks have fallen into oversold territory. Given this backdrop, we think it might be wise to scoop up the beaten-down stocks of fundamentally sound companies Zoetis (ZTS), O’Reilly Automotive (ORLY), and Endeavor Group (EDR) before they rebound. Let’s discuss.
The stock market has faced intense selling pressure of late on investor angst over the Fed’s aggressive monetary policy tightening to tame surging inflation, which might push the economy into recession. The overall market sentiment has been bearish since the beginning of the year due to the multi-decade high inflation, the war between Ukraine and Russia, and high energy and commodity prices.
Many high-quality stocks have borne the brunt of the recent sell-off and are now trading at deep discounts. Quilter Cheviot investment manager Poppy Fox said, “There may be some sound logic in buying shares of companies after their price takes a tumble, particularly if you continue to believe in the investment case.”
Given this backdrop, we think it might be wise to add battered stocks Zoetis Inc. (ZTS), O’Reilly Automotive, Inc. (ORLY), and Endeavor Group Holdings, Inc. (EDR) to one’s portfolio. Due to these company’s solid fundamentals and growth prospects, their stocks are expected to rebound strongly once the market stabilizes.
Zoetis Inc. (ZTS)
ZTS in Parsippany, NJ, discovers, develops, manufactures, and commercializes animal health medicines, vaccines, and diagnostic products. The company offers vaccines and pharmaceutical products that comprise pain and sedation, antiemetic, reproductive, oncology products, and dermatology products.
On Dec. 7, 2021, ZTS announced that its board of directors had approved a $ 3.5 billion share repurchase program over a multi-year period as part of its capital allocation plans. Executive VP and CFO Wetteny Joseph said, “Our financial performance has remained solid this year and allows us to continue making meaningful investments in our business while returning capital to our shareholders.”
ZTS ‘revenue increased 6.1% year-over-year to $ 1.98 billion for the first quarter, ended March 31, 2022. The company’s net income increased 6.4% year-over-year to $ 595 million. Also, its EPS came in at $ 1.26, representing an increase of 7.6% year-over-year.
Analysts expect ZTS ‘EPS for its fiscal 2023 to increase 13.5% year-over-year to $ 5.80. Its revenue for the quarter ending Sept. 30, 2022, is expected to increase 11% year-over-year to $ 2.14 billion. It surpassed the Street EPS estimates in each of the trailing four quarters. The stock has declined 33.1% in price year-to-date to close the last trading session at $ 163.08.
ZTS ‘POWR Ratings reflect solid prospects. According to our proprietary rating system, it has an overall rating of B, which translates to a Buy. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has an A grade for Quality and a B grade for Stability. It is ranked # 16 out of 166 stocks in the Medical – Pharmaceuticals industry. Click here to see the other ratings of ZTS for Growth, Value, Momentum, and Sentiment.
Click here to checkout our Healthcare Sector Report for 2022
O’Reilly Automotive, Inc. (ORLY)
ORLY in Springfield, Mo., is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories. The company sells its products to both DIY and professional service provider customers. Its product line includes new and remanufactured complex automotive parts, such as alternators, starters, fuel pumps, and water pumps.
For its fiscal first quarter, ended March 31, 2022, ORLY’s sales increased 6.6% year-over-year to $ 3.29 billion. The company’s gross profit increased 4.1% year-over-year to $ 1.70 billion. Also, its EPS came in at $ 7.17, representing a 1.5% increase year-over-year. In addition, its EBITDAR has increased 6.7% year-over-year to $ 3.63 billion.
For its fiscal 2023, ORLY’s EPS is expected to increase 11.6% year-over-year to $ 36.79. Its revenue for the quarter ending June 30, 2022, is expected to increase 14.9% year-over-year to $ 3.71 billion. It surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has declined 13.2% over the past month to close the last trading session at $ 622.34.
ORLY’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to a Buy in our proprietary rating system.
ORLY has an A grade for Quality and a B grade for Sentiment. Within the Auto Parts industry, it is ranked # 14 out of 69 stocks. To see the other ratings of ORLY for Growth, Value, Momentum, and Stability, click here.
Endeavor Group Holdings, Inc. (EDR)
EDR operates as an entertainment, sports, and content company in the United States, the United Kingdom, and internationally. It operates through the Owned Sports Properties; Events, Experiences & Rights; and Representation segments. EDR is headquartered in Beverly Hills, Calif.
On Dec. 8, 2021, EDR announced the creation of Diamond Baseball Holdings, which is dedicated to supporting, promoting, and enhancing the sport of baseball through professional management, best practices, innovation, and investment. EDR President Mark Shapiro said, “Opportunities to move into an ownership position of a sport so steeped in history are increasingly rare, and we are confident this will drive meaningful growth in the Owned Sports Properties segment of our company.”
EDR’s revenue increased 37.7% year-over-year to $ 1.47 billion for the first quarter, ended March 31, 2022. The company’s adjusted net profit increased 122.3% year-over-year to $ 129.21 million. Also, its adjusted EBITDA increased 57.6% year-over-year to $ 314.44 million.
Analysts expect EDR’s EPS for its fiscal 2022 to increase 174.5% year-over-year to $ 1.40. Its revenue for its fiscal 2023 is expected to increase 9.2% year-over-year to $ 5.79 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has declined 47.4% year-to-date to close the last trading session at $ 18.34.
EDR’s POWR Ratings reflect this promising outlook. It has an A grade for Growth and a B grade for Sentiment.
It is ranked first out of 16 stocks in the Entertainment – Sports & Theme Parks industry. Click here to see the other ratings of EDR for Value, Momentum, Stability, and Quality.
ZTS shares were unchanged in premarket trading Friday. Year-to-date, ZTS has declined -32.95%, versus a -15.98% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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