Inflation rose 8.6% in May, the highest in more than 40 years. Consequently, the Federal Reserve recently hiked its benchmark interest by 75 basis points, the largest increase since 1994. Moreover, according to economists polled by Reuters, the central bank might undertake a 75 basis-point hike in July and a 50 basis-point increase in September.
The aggressive policy tightening by the Fed to combat high inflation led to brutal market turmoil and added fuel to existing recession fears. Recently, Goldman Sachs doubled the odds of a U.S. recession from 15% to 30%. Also, analysts at Citigroup Inc. (C) and Deutsche Bank (DB) predicted a 50% chance of a coming recession.
However, certain stocks are defying the market downtrend. Their solid fundamentals and healthy cash flows should help them stay afloat even if the economy witnesses a recession.
Adams Resource & Energy, Inc. (AE), Caleres, Inc. (CAL), and Photronics, Inc. (PLAB) are three such stocks that are well-positioned to survive the market downturn and deliver steady returns. These stocks are rated Strong Buy in our proprietary POWR Ratings system.
Adams Resource & Energy, Inc. (AE)
AE engages in the marketing, transportation, and storage of various crude oil and natural gas basins in the United States. The company operates through three 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.
In the fiscal 2022 first quarter ended March 31, 2022, AE's revenues increased 137.9% year-over-year to $774.25 million. Its operating earnings grew 111.6% year-over-year to $8.15 million. The company's net earnings and earnings per share came in at $6.09 million and $1.39, registering increases of 116.9% and 110.6%, respectively, from the prior-year period.
The $764.88 million consensus revenue estimate for the fiscal year 2022, ending December 2022, represents a 51.6% improvement from the last year. Analysts expect AE’s EPS for the current year to increase 28.7% year-over-year to $3.54.
The stock has increased 14.3% over the six months and 12.6% year-to-date to close the last trading session at $31.31.
AE's POWR Ratings reflect this promising outlook. The stock has an overall grade of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
AE has a grade of A for Value and Momentum. It has a B grade for Sentiment and Quality. Within the B-rated Energy - Oil & Gas industry, it is ranked #2 of 99 stocks.
Click here to see additional POWR Ratings (Stability and Growth) for AE.
Caleres, Inc. (CAL)
CAL is a leading retailer and wholesaler of footwear in the United States, Canada, China, and Guam. The company operates through two segments: Famous Footwear and Brand Portfolio. It offers licensed, branded, and private-label athletic, casual, and dress footwear products to women, men, and children.
During the first quarter, CAL repurchased 701,000 shares of common stock, representing approximately 1.9% of shares outstanding, by utilizing its operating cash generation. At quarter-end, roughly 8.3 million shares are available in the current repurchase authorization.
“We remain optimistic about the company's long-term prospects and potential for strong cash flows. We continue to view our stock as an attractive investment option and buying back shares as a prudent use of cash and expect to make ongoing purchases under the existing authorization during the remainder of 2022,” said Ken Hannah, Senior Vice President and CEO.
CAL's net sales increased 15.1% year-over-year to $735.12 million, and its adjusted gross profit grew 19% year-over-year to $326.99 million in the fiscal 2023 first quarter ended April 30, 2022. Its adjusted operating earnings rose 111.1% year-over-year to $66.20 million.
In addition, the company’s adjusted net earnings and earnings per common share attributable to CAL shareholders came in at $49.99 million and $1.32, up 116.8% and 120% year-over-year, respectively.
Analysts expect CAL's revenue for the fiscal 2023 second quarter (ending July 2022) to come in at $735.56 million, representing an 8.9% rise from the prior-year period. The street expects the company's EPS for the ongoing quarter to come in at $1.32, representing a growth of 11.2% year-over-year.
The company has surpassed the consensus revenue estimates in three of the trailing four quarters, and the consensus EPS estimates in each of the trailing four quarters, which is impressive.
CAL’s shares have gained 18.9% over the past month and 17.6% year-to-date to close the last trading session at $26.67.
CAL's POWR Ratings reflect a strong outlook. The stock has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system.
It has a B grade for Sentiment, Value, Quality, and Growth. It is ranked #3 of 68 stocks in the B-rated Fashion & Luxury industry.
Click here to see CAL's POWR Ratings for Stability and Momentum.
Photronics, Inc. (PLAB)
PLAB manufactures, markets, and sells photomask products and services in the U.S., Taiwan, Korea, Europe, China, and internationally. The company sells its products to semiconductor, FPD, and electronics manufacturers through its sales personnel and customer service representatives.
In the fiscal 2022 second quarter ended May 1, 2022, PLAB's revenue grew 28% year-over-year to $204.51 million, and its gross profit improved 85.8% from the year-ago value to $72.93 million. The company's operating income rose 150.4% year-over-year to $52.11 million. Its net income and earnings per share stood at $45.44 million and $0.49, registering a growth of 178.4% and 188.2%, respectively, year-over-year.
The consensus revenue estimate of $214.53 million for the fiscal 2022 fourth quarter, ending October 2022, represents an increase of 18.3% from the prior-year period. The $0.53 consensus EPS estimate for the next quarter indicates a 20% year-over-year rise. Also, analysts expect its EPS to grow at a 10% CAGR over the next five years.
Furthermore, it has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 23.9% over the past month and 43.7% over the past year to close the last trading session at $19.08.
PLAB's POWR Ratings reflect this strong outlook. It has an overall grade of A, equating to a Strong Buy in our proprietary rating system.
PLAB has a grade of A for Sentiment and B for Growth, Value, and Quality. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked #3 of 96 stocks.
To see additional POWR Ratings (Momentum and Stability) for PLAB, click here.
AE shares were trading at $32.51 per share on Friday morning, up $1.20 (+3.83%). Year-to-date, AE has gained 18.51%, versus a -18.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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