Soaring anxieties over an impending recession on the backs of interest rate hikes by the Fed are not likely to ease anytime soon. Amid such volatilities, beginners with little money might add quality stocks Verizon Communications (VZ), Celestica (CLS), and Berry Corp. (BRY) to their portfolio now. Read on….
The Fed’s hawkish comments have brought in a fresh bout of anxiety among investors, further aggravated by recessionary fears. Therefore, amid such uncertainties, let us take a look at stocks Verizon Communications Inc. (VZ), Celestica Inc. (CLS), and Berry Corporation (BRY), which might be ideal buys for beginners with little money, for reasons mentioned throughout the article.
Inpouring macroeconomic data and the Fed’s hawkish statements dashed investors’ hopes about a pivot on interest rates this year. In addition, experts anticipated that persistent rate hikes could tip the economy into a recession. This has added to the already existing anxieties.
“Bond King” Jeffrey Gundlach warns of an impending recession for the U.S. economy, and investors need to prepare for it regardless of its severity. In addition, TD Securities strategist Priya Misra warns, “I think the Fed has no choice but to engineer a hard landing. I think the Fed is going to feel that pressure to continue to hike.”
Investors are increasingly turning bearish. According to an American Association of Individual Investors (AAII) survey, for the week that ended March 1, 2023, 44.8% of investors have become bearish, indicating an unusually high level.
Against this backdrop, fundamentally sound value stocks VZ, CLS, and BRY might be solid buys for beginners now with little money.
Verizon Communications Inc. (VZ)
VZ offers communications, technology, information, and entertainment products and services worldwide to consumers, businesses, and governmental entities. It operates through two segments: Consumer and Business.
On March 2, VZ revealed an Edge Discovery & Quality of Service (QoS) API proof of concept with Amazon Web Services, Inc. (AWS) that allows customers to combine Dynamic Quality of Service (QoS) from VZ with AWS edge services. This combination should deliver the ability for customers to deploy low latency, high bandwidth applications across various emerging use cases.
On February 12, 2023, VZ announced that its newest data plan, 50 Mbps Verizon Fios service, would be available in Boston to assist small business owners in the Boston area in gaining high-speed internet access. This is expected to enhance the company’s income streams.
On March 2, VZ announced a quarterly dividend of 65.25 cents per outstanding share, payable to its shareholders on May 1, 2023. The company made $10.80 billion in dividend payments in 2022. This reflects the cash generation ability of the company.
In terms of forward non-GAAP P/E, VZ is trading at 8.16x, 49.4% lower than the industry average of 16.12x. Its forward EV/EBITDA multiple of 7.13 is 16.7% lower than the industry average of 8.56x.
VZ’s trailing-12-month net income margin of 15.53% is 359.1% higher than the industry average of 3.38%. Also, its trailing-12-month ROCE of 24.58% is 578.2% higher than the 3.62% industry average.
For the fiscal fourth quarter that ended December 31, 2022, VZ’s total operating revenues increased 3.5% year-over-year to $35.25 billion. The company’s wireless equipment revenue grew 4.1% from the prior-year period to $7.63 billion. Net income rose 41.4% year-over-year to $6.70 billion, while its adjusted EPS stood at $1.19 for the same quarter.
Analysts expect VZ’s revenue for the fiscal first quarter (ending March 2023) to increase 1.2% year-over-year to $33.95 billion. For the same quarter, EPS is expected to come in at $1.19. The company shows an impressive earnings surprise history, surpassing the consensus revenue estimates in each of the trailing four quarters.
Over the past three months, the stock has gained 3.2% to close the last trading session at $38.26.
VZ’s POWR Ratings reflect this positive outlook. VZ has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The company has a B grade for Value, Quality, and Stability. Within the Telecom – Domestic industry, it is ranked #4 among 20 stocks.
Click here to see the additional POWR Ratings of VZ for Growth, Momentum, and Sentiment.
Celestica Inc. (CLS)
CLS operates as a hardware platform and supply chain solutions provider. It operates through two segments: Advanced Technology Solutions and Connectivity & Cloud Solutions. The company is headquartered in Toronto, Canada.
In terms of forward non-GAAP P/E, CLS is trading at 6.53x, 68.1% lower than the industry average of 20.47x. Its forward EV/EBITDA multiple of 4.08 is 69.1% lower than the industry average of 13.21.
CLS’ trailing-12-month ROTC margin of 7.14% is 122.7% higher than the industry average of 3.21%. Also, its trailing-12-month ROCE of 9.27% is 94.9% higher than the 4.75% industry average.
In the fiscal fourth quarter that ended December 31, 2022, CLS’ IFRS revenue increased 35.1% year-over-year to $2.04 billion. For the same quarter, non-IFRS adjusted net earnings came in at $68.40 million, while its non-IFRS adjusted earnings per share stood at $0.56, up 23.9% and 27.3% from their year-ago values, respectively.
For the fiscal first quarter ending March 2023, analysts expect CLS’ revenue to come in at $1.81 billion, representing an increase of 15.8% year-over-year. For the same quarter, the consensus EPS estimate of $0.45 indicates a 16.3% year-over-year increase. The company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.
The stock has gained 34% over the past six months and 21.8% over the past three months to close its last trading session at $13.20.
It is no surprise that CLS has an overall A rating, which translates to a Strong Buy in our POWR Ratings system.
CLS is also rated an A for Growth, Value, and Momentum and a B for Sentiment. Within the Technology – Services industry, it is ranked first out of 80 stocks.
In addition to the POWR Rating grades we’ve stated above, one can see the additional CLS grades for Quality and Stability here.
Berry Corporation (BRY)
BRY is an independent upstream energy business focused on developing and producing oil reserves in the western United States. Its segments include Development and Production; and Well Servicing and Abandonment.
In February, BRY announced dividends totaling $0.50 per share on the company’s outstanding common stock, comprising a fixed dividend of $0.06 per share and a variable dividend of $0.44 per share. The dividends are payable to shareholders on March 23, 2023. This reflects on BRY’s cash generation ability.
Beginning with the first quarter 2023 results, in accordance with the updated shareholder return model, BRY plans to allocate adjusted free cash flow as 80%, primarily to share repurchases and debt repurchases, and 20% to variable dividends. In addition, the board also increased the authorization for share repurchases to $200 million.
In terms of forward non-GAAP P/E, BRY is trading at 7.36x, 15.9% lower than the industry average of 8.75x. Its forward EV/EBITDA multiple of 3.24 is 40.8% lower than the industry average of 5.47.
BRY’s trailing-12-month levered FCF margin of 15.41% is 128.6% higher than the industry average of 6.74%. Also, its trailing-12-month ROCE of 33.51% is 49.2% higher than the 22.46% industry average.
For the fiscal year that ended December 31, 2022, BRY’s total revenues increased 68.5% year-over-year to $918.34 million, while its adjusted EBITDA increased 79.1% to $379.95 million. The company’s adjusted net income came in at $226.46 million or $2.74 per share, compared to $10.72 million or $0.13 per share during the previous fiscal year that ended December 31, 2021.
Analysts expect BRY’s revenue to increase 117% year-over-year to $204.20 million for the fiscal first quarter ending March 2023. The company’s EPS for the same quarter is expected to be $0.24. Moreover, it surpassed earning consensus in three out of the four trailing quarters, which is impressive.
Shares of BRY have gained 6.7% over the past month and 20.4% over the past three months to close the last trading session at $9.72.
BRY’s POWR Ratings reflect its solid prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
The stock has an A grade for Value and Momentum and a B for Growth. Within the B-rated Energy – Oil & Gas industry, it is ranked #18 of 91 stocks.
To see additional POWR Ratings for Growth, Stability, Quality, and Sentiment for BRY, click here.
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VZ shares rose $0.11 (+0.29%) in premarket trading Monday. Year-to-date, VZ has declined -1.37%, versus a 5.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi’s interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master’s degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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