Consumers are feeling better about the economy this month because of easing inflation and a still-strong labor market, as evident from the preliminary consumer sentiment index surging to 66.4 from 64.9 in January, marking the best reading since January 2021.
However, according to Niall O’Sullivan, Neuberger Berman’s chief investment officer of multi-asset strategies for Europe, the Middle East, and Africa, “inflation is going to be harder to tame.” He added, “Central banks will have to be at it much longer than many people think.”
Moreover, he also believes that it could be years rather than months before inflation is properly curbed, and the Fed is unlikely to cut rates this year.
While according to Dow Jones, economists are expecting a 0.4% increase in CPI in January, translating into 6.2% annual growth, there are some indications that the figure could be higher.
Given the lingering macroeconomic uncertainties, investing in large-cap stocks could be safe because these companies are more established and usually survive market disruptions better. Hence, fundamentally sound large-cap stocks, Visa Inc. (V), Eli Lilly and Company (LLY), and Merck & Co., Inc. (MRK), could be perfect buys in 2023.
Visa Inc. (V)
V is a leading payments technology company that facilitates digital payments among consumers, merchants, financial institutions, strategic partners, businesses, and government entities. In addition, it provides card products, platforms, and value-added services.
The company offers its products and services under Visa, Visa Electron, Interlink, VPAY, and PLUS brands. V has a market capitalization of $481.10 billion.
V has paid dividends for 14 consecutive years. Over the last three years, V’s dividend payouts have grown at a 14.5% CAGR. While V’s four-year average dividend yield is 0.62%, its current dividend translates to a 0.79% yield.
V’s net revenues came in at $7.94 billion for the first quarter that ended December 31, 2022, up 12.4% year-over-year. Its operating income came in at $5.10 billion, up 6.6% year-over-year, while its non-GAAP net income increased 17.4% year-over-year to $4.58 billion. The company’s non-GAAP EPS came in at $2.18, up 20.4% year-over-year.
V’s revenue is expected to increase by 10.4% year-over-year to $32.35 billion in 2023. Its EPS is expected to grow 12.5% year-over-year to $8.44 in 2023. It surpassed EPS estimates in all four trailing quarters. Over the past nine months, the stock has gained 14.9% to close the last trading session at $228.88.
V’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
V has an A grade for Sentiment and Quality and a B for Stability. Within the Consumer Financial Services industry, it is ranked #4 out of 48 stocks. Click here to access the additional POWR Ratings for V (Value, Momentum, and Growth).
Eli Lilly and Company (LLY)
LLY discovers, develops, and markets human pharmaceuticals worldwide. The company provides diabetes, oncology, neuroscience, and other products. LLY has a market capitalization of $332.94 billion.
On February 13, 2023, LLY will provide its active pharmaceutical ingredient (API) for human insulin at a lower price to International Agencies (Bangladesh) Ltd. (IABL) in an effort to improve patient access and affordability for high-quality insulin for almost one million diabetics in Bangladesh by 2030.
On January 28, 2023, Loxo@Lilly, LLY’s oncology unit, announced that the FDA had approved JaypircaTM (pirtobrutinib, 100 mg & 50 mg tablets) for the treatment of adult patients with relapsed or refractory mantle cell lymphoma (MCL) after at least two lines of systemic therapy, including a Bruton’s tyrosine kinase (BTK) inhibitor. This approval should be beneficial for the company.
LLY has paid dividends for 33 consecutive years. Over the last three years, LLY’s dividend payouts have grown at a 15% CAGR. LLY’s four-year average dividend yield is 1.63%, and its current dividend translates to a 1.31% yield.
LLY’s trulicity revenues increased 2.8% year-over-year to $1.94 billion for the fourth quarter ended December 31, 2022. Its net income increased 12.3% year-over-year to $1.94 billion, and its EPS came in at $2.14, up 12.6% year-over-year.
Street expects LLY’s revenue to increase 7.4% year-over-year to $30.65 billion in 2023. Its EPS is expected to increase 7.4% year-over-year to $8.53. It surpassed EPS estimates in three out of the four trailing quarters. Over the past year, the stock has gained 48.6% to close the last trading session at $350.40.
It’s no surprise that LLY has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B for Stability and Quality. It is ranked #37 out of 172 stocks in the Medical – Pharmaceuticals industry.
Beyond what is stated above, we’ve also rated LLY for Value, Growth, Momentum, and Sentiment. Get all LLY ratings here.
Merck & Co., Inc. (MRK)
MRK is a global provider of health solutions through its prescription medicines, vaccines, biological therapies, and animal health products. The company operates through two segments: Pharmaceutical and Animal Health. It offers its products to drug wholesalers, retailers, hospitals, government agencies, and other healthcare providers. MRK has a market capitalization of $277.75 billion.
On January 26, 2023, Merck Animal Health, a division of MRK, announced the approval of an additional indication for BRAVECTO® Chews for Dogs by the U.S. Food and Drug Administration. It cures and manages Asian longhorned ticks, an invasive Ixodid species found in more than one-third of the U.S., and should be in demand.
MRK has paid dividends for 12 consecutive years. Over the past three years, MRK’s dividend payouts have grown at 9.1% CAGR. While MRK’s four-year average dividend yield is 2.95%, its current dividend translates to a 2.69% yield.
MRK’s total sales came in at $13.83 billion for the fourth quarter ended December 31, 2022, up 2.3% year-over-year. Its Pharmaceutical segment revenue increased marginally year-over-year to $12.18 billion.
Street expects MRK’s revenue to increase 6% year-over-year to $61.72 billion in 2024. Its EPS is expected to increase 24.7% year-over-year to $8.58 in 2024. It surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 42.9% to close the last trading session at $109.55.
MRK’s overall A rating equates to a Strong Buy in our POWR Ratings system. It has a B grade for Value, Stability, and Quality. The stock is ranked #18 in the same industry.
We’ve also rated MRK for Momentum, Sentiment, and Growth. Get all MRK ratings here.
What To Do Next?
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V shares were unchanged in premarket trading Tuesday. Year-to-date, V has gained 10.38%, versus a 7.95% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.3 Large-Cap Stocks to Buy for the Perfect Portfolio in 2023 appeared first on StockNews.com