As inflation is still far from the Fed’s target, interest rates are expected to remain elevated this year. The interest rate hikes are expected to keep the stock market under pressure.
Amid uncertainties, large-cap stocks are considered safer options due to their ability to generate stable cash flows and lower volatility, irrespective of the economic condition. I think large-cap stocks, AbbVie Inc. (ABBV), The Coca-Cola Company (KO), and Oracle Corporation (ORCL), look poised for a bull run despite the lingering macro issues.
The recent Fed’s minutes indicated that there are signs inflation is coming down, but not enough to counter the need for more interest rate increases. Moreover, Bank of America and Goldman Sachs anticipate that the Fed will raise interest rates further this year amid persistent inflation and a resilient labor market. The threat of a U.S. recession remains alive in 2023.
Investing in large-cap stocks can help hedge some of the market risks. So, let’s delve deeper into these stocks mentioned above:
AbbVie Inc. (ABBV)
Biopharmaceutical company ABBV conducts research, development, manufacturing, commercializing, and selling medicines worldwide. The company’s products are segmented into Immunology; Oncology; Anaesthetics; Neuroscience; Eyecare; Women’s Health; and Others. ABBV has a market capitalization of $272.98 billion.
On February 23, 2023, ABBV and Capsida Biotherapeutics Inc. (“Capsida”) announced an expanded strategic collaboration to explore genetic therapies for rare eye illnesses. Capsida’s innovative adeno-associated virus (AAV) engineering platform and manufacturing ability should boost ABBV’s capabilities.
ABBV’s gross profit margin of 71.53% is 28.1% higher than the 55.84% industry average, while its EBITDA margin of 53.55% is substantially higher than the industry average of 3.73%.
ABBV has paid dividends for nine consecutive years. Over the last three years, ABBV’s dividend payouts have grown at 9.2% CAGR. While ABBV’s four-year average dividend yield is 4.59%, its current dividend translates to a 3.84% yield.
ABBV’s net revenues came in at $15.12 billion for the fourth quarter that ended December 31, 2022, up marginally year-over-year. Its operating earnings increased 8.4% year-over-year to $5.50 billion. In addition, its immunology revenue increased 17.5% year-over-year to $7.93 billion.
Street expects ABBV’s EPS to increase marginally year-over-year to $11.16 in 2024. It surpassed EPS estimates in all four trailing quarters. Over the past six months, the stock has gained 13.2% to close the last trading session at $154.28.
ABBV’s POWR Ratings reflect this promising outlook. The stock has an overall rating 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.
ABBV has an A grade for Quality and a B for Stability and Value. Within the Medical – Pharmaceuticals industry, it is ranked #13 out of 174 stocks. Click here to access the additional POWR Ratings for ABBV (Growth, Momentum, and Sentiment).
The Coca-Cola Company (KO)
KO is a beverage company that operates through segments, including Europe, the Middle East, and Africa; Latin America; North America; Asia Pacific; Global Ventures; and Bottling Investments. It owns and markets five non-alcoholic sparkling soft drink brands, and its products are sold in more than 200 countries. KO has a market capitalization of $258.82 billion.
KO’s trailing-12-month gross profit and EBITDA margins of 58.14% and 31.42% are 83.9% and 174.2% higher than the industry averages of 31.61% and 11.46%.
KO has paid dividends for 60 consecutive years. Over the last three years, KO’s dividend payouts have grown at a 3.2% CAGR. While KO’s four-year average dividend yield is 3.05%, its current dividend translates to a 3.08% yield.
KO’s net operating revenue increased 7% year-over-year to $10.13 billion in the fourth quarter that ended December 31, 2022. Its gross profit grew 4.4% from the year-ago value to $5.16 billion, while its operating income increased 24.1% year-over-year to $2.08 billion.
KO’s revenue is expected to increase 4.5% year-over-year to $44.97 billion in 2023. Its EPS is expected to grow 4.8% year-over-year to $2.6 in 2023. It surpassed EPS estimates in three of four trailing quarters. KO’s shares have lost marginally intraday to close the last trading session at $59.82.
KO’s robust prospects are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system. It has an A grade for Sentiment and a B for Stability and Quality.
Within the B-rated Beverages industry, it is ranked #17 out of 37 stocks. To access KO’s ratings for Growth, Value, and Momentum, click here.
Oracle Corporation (ORCL)
ORCL provides products and services that address all aspects of corporate IT environments, including applications, platforms, and infrastructure worldwide. The company operates through cloud services and license support; cloud license; on-premises license; hardware; and services segments. ORCL has a market capitalization of $237.16 billion.
On February 2, 2023, ORCL announced that Mizuho Bank, Ltd., one of Japan’s largest financial services organizations and the integrated retail and corporate banking unit of Mizuho Financial Group, Inc. (MFG), is modernizing its legacy banking system for international operations by integrating ORCL’s banking solutions to support critical functions. This reflects ORCL’s reach and solid industry position.
ORCL’s trailing-12-month gross profit and EBITDA margins of 76.10% and 39.88% are 54.7% and 253.4% higher than the industry averages of 49.19% and 11.28%.
ORCL has paid dividends for eight consecutive years. Over the last three years, ORCL’s dividend payouts have grown at a 10.1% CAGR. While ORCL’s four-year average dividend yield is 1.59%, its current dividend translates to a 1.46% yield.
ORCL’s total revenue increased 18.5% year-over-year to $12.28 billion for the second quarter that ended November 30, 2022. Its non-GAAP operating income came in at $5.09 billion, up 4.8% year-over-year. The company’s net income came in at $1.74 billion compared to a net loss of $1.25 billion in the previous-year quarter. Its non-GAAP EPS came in at $1.21.
Analysts expect ORCL’s revenue to increase 17.6% year-over-year to $49.90 billion in 2023. Its EPS is estimated to increase marginally year-over-year to $4.91 in 2023. Over the past nine months, the stock has gained 20.9% to close the last trading session at $87.96.
It’s no surprise that ORCL has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Stability and Sentiment. It is ranked #29 out of 138 stocks in the Software - Application industry.
Beyond what is stated above, we’ve also rated ORCL for Value, Growth, Momentum, and Quality. Get all ORCL ratings here.
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ABBV shares were trading at $153.46 per share on Tuesday morning, down $0.82 (-0.53%). Year-to-date, ABBV has declined -4.14%, versus a 3.92% 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.
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