For Immediate Release
Chicago, IL – June 27, 2022 – Stocks in this week’s article areLouisiana-Pacific Corp. LPX, The Coca-Cola Co. KO, Qualcomm Inc. QCOM, Matson, Inc. MATX and Dillard's, Inc. DDS.
Bet on 5 Stocks with High ROE to Trounce Recession Fears
With the U.S. consumer price index rising 8.6% in May – the fastest rise since December 1981 – the odds of a recession later in 2022 have increased significantly, triggering intense volatility in the equity markets. As the high inflationary pressure refuses to abate, the Fed is continuing with its aggressive rate hike policy and raised the interest rate for the federal funds by 75 basis points to 1.50-1.75%. The Fed aims to enforce similar increases in the remainder of the year to restore price stability.
The central bank has also offered a broad outline of its reduction in asset holdings for monetary tightening. The Fed intends to reduce Treasury holdings and mortgage-backed securities by $30 billion and $17.5 billion, respectively, from June and extend the tallies to $65 billion and $35 billion after three months. Despite these initiatives, experts remain anxious about high inflation data and aim to look for cues for probable recession from the upcoming new home sales data and the final University of Michigan consumer sentiment report for June.
As investors employ a wait-and-see approach in a classic example of "backing and filling" in the market, they can benefit from 'cash cow' stocks that garner higher returns. However, identifying cash-rich stocks alone does not make for a solid investment proposition unless it is backed by attractive efficiency ratios like return on equity (ROE).
A high ROE ensures that the company is reinvesting cash at a high rate of return. Louisiana-Pacific Corp., The Coca-Cola Co., Qualcomm Inc., Matson, Inc. and Dillard's, Inc. are some of the stocks with high ROE to profit.
ROE: A Key Metric
ROE = Net Income/Shareholders' Equity
ROE helps investors distinguish profit-generating companies from profit burners and is useful in determining the financial health of a company. In other words, this financial metric enables investors to identify companies that diligently deploy cash for higher returns.
Moreover, ROE is often used to compare the profitability of a company with other firms in the industry — the higher, the better. It measures how well a company is multiplying its profits without investing new equity capital and portrays management's efficiency in rewarding shareholders with attractive risk-adjusted returns.
Here are five of the 16 stocks that qualified the screen:
Louisiana-Pacific Corp.: Headquartered in Nashville, TN, Louisiana-Pacific is a leading manufacturer of sustainable, quality engineered wood building materials, structural framing products and exterior siding for use in residential, industrial and light commercial construction. The company's products are used primarily in new home construction, repair and remodeling and outdoor structures.
Louisiana-Pacific delivered a trailing four-quarter earnings surprise of 14%, on average. It has a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.
The Coca-Cola Co.: The Atlanta, GA-based Coca-Cola Company offers more than 4,700 beverage products (and more than 500 brands), spanning from sodas (or sparkling beverages) to energy drinks. In addition to its primary sparkling soft drinks (carbonated), the company sells a large range of still (non-carbonated) beverages, including water, enhanced water, juices and juice drinks, sports drinks, ready-to-drink teas and coffees and dairy and energy drinks.
The company has a long-term earnings growth expectation of 7% and delivered a trailing four-quarter earnings surprise of 13.6%, on average. Coca-Cola Company carries a Zacks Rank #2.
Qualcomm Inc.: Headquartered in San Diego, CA, Qualcomm designs, manufactures and markets digital wireless telecom products and services based on the Code Division Multiple Access (CDMA) technology. The products include CDMA-based integrated circuits (ICs) and system software for wireless voice and data communications as well as global positioning system products. The company delivered a trailing four-quarter earnings surprise of 11.4%, on average.
Qualcomm carries a Zacks Rank #2. The company has a long-term earnings growth expectation of 16.3%. Qualcomm is well-positioned to benefit from solid 5G traction with greater visibility and a diversified revenue stream to meet its long-term revenue targets.
Matson, Inc.: Headquartered in Honolulu, Hawaii, Matson offers ocean transportation and logistics services to the U.S. military, freight forwarders, retailers, consumer goods, automobile manufacturers and other customers. The company provides a vital lifeline to the domestic non-contiguous economies of Hawaii, Alaska and Guam and other island economies in Micronesia.
This Zacks #2 Ranked company delivered a trailing four-quarter earnings surprise of 2.1%, on average. Matson's fleet of owned and chartered vessels includes containerships, combination containers and custom-designed barges.
Dillard's, Inc.: Founded in 1938, Dillard's is a large departmental store chain featuring fashion apparel and home furnishings. Its merchandise mix consists of both branded and private-label items. The company's strategy is to offer more fashion-forward and trendy products to attract customers.
Dillard's is benefiting from continued momentum in consumer demand and better inventory management. The company has a long-term earnings growth expectation of 14.6% and delivered a trailing four-quarter earnings surprise of 224.1%, on average. Dillard's sports a Zacks Rank #1.
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For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1943387/bet-on-5-stocks-with-high-roe-to-trounce-recession-fears
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QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
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Matson, Inc. (MATX) : Free Stock Analysis Report
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