The speculative rally earlier this year, sparked by hopes for a Fed turnaround, seems to have hit a wall. Analysts warn of an impending economic downturn. As such, investors could consider buying the fundamentally strong stocks of Honda Motor (HMC), Nokia (NOK) and Genie Energy (GNE) for potential gains. Read more….
Markets have been very volatile lately amid fears that sticky US inflation raises the prospect of more Fed rate hikes. Considering this situation, Honda Motor Co., Ltd. (HMC), Nokia Oyj (NOK) and Genie Energy Ltd. (GNE) could help investors achieve significant returns on their investments. Let’s take a closer look to better understand each of these resources.
Investor optimism increased in early 2023 amid speculation that high inflation was a thing of the past and that the Federal Reserve would soon back off its aggressive rate hikes. However, last month the market struggled to expand after January’s momentum after the central bank was expected to continue to raise interest rates.
Looking at the personal consumption expenditure (PCE) report that shows inflation higher than expected in JanuaryThe Fed appears to be far from its inflation target.
As stocks fall amid renewed fears of inflation, Wall Street analysts warn that the stock market’s euphoric rally was nothing more than a trick of the head.
Morgan Stanley (SM), strategist Michael Wilson, believes that the hurdles for US stocks will deepen in March, with stocks under pressure from falling earnings and high valuations. The strategist expects stock indices to fall in the spring, forecasting that The S&P 500 would drop as much as 24% to 3,000 points in the first half of this year.
Given the likelihood of a downturn in the coming months, HMC, NOK and GNE, with strong fundamentals and solid growth prospects, could be solid additions to the portfolio.
Honda Motor Co., Ltd. (HMC)
Headquartered in Tokyo, Japan, HMC manufactures and sells motorcycles, cars and energy products. It also sells spare parts and provides after-sales services directly through retail dealers, independent distributors and licensees. The company operates in four business segments: Motorcycle; Car; Financial services; and creating life.
On January 13, LG Energy Solution and HMC entered into a JV agreement for the production of lithium-ion batteries for electric vehicles. The plant is expected to have an annual production capacity of around 40 GWh. All batteries produced by the new JV would be supplied exclusively to HMC’s North American factories to power electric vehicles. This strategic alliance is expected to generate significant revenue in the coming years.
The two companies recently held the official groundbreaking ceremony for the electric vehicle battery joint venture in Fayette County, Ohio.
In the fiscal third quarter ending December 31, 2022, HMC’s sales revenue increased 20.3% year-on-year to ¥4.44 trillion (US$32.62 billion). His Operating profit increased 22.2% year-on-year to 280.40 billion yen ($2.06 billion), while its profit for the year attributable to the owners of the parent company was 244.60 billion yen ($1.80 billion), which means an increase of 26.8% compared to the previous year.
HMC’s 0.60x EV/sales ahead is 49.1% lower than the industry average of 1.18x. Its 7.44x forward EV/EBITDA is 25% lower than the industry average of 9.91x. In addition, its Price/Sales forward multiplier of 0.35 is comparable to the industry average of 0.93.
For the fourth quarter (ending March 31, 2023), HMC revenue is expected to grow 11.3% year-on-year to $33.36 billion. Its EPS is expected to grow by 13.2% annually over the next five years. It has outperformed consensus estimates of revenue in three of the last four quarters, which is impressive.
Over the last three years, EBITDA and EBIT of shares increased by a CAGR of 16.9% and 7.6%, respectively. Moreover, its EPS increased by a CAGR of 15.6% over the same period.
HMC shares are up 14.1% year-to-date and 7.9% over the last three months, closing the last trading session at $26.09.
HMC POWR ratings reflect this promising prospect. The company has an overall A rating, which means a Strong Buy in our proprietary rating system. POWR ratings rate stocks on 118 different factors, each with its own weighting.
It is rated A for value and B for stability, moods and quality. Among the 61 shares in Car and vehicle manufacturers ranks 2nd in the industry. To see other HMC ratings for Growth and Momentum, click here.
Nokia Oh (NOK)
SAI offers products and services for radio access networks covering technologies from 2G to 5G and microwave radio links for transport networks. This Finnish network solutions provider operates in four segments: mobile networks; network infrastructure; cloud and web services; and Nokia Technologies.
On February 26, SAI announced the launch of anyRAN, a revolutionary approach to help mobile operators and enterprises choose dedicated, hybrid or cloud-based RAN solutions, regardless of business model. In doing so, the company strengthens partnerships with leaders in cloud and data center infrastructure, offering end customers the flexibility and choice of Cloud RAN solutions.
Recently, NOK won a contract with MTN South Africa to implement its comprehensive AirScale portfolio to upgrade and expand MTN’s 5G radio network for excellent coverage and capacity. In addition, it won a new 10-year 5G deal with Antina to upgrade the existing 5G network infrastructure across Singapore.
Such deals should improve 5G connectivity for businesses and consumers with high bandwidth, ultra-fast speeds and low latency, driving digitalization and expanding coverage in Africa and Singapore.
February 14 SAI and Kyndryl Holdings, Inc. (KD), the world’s largest IT infrastructure services provider, announced a three-year extension and expansion of its global network and edge collaboration, focusing on developing and delivering industry-leading private LTE and 5G wireless services and Industry 4.0 solutions to customers worldwide.
This evolving, strong relationship between SAIs and KDs is expected to be a unique combination of vertical and horizontal capabilities that will provide IT, OT and business leaders with access to the innovations, tools and expert resources needed to digitally transform their business.
In terms of forward EV/Sales, NOK is trading at 0.81x, 71.4% lower than the industry average of 2.83x. Similarly, its future EV/EBITDA and price/sales multiples of 5.14 and 0.95 are 60% and 65% lower than the industry averages of 12.85 and 2.71, respectively.
Over the past three years, net income and NOK EPS increased by 746.8% and 744.3% CAGR, respectively. Its EBITDA increased by 11.7% CAGR over the same period.
NOK’s net sales increased 16.1% year-on-year to EUR 7.45 billion (US$ 7.93 billion) in the fourth quarter ended December 31, 2022. Its operating profit increased 19.2% year-on-year to €882 million ($938.25 million). . The company’s net profit for the period increased by 363.5% year-on-year to EUR 3.15 billion (US$ 3.35 billion), while EPS increased by 366.7% over the previous quarter to EUR 0.56.
Analysts expect EPS and NOK revenue to increase 10.9% and 9.5% year-on-year to $0.08 billion and $6.15 billion respectively in the first fiscal quarter (ending March 31, 2023). It exceeded EPS estimates in three of the last four quarters. The NOK has gained slightly since the beginning of the year to close the last trading session at USD 4.68.
It’s no surprise that SAI has an overall A rating, translating to a Strong Buy in our proprietary rating system. It is rated A for value and B for height. In category B Technology – Communications/Networks industry, ranks 4th out of 49 companies.
In addition to the POWR ratings I just highlighted, you can see the NOK ratings for momentum, stability, sentiment and quality, Here.
Genie Energy Ltd. (GNE)
GNE and its subsidiaries provide electricity and natural gas to consumers and small businesses around the world. It has three operating segments: Genie Retail Energy (GRE); GRE international; and Genie Renewables.
In November last year, the company purchased a portfolio of contracts with individual and small commercial customers from Mega Energy. This acquisition is supported by strong cash flow and should enable GNE to expand its reach into seven states of retail delivery markets.
For the fiscal third quarter ending September 30, 2022, GNE’s gross profit increased 24.7% year-on-year to $43.14 million. The company’s operating income increased 34.8% year-on-year to $23.54 million, while adjusted EBITDA was up 35.3% year-on-year to $24.50 million.
In addition, its net income attributable to ordinary shareholders was $18.31 million, compared to a net loss of $2.66 million in the prior-year period. In addition, its EPS was $0.70 compared to a net loss per share of $0.10 in the same quarter last year.
In terms of rolling 12-month EV/sales, GNE is currently trading at 0.66x, 83.2% lower than the industry average of 3.93x. Its 12-month EV/EBITDA multiple of 2.48 is 80.4% lower than the industry average of 12.68. In addition, its 12-month EV/EBIT multiple of 2.52 is 88.6% lower than the industry average of 22.16x.
EBITDA and EBIT GNE increased CAGR by 120.2% and 156.4% respectively over the last three years. Moreover, its net income increased by a CAGR of 81.9% over the same period.
The stock gained 102% over the past year to close the last trading session at $11.98.
GNE’s strong foundations are reflected in POWR’s ratings. Stocks have an overall A rating, translating into strong buying in our proprietary rating system.
It is also rated A for value and B for height and momentum. Of the 64 shares in Utilities – domestic ranks first in the industry. To view GNE’s stability, sentiment and quality ratings, click here.
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HMC shares remained unchanged in Friday’s pre-sale. HMC has gained 14.13% since the beginning of the year, compared to the S&P 500’s gain of 4.02% over the same period.
About the author: Shweta Kumari
Shweta’s deep interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. He uses his knowledge to help retail investors make informed investment decisions.
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