The stock market remains under pressure on investors’ concerns over multi-decade high inflation, little measurable progress on ending the Ukraine-Russia war, and the potential for a recession. The major stock market indexes tumbled last week. While the S&P 500 lost 2.7%, the Dow Jones Industrial Average dropped 1.7%, and the Nasdaq Composite lost 3.7%.
Recently, Nomura predicted that the Federal Reserve would hike interest rates by 75 basis points in June and July. This news fostered further concern among investors, fueling immense market volatility. However, according to The Leuthold Group's James Paulsen, a likely peak in inflation over the past few months means investors should start buying stocks. Also, investors should take advantage of this market downturn and invest in stocks that have the potential to generate long-term gains based on their solid fundamentals.
Given this backdrop, we think it could be prudent to invest in fundamentally sound stocks FedEx Corporation (FDX) and SAP SE (SAP). These stocks are currently trading below their 52-week highs but could soar in price in the coming months.
FedEx Corporation (FDX)
FDX in Memphis, Tenn., offers transportation, e-commerce, and business services internationally. The company's FedEx Express segment offers express transportation, small-package ground delivery, and freight transportation services; the FedEx Ground segment provides day-certain delivery services to businesses and residences; and the FedEx Freight segment offers less-than-truckload freight transportation services.
Last month, FedEx Express, a subsidiary of FDX, teamed up with California Bay Area-based Elroy Air, a company that is building the first end-to-end autonomous vertical take-off and landing (VTOL) aerial cargo system. Under the agreement, FedEx Express will organize plans to test Elroy Air's Chaparral autonomous air cargo system within the company's middle-mile logistics operations, moving shipments between sorting locations. This is the recent initiative from FDX to explore and adopt emerging technologies across its networks.
Also, last month, FDX's subsidiary, FedEx Office, a leading provider of convenient, state-of-the-art printing, packing, and shipping services, announced an alliance with Notarize, a leading online notarization provider, to launch FedEx Office Online Notary. The new service will make convenient, fully-digital notary services available to the millions of Americans who require personal or professional documents notarized annually.
For the third quarter, ended Feb. 28, 2022, FDX's total revenue increased 10% year-over-year to $23.64 billion. The non-GAAP operating income grew 37.7% from its year-ago value to $1.46 billion, while its non-GAAP net income improved 30% year-over-year to $1.22 billion. The company's non-GAAP EPS rose 32.3% from its prior-year quarter to $4.59.
Analysts expect FDX's revenue to increase 8.5% year-over-year to $24.53 billion for the fourth quarter, ending May 31, 2022. The $6.84 consensus EPS estimate for the fourth quarter, ending May 31, 2022, represents a 36.5% improvement year-over-year.
In addition, closing the last trading session at $205.21, the stock is currently trading 35.9% below its 52-week high of $319.90, which it hit on May 27, 2021.
FDX's POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
FDX is also rated a B grade for Value, Sentiment, and Quality. Within the B-rated Air Freight & Shipping Services industry, it is ranked #2 of 18 stocks.
To see additional POWR Ratings for Growth, Stability, and Momentum for FDX, click here.
SAP SE (SAP)
Headquartered in Walldorf, Germany, SAP functions worldwide as an enterprise application software company. The company has three operational segments: Applications, Technology & Support; Qualtrics; and Services. It offers SAP S/4HANA, an ERP suite with intelligent technologies, such as artificial intelligence, machine learning, and advanced analytics.
SAP's total revenue increased 11% year-over-year to €7.08 billion ($7.64 billion) for the first quarter, ending March 31, 2022. Its operating profit grew 10% from its year-ago value to €1.05 billion ($1.14 billion), while its EPS amounted to €0.63. The company's cash and cash equivalents stood at €11.49 billion ($12.40 billion) for the three months ended March 31, 2022.
The $6.68 consensus EPS estimate for its fiscal year 2023 indicates a 20.8% improvement year-over-year. Analysts expect SAP's revenue to increase 3.2% year-over-year to $32.01 billion for its fiscal year 2022. In addition, the company has an impressive earnings history; it surpassed the consensus EPS estimate in three of the trailing four quarters.
Furthermore, closing the last trading session at $103.85, the stock is currently trading 31.4% below its 52-week high of $151.48, which it hit on Sept. 1, 2021.
SAP's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Stability, Value, and Quality. In the Software - Application industry, it is ranked #12 of 158 stocks.
In total, we rate SAP on eight distinct levels. Beyond what we have stated above, we have also given SAP grades for Growth, Momentum, and Sentiment. Get all the SAP ratings here.
Click here to check out our Software Industry Report for 2022
FDX shares were trading at $201.06 per share on Monday morning, down $4.15 (-2.02%). Year-to-date, FDX has declined -22.00%, versus a -10.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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