With the Fed launching another significant rate hike last week, bearish sentiments flooded the stock market, with the Dow Jones Industrial Average notching a new low for 2022 and closing below 30,000 on Friday. Analysts at Goldman Sachs now see an increased risk of hard-landing and have cut the year-end S&P 500 target, predicting more than a 4% downside.
“The market has been transitioning clearly and quickly from worries over inflation to concerns over the aggressive Federal Reserve campaign,” said Quincy Krosby of LPL Financial.
On the bright side, CNBC’s Jim Cramer said inflation could soon decline, leaning on charts analysis from legendary technician Larry Williams. “The charts, as interpreted by Larry Williams, suggest that inflation could soon cool down substantially if history’s any guide,” he said.
Given the uncertainties, we think investors should consider buying Cisco Systems, Inc. (CSCO) and TravelCenters of America Inc. (TA), considering their fundamental strengths.
Cisco Systems, Inc. (CSCO)
CSCO designs, manufactures, and sells Internet Protocol-based networking and other products related to the communications and information technology industry in the Americas, Europe, the Middle East, Africa, the Asia Pacific, Japan, and China. The company sells its products and services directly, as well as through systems integrators, service providers, other resellers, and distributors.
On August 23, CSCO declared a quarterly cash dividend of $0.38 per common share, payable to shareholders on October 26, 2022. This reflects the company’s strong cash flow positioning.
On July 21, CSCO launched a new Webex Wholesale Route-to-Market (RTM) for Service Provider partners to address the evolving needs of SMBs. This wholesale business model featuring multiple packages should benefit CSCO.
CSCO’s total revenue came in at $51.56 billion for the fiscal year ended July 30, 2022, representing a 3.5% year-over-year growth. Its operating income grew 8.9% from the prior year to $13.97 billion, while its non-GAAP net income rose 3.4% from last year to $14.09 billion. EPS increased 4.3% to $3.36 in the same period.
Analysts expect CSCO’s revenue for the fiscal quarter ending October 2022 to be $13.30 billion, indicating a 3.1% year-over-year growth. The company’s EPS is expected to increase 1.8% from the prior-year quarter to $0.84 in the same period. Additionally, CSCO has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
CSCO’s stock slumped 1.2% intraday to close the last trading session at $40.66.
CSCO has an overall rating of B, equating to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Quality. In the 51-stock Technology – Communication/Networking industry, CSCO is ranked #7. Click here to get the additional POWR Ratings for CSCO for Growth, Value, Momentum, Stability, and Sentiment.
TravelCenters of America Inc. (TA)
TA operates travel centers, truck service facilities, and restaurants in the United States and Canada. Its full and quick service restaurants operate under the brands Iron Skillet, Country Pride, IHOP, Black Bear Diner, Fuddruckers, Bob Evans, Popeye’s Chicken & Biscuits, Subway, Burger King, Taco Bell, Pizza Hut, Dunkin’, and Starbucks Coffee.
For the second quarter ended June 30, TA’s total revenues increased 67.9% year-over-year to $3.08 billion. Its income from operations grew 89.3% year-over-year to $94.23 million. The company’s adjusted net income and adjusted net income per share rose 117% and 108.7% year-over-year to $64.40 million and $4.34, respectively.
Street expects TA’s revenue for the quarter ending September 2022 to come in at $2.73 billion, reflecting a 40.6% year-over-year increase. The company’s EPS is expected to increase 75.9% from the prior-year quarter to $2.67.
TA has gained 57.4% over the past three months to close its last trading session at $53.16.
It is no surprise that TA has an overall A rating which translates to Strong Buy in our POWR Ratings system.
TA also has an A grade for Growth and Value and a B for Sentiment and Quality. In the Specialty Retailers industry, it is ranked #1 out of 46 stocks. To get TA’s grade for Momentum and Stability, click here.
CSCO shares were trading at $40.58 per share on Monday afternoon, down $0.08 (-0.20%). Year-to-date, CSCO has declined -34.56%, versus a -22.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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