The central bank is widely expected to deliver a fourth straight 75-basis point rate hike next month as it fights sky-high inflation. Neel Kashkari, Minneapolis Federal Reserve President, said that the Federal Reserve might need to push its benchmark policy rate above 4.75% if underlying inflation does not stop rising.

Like the second quarter, investors had been anticipating an earnings apocalypse, but of the thirty-five companies that have reported third-quarter earnings as of October 17, 68.5% have beaten estimates, higher than the historical average of 66.2%, according to Refinitiv. Investors seem to be hopeful about the rest of the companies that are yet to report their quarterly earnings.

On the other hand, Goldman Sachs CEO David Solomon said that the United States might tip into a recession next year. Still, it is possible that inflation can be tamed without causing too much economic pain. Solomon said, “I could still see a scenario with a soft landing.”

Given this backdrop, fundamentally strong stocks Bristol-Myers Squibb Company (BMY), Energy Transfer LP (ET), and The Kroger Co. (KR), which have consistently reported strong financials this year, could be ideal buys ahead of their earnings release. Moreover, these are excellent dividend-paying companies.

Bristol-Myers Squibb Company (BMY)

BMY engages in the discovery, development, licensing, manufacture, and sale of biopharmaceutical products globally. The company’s offerings include products for hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and COVID-19 diseases.

On October 4, BMY and Autolus Therapeutics plc (AUTL), a biopharmaceutical company developing next-generation programmed T cell therapies, entered into an agreement that grants BMY access to incorporate Autolus’ proprietary RQR8 safety switch into an initial set of selected cell therapy programs on a target-by-target basis for the treatment of cancer. This should help in BMY’s further developments in this space.

On September 16, BMY received approval from the European Commission for the LAG-3-blocking antibody combination, Opdualag, to treat unresectable or metastatic melanoma with tumor cell PD-L1 Expression < 1%.

This approval would enable the treatment of all adults and adolescents above 12 years of age in all European Union member states, as well as Iceland, Liechtenstein, and Norway, which might boost the revenue stream of the company.

On September 14, BMY declared a quarterly dividend of $0.54 per share and a quarterly dividend of $0.50 per share on the company’s $2.00 convertible preferred stock, payable on November 1, 2022, and December 1, 2022, respectively. It pays a $2.16 per share dividend annually, which translates to a 3.03 % yield on the current price. The company’s dividends have grown at a CAGR of 9.6% over the past three years.

During the second quarter ended June 30, BMY’s total revenues increased 1.6% year-over-year to $11.89 billion. The company’s non-GAAP net earnings attributable to BMY amounted to $4.15 billion, up 13.2% year-over-year, while the non-GAAP EPS improved 18.4% from the prior-year quarter to $1.93.

Analysts expect BMY’s EPS for the fiscal year ending December 2023 to be $7.98, indicating a 6.2% year-over-year growth. The company’s revenue is expected to increase by 3.2% from the prior year to $47.55 billion next year. The company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.

Over the past year, BMY has gained 26% to close its last trading session at $71.74. It has gained 15.1% year-to-date.

BMY’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

BMY has an A grade for Value and a B for Growth and Quality. It is ranked #5 out of 161 stocks in the Medical - Pharmaceuticals industry. 

Beyond what we’ve stated above, we have also given BMY grades for Momentum, Stability, and Sentiment. Get all BMY ratings here.

Energy Transfer LP (ET)

ET owns and operates a portfolio of energy assets in the United States. The company sells natural gas to independent power plants, electric utilities, local distribution, and industrial end-users.

On August 24, ET announced that its subsidiary Energy Transfer LNG Export, LLC, had entered into an LNG Sale and Purchase Agreement with Shell NA LNG LLC about its Lake Charles LNG Project. This agreement should help the company meet the increasing demand for LNG and boost its revenues.

Earlier in August, ET announced that it had completed the sale of its 51% interest in Energy Transfer Canada ULC to a joint venture that includes Pembina Pipeline Corporation and global infrastructure funds managed by KKR. The asset sale is expected to enable the company to redeploy capital within its U.S. footprint.

On July 26, ET declared a quarterly dividend of $0.23 per share, paid out on August 19. Its annual dividend of $0.92 yields 7.86% on current prices. Moreover, the company’s 4-year average yield stands at 10.45%.

During the fiscal second quarter ended June 30, ET’s revenue increased 71.8% year-over-year to $25.95 billion. The company’s operating income grew 32.3% year-over-year to $2.11 billion. The company’s net income attributable to partners increased 111.8% from the prior-year period to $1.33 billion, while its net income per common unit for the same quarter rose 95% year-to-year to $0.39.

ET’s revenue is expected to increase 44.3% year-over-year to $24.04 billion in the third fiscal quarter ended September 2022. Its EPS is likely to rise 82.9% year-over-year to $0.37 for the same quarter. Additionally, the company has surpassed EPS estimates in three of four trailing quarters, which is impressive.

ET’s shares have gained 43.3% year-to-date to close its last trading session at $11.79. The stock has gained 16.8% over the last three months.

ET’s strong fundamentals are reflected in its POWR Ratings. The company has an overall rating of B, which translates to Buy in our proprietary rating system. It also has an A grade for Momentum and a B grade for Value. Among the 94 stocks in the B-rated Energy – Oil & Gas industry, it is ranked #31.

To see additional ratings for ET for Growth, Quality, Sentiment, and Stability, click here.

The Kroger Co. (KR)

KR operates as a retailer in the United States. The company operates combination food and drug stores, multi-department stores, marketplace stores, and price-impact warehouses.

On October 18, KR announced the official opening of its newest Customer Fulfillment Center in Romulus, Michigan, which will leverage advanced robotics technology and creative solutions to redefine the customer experience for customers in the greater Detroit area. The expansion should help drive up the revenue of the company over time.

On October 14, KR and Albertsons Companies (ACI) announced that they have entered into a definitive agreement under which the companies will merge, aiming to expand the customer reach and improve proximity to deliver fresh and affordable food to approximately 85 million households with a premier omnichannel experience. The company expects this collaboration to drive profitable growth and sustainable value for all.

On September 15, KR declared a quarterly dividend of 26 cents per share to be paid to shareholders on December 1, 2022. Its annual dividend of $1.04 yields 2.41% on prevailing prices. The company’s dividend payouts have increased at a 15.3% CAGR over the past three years and a 12.9% CAGR over the past five years. The company has a record of 15 years of consecutive dividend growth.

KR’s sales increased 9.3% year-over-year to $34.64 billion in the fiscal second quarter ending August 13. Its operating profit increased 13.7% year-over-year to $954 million. The company’s adjusted EBITDA grew 10.9% from the year-ago value to $7.63 billion, while its adjusted EPS improved 12.5% year-over-year to $0.90.

Street expects KR’s revenue for the fiscal year ending January 2023 to come in at $148.32 billion, indicating an increase of 7.6% year-over-year. The company’s EPS is expected to grow 10.9% year-over-year to $4.08 in the same year. Additionally, as the company surpassed the consensus EPS estimates in each of the trailing four quarters, it has an impressive earnings surprise history.

KR has gained 10.1% over the past year to close the last trading session at $43.16. The stock gained 2.5% intraday yesterday.

It is no surprise that KR has an overall rating of A, translating to Strong Buy in our POWR Ratings system. The stock has a B grade in Quality, Value, and Growth. It is ranked #9 of 38 stocks in the A-rated Grocery/Big Box Retailers industry.

Click here to access additional POWR Ratings for KR for Momentum, Stability, and Sentiment.

BMY shares rose $0.01 (+0.01%) in premarket trading Wednesday. Year-to-date, BMY has gained 18.65%, versus a -21.43% rise in the benchmark S&P 500 index during the same period.

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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