Following the announcement of the fourth consecutive 75-bps rate hike last week, the U.S. 10-year Treasury yield hit its highest since July 2008. This has put massive pressure on the fair value of stocks and invited increased scrutiny on already underwhelming corporate earnings.

JJ Kinahan, CEO of IG North America in Chicago, expressed his concern regarding the impact of macroeconomic headwinds on earnings: “Ultimately, earnings drive stocks, but when they are being overshadowed, it is tough to have that optimism.”

Furthermore, with the economy refusing to cool down fast enough, as evidenced by the latest employment data, Fed officials have been largely unanimous about the need to be aggressive.

Given such near-term uncertainties, investors could buy quality stocks Bristol-Myers Squibb Company (BMY), TravelCenters of America Inc. (TA), and J.Jill, Inc. (JILL), which are trading at discounts to their peers, for solid long-term returns.

Bristol-Myers Squibb Company (BMY)

BMY discovers, develops, manufactures, and markets biopharmaceutical products globally. The company offers solutions for hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and Covid-19 diseases.

On November 1, BMY paid its quarterly dividend of $0.54 per share. The company pays a $2.16 per share dividend annually, which translates to a 2.71% yield on the current price. The company’s dividends have grown at a 6.7% CAGR over the past five years.

On October 31, BMY announced positive topline results of the Phase 3 COMMANDS trial. With this, the company is one step closer to addressing a significant need for new and better first-line treatment options for patients with transfusion-dependent myelodysplastic syndromes (MDS).

On October 26, BMY announced new retrospective analyses on serologic responses and clinical outcomes with COVID-19 vaccination in participants treated with Zeposia (ozanimod) from the ongoing Phase 3 DAYBREAK open-label extension (OLE) study in relapsing multiple sclerosis (MS). All adverse events related to COVID-19 in vaccinated study participants were nonserious.

For the third quarter of fiscal 2022 ended September 30, BMY’s total in-line products and new product portfolio revenue increased 8% year-over-year to $8.62 billion. The company reported net earnings attributable to BMY of $1.60 billion, up 6.7% year-over-year.

Its non-GAAP EPS attributable to BMY increased 3.1% year-over-year to $1.99.

Analysts expect BMY’s revenue for the fiscal year (ending December 2023) to increase 2.7% year-over-year to $47.20 billion. The company’s EPS for the same period is expected to grow 4.4% from the previous year to $7.95. Moreover, BMY has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.

BMY’s stock has gained 15.6% over the past month and 28.9% year-to-date to close the last trading session at $79.78. In terms of forward non-GAAP P/E, the stock is trading at 10.48x, 42% lower than the industry average of 18.08x. Its forward EV/EBITDA of 10.13x is 22.2% lower than the industry average of 13.02x.

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

The stock also has an A grade for Value and grade B for Stability, Sentiment, and Quality. It is ranked #5 of 164 stocks in the Medical – Pharmaceuticals industry.

To see additional POWR Ratings for Growth and Momentum for BMY, click here.

TravelCenters of America Inc. (TA)

TA operates travel centers in the United States and Canada under the TravelCenters of America, TA, TA Express, Petro Stopping Centers, and Petro brand names. Its offers diesel and gasoline fuel, truck maintenance and repair, full-service and quick-service restaurants, travel stores, car and truck parking, and other services.

On October 26, TA announced network expansion and guest experience updates, including the opening of four new travel centers, the planned opening of four additional locations by the end of 2022, and the completed enhancements of over 50 travel centers as part of a site upgrade plan announced last year.

This capacity expansion would enable the company to serve more travelers with an enhanced experience and is expected to positively impact the company’s top line.

In the third quarter of the fiscal year 2022 ended September 30, TA’s revenues increased 44.9% year-over-year to $2.81 billion. Its income from operations grew 43.4% from the year-ago value to $57.15 million. Its adjusted EBITDA rose 36% from the prior-year period to $88.60 million.

Furthermore, the company’s adjusted net income attributable to common stockholders came in at $37.60 million or $2.54, up 69.4% and 67.1% from the prior-year period, respectively.

The consensus EPS estimate of $9.28 for the fiscal year 2022 represents a 125.7% improvement year-over-year. The consensus revenue estimate of $10.88 billion for the current year indicates a 48.4% increase from the previous year. The company has an impressive earnings surprise history since it has topped the consensus EPS estimates in three of the trailing four quarters.

The stock has gained 41.1% over the past six months to close the last trading session at $51.07. In terms of forward non-GAAP P/E, the stock is trading at 5.51x, 54.5% lower than the industry average of 12.10x. Its forward EV/sales multiple of 0.24 is 78.3% lower than the industry average of 1.09.

TA’s steady outlook has earned it an overall POWR Ratings of B, which translates to a Buy in our proprietary rating system. It has a grade of A for Value and a B for Growth.

In the Specialty Retailers industry, it is ranked #5 of 46 stocks.

Click here to see additional POWR Ratings for Momentum, Sentiment, Quality, and Stability for TA.

J.Jill, Inc. (JILL)

JILL is an omnichannel retailer of women’s apparel. The company’s flagship brand J.Jill is focused on clothing for women in the 45-age segment. It offers two sub-brands extensions of its brand aesthetic: Pure Jill and Wearever.

For the second quarter of fiscal 2022 ended July 30, JILL’s net sales increased marginally year-over-year to $160.34 million, while its adjusted income from operations increased 16.8% year-over-year to $28.19 million. The company’s adjusted EBITDA and net income grew 8.8% and 34.6% year-over-year to $35.57 million and $17.69 million, respectively.

In addition, JILL’s adjusted quarterly net income per share increased 33.3% year-over-year to $1.24.

Analysts expect JILL’s revenue and EPS for the current fiscal year (ending January 2023) to increase 4% and 26.8% year-over-year to $608.8 million and $2.7, respectively. The company has an impressive earnings surprise history of surpassing its consensus EPS estimates in each of the trailing four quarters.

JLL’s stock has gained 37.8% over the past month and 46.2% over the past six months to close the last trading session at $22.91. In terms of forward non-GAAP P/E, the stock is trading at 8.49x, 29.9% lower than the industry average of 12.10x. Its forward Price /Sales of 0.38x is 54% lower than the 0.83x industry average.

It is no surprise that JILL has an overall rating of A, which translates to Strong Buy in our POWR Ratings system. It also has a grade of A for Sentiment and Quality and a B for Value.

JILL tops the list of 66 stocks in the Fashion & Luxury industry.

Beyond what we have stated above, we have also given JILL grades for Growth, Momentum, and Stability. Get all JILL ratings here.

BMY shares fell $0.01 (-0.01%) in after-hours trading Thursday. Year-to-date, BMY has gained 31.27%, versus a -15.94% rise in the benchmark S&P 500 index during the same period.

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.

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