The stock market has been highly volatile so far this year due to worries over skyrocketing inflation, expected monetary policy tightening, an ongoing geopolitical crisis, and China’s recent COVID-19 outbreak adding to the existing supply chain disruptions. Furthermore, despite the Fed’s efforts to combat surging inflation, Bank of America Corp. (BAC) is warning of a ‘Recession shock’ and high inflation, which could pose a significant threat to the economic recovery. Consumer prices rose by 8.5% in March, their highest gain since 1981.
Investors have been betting on mega-cap stocks to withstand the current market headwinds and potential recessionary shock. Given their strong cash flows and stable revenue and earnings growth prospects, mega-cap companies provide steady returns to investors. Also, such established companies are well-positioned to withstand the market’s fluctuations and are considered “safer” than mid-cap and small-cap companies. Investors’ interest in the mega-cap stocks is evident in the Vanguard Mega Cap ETF’s (MGC) 5.8% gains over the past month.
Given the backdrop, we think it could be wise to invest in the quality mega-cap stocks Shell plc (SHEL), AbbVie Inc. (ABBV), and Exxon Mobil Corporation (XOM), which have rallied more than 10% in price year-to-date.
Shell plc (SHEL)
Headquartered in London, SHEL is an energy and petrochemical company that operates in Europe, Asia, Oceania, Africa, the United States, and the rest of the Americas. The company operates through Integrated Gas; Upstream; Marketing; Chemicals and Products; and Renewables and Energy Solutions segments. It produces gas-to-liquids fuels and other products, and markets and sells crude oil, natural gas, and natural gas liquids.
In February, SHEL announced a $8.5 billion share buyback program for the first half of 2022. This includes the remaining $5.50 billion of Permian divestment proceeds and $3 billion as part of SHEL’s capital allocation framework. Through the share buyback program, the company might reduce the outstanding shares and maintain its profitability.
SHEL's total revenues and other income increased 102.6% year-over-year to $90.22 billion in its fiscal year 2021 fourth quarter, ended Dec. 31, 2021. SHEL’s income before taxation grew 494.5% year-over-year to $16.27 billion. Its adjusted EBITDA rose 88.1% year-over-year to $16.35 billion. The company’s income for the period and earnings per share came in at $11.60 billion and $1.48, respectively, registering a 393.3% and 384.6% increase from the prior-year period.
Analysts expect SHEL's revenue for its fiscal year 2022, ending Dec. 31, 2022, to come in at $382.09 billion, representing a 46.1% rise year-over-year. The Street expects the company's EPS for the current year to be $8.80, representing a 76.7% increase year-over-year.
The stock gained 11% in price year-to-date and 15.4% over the past month and closed yesterday's trading session at $57.04.
SHEL's POWR Ratings reflect this promising outlook. It has an overall B grade, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
SHEL has an A grade for Momentum and B for Sentiment. Within the B-rated Energy - Oil & Gas industry, it is ranked #21 of 97 stocks.
To see additional POWR Ratings (Stability, Value, Growth, and Quality) for SHEL, click here.
AbbVie Inc. (ABBV)
ABBV in North Chicago, Ill., develops, manufactures, and sells pharmaceuticals worldwide. The company offers HUMIRA, a therapy for autoimmune and intestinal diseases, SKYRIZI to treat plaque psoriasis in adults, IMBRUVICA to treat chronic lymphocytic leukemia (CLL), and MAVYRET to treat patients with chronic HCV genotype 1-6 infection. In addition, ABBV offers CREON, a pancreatic enzyme therapy, and Linzess to treat bowel syndrome.
On April 4, ABBV entered a multi-year agreement with Resorts World Las Vegas to become the preferred aesthetics and rewards partner of the new world-class resort. “With partnerships like this we are truly creating consumer engagement in a way that has never been done before within aesthetics. We plan to continue to pursue meaningful partnerships like this for the benefit of our loyal consumers,” said Heidi Shurtz, Associate Vice President, Integrated Marketing and Promotions at ABBV.
In March, ABBV expanded its immunology portfolio in Canada because Health Canada has approved SKYRIZI® for the treatment of adult patients with active psoriatic arthritis. This development is expected to boost the company’s business growth and profitability.
In its fiscal 2021 fourth quarter, ended Dec. 31, 2021, ABBV's adjusted net revenues increased 22.6% year-over-year to $56.12 billion. Its operating earnings improved 35.2% from the prior-year period to $5.07 billion. Its net earnings rose 10,544.7% year-over-year to $4.05 billion. And the company's adjusted earnings per share rose 13.4% year-over-year to $3.31.
The $13.62 billion consensus revenue estimate for the fiscal 2022 first quarter ended March 31, 2022, represents 5.3% growth from the same period in 2021. The $3.14 consensus EPS estimate for the to-be-reported quarter indicates a 6.6% year-over-year rise. It is no surprise that ABBV has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock improved 17.4% in price year-to-date and 46.9% over the past year. It closed yesterday's trading session at $158.95.
ABBV’s POWR Ratings reflect a strong outlook. The stock has an overall A rating, which translates to Strong Buy in our POWR Ratings system.
ABBV has a B grade for Sentiment and Quality. It is ranked #7 of 173 stocks in the Medical - Pharmaceuticals industry.
Click here to see ABBV’s POWR Ratings for Stability, Momentum, Growth, and Value.
Click here to checkout our Healthcare Sector Report for 2022
Exxon Mobil Corporation (XOM)
XOM is the crude oil and natural gas producer in the United States and internationally. The Irving, Tex., company operates through three segments: Upstream; Downstream; and Chemical. XOM manufactures, trades, transports, and sells crude oil, natural gas, petroleum products, petrochemicals, and biofuels. It has approximately 20,528 net-operated wells with proved reserves.
This month, XOM introduced its new Exceed™ S performance polyethylene (PE) resins. With Exceed S, converters can obtain performance levels with easy stiffness, processing, and more durable flexible packaging contributing to consumer satisfaction. This is expected to enhance the company’s profitability.
In February, XOM completed its first commercial sale of certified circular polymers to Berry Global, a leading provider of innovative packaging and engineering products. The circular polymers are made using its Exxtend™ technology for advanced plastic waste recycling. The company is scaling up its advanced recycling capabilities by manufacturing more circular products for customers, thereby boosting its revenue streams.
XOM’s total cash and cash equivalents increased 54.5% year-over-year to $6.80 billion in its fiscal year 2021 fourth quarter, ended Dec. 31, 2021. Its cash inflow from operating activities grew 327.6% from its year-ago value to $17.12 billion. Its net income attributable to XOM increased 144.2% year-over-year to $8.87 billion. And XOM’s earnings per common share rose 144.3% year-over-year to $2.08.
Analysts expect XOM's revenue for its fiscal year 2022 first quarter, ended March 31, 2022, to be $81.31 billion, representing a 37.5% rise year-over-year. The Street expects the company's EPS for the to-be-reported quarter to come in at $2.19, representing a 236.5% increase year-over-year. The company has an impressive earnings surprise history; it has surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of XOM have increased 36.6% in price year-to-date and 42.2% over the past six months. It closed yesterday's trading session at $86.81.
XOM's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B grade, which equates to Buy in our proprietary rating system.
XOM has an A grade for Momentum and B for Growth and Quality. Within the B-rated Energy-Oil & Gas industry, it is ranked #38 of 97 stocks.
To see additional POWR Ratings (Value, Stability, and Sentiment) for XOM, click here.
SHEL shares were trading at $56.93 per share on Thursday afternoon, down $0.11 (-0.19%). Year-to-date, SHEL has gained 9.04%, versus a -7.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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