Needless to say, 2022 has been a bad year for stock investors, and with a likely big interest rate hike coming this week, inflation still soaring at 40-year highs and a risk-sapping malaise hanging across Wall Street, things may get much worse before they get better. While only time will tell, seasoned investors will tell you the time to buy is when things look the ugliest, and for four top U.S. companies, that time may be now.
One of the characteristics of a bear market is the legion of analysts who cover stocks for the big banks and brokerage firms become very gun-shy. If a company slips up at all the proverbial baby is tossed out with the bath water. Four top blue chips have already faced analysts’ concerns over earnings misses, and while the near-term path for these top companies may be rocky, the long-term upside is likely unchanged.
All four pay solid and dependable dividends, and are still rated Buy at BofA Securities, where we screened for its take on the four companies’ current issues. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
The legacy telecommunications company has been going through a long restructuring, lowered its dividend, and has sold off or merged underperforming assets. AT&T, Inc. (NYSE: T) provides telecommunications, media, and technology services worldwide. Its communications segment offers wireless voice and data communications services; and sells handsets, wireless data cards, wireless computing devices, and carrying cases and hands-free devices through its own company-owned stores, agents, and third-party retail stores.
AT&T also provides data, voice, security, cloud solutions, outsourcing, and managed and professional services, as well as customer premises equipment for multinational corporations, small and mid-sized businesses, and governmental and wholesale customers. In addition, this segment offers broadband fiber and legacy telephony voice communication services to residential customers. It markets its communications services and products under the AT&T, Cricket, AT&T PREPAID, and AT&T Fiber brand names.
The company’s Latin America segment provides wireless services in Mexico and video services in Latin America. This company section markets its services and products under the AT&T and Unefon brand names.
AT&T posted very solid results for the second quarter, but the stock was hammered after the company lowered free-cash flow guidance for 2022. The BofA Securities team felt the company will also lower the guidance for 2023 as well.
Investors are paid a huge 6.07% dividend, and the BofA analyst stays with a Buy rating and a strong $25 target price. The Wall Street consensus target is posted at $23.20. The stock closed Tuesday at $18.30.
International Business Machines
This blue-chip giant is still offering investors an incredibly solid entry point. International Business Machines (NYSE:IBM) provides integrated solutions and services worldwide. The company operates through four business segments: software, consulting, infrastructure, and financing.
The software segment offers hybrid cloud platform and software solutions, such as Red Hat, an enterprise open-source solution; software for business automation, AIOps and management, integration, and application servers; data and artificial intelligence solutions; and security software and services for threat, data, and identity. This section also provides transaction-processing software that supports clients’ mission-critical and on-premise workloads in banking, airlines, and retail industries.
The consulting segment offers business transformation services, including strategy, business process design and operations, data and analytics, and system-integration services; technology consulting services; and application and cloud-platform services.
The infrastructure segment provides on-premises and cloud-based server and storage solutions for its clients’ mission-critical and regulated workloads; and support services and solutions for hybrid cloud infrastructure, as well as remanufacturing and remarketing services for used equipment. While the financing area offers lease, installment payment, loan financing, and short-term working capital financing services.
IBM posted results that also beat expectations, but warned that third-quarter results would likely come in less than expected, with a big factor being the continuing strength of the U.S. dollar.
IBM investors are treated to a large 5.15% dividend. The BofA Securities team lowered its target price on the venerable technology giant to $155 from $163 while maintaining a Buy rating on the shares. The consensus target is posted lower at $143.05. The final trade for Tuesday was reported at $128.08.
This is another top telecommunications company that offers tremendous value at current levels. Warren Buffett’s Berkshire Hathaway owns a stunning 158.8 million shares of the company. Verizon Communications, Inc (NYSE: VZ) is one of the largest US telecom companies. It provides wireless and wireline service to retail, enterprise and wholesale customers.
The company’s wireless network serves about 120 million mobile connections with 115 million postpaid subscribers. Verizon’s wireline business has undergone a period of secular decline because of wireless substitution and cable competition.
Verizon also provides converged communications, information and entertainment services over America’s most advanced fiber-optic network, and delivers integrated business solutions to customers worldwide.
Verizon reported results that came in just below Wall Street expectations and the company also cut full-year 2022 guidance. Patient investors will receive a stellar 5.70% dividend. BofA Securities is still bullish on the long term for the company and reiterated a Buy rating on the shares with a towering $64 target price objective. The consensus is set lower at $58.03. The shares were last seen on Tuesday at $44.92.
The giant retailer was hammered Tuesday after disappointing results were reported for the quarter. Wal-Mart Stores Inc. (NYSE: WMT) is the world’s largest retailer operating retail stores under the formats of Wal-Mart Stores, Supercenters, Neighborhood Markets and Sam’s Club locations in the United States as well as a growing e-commerce business (including Jet.com). Internationally, Wal-Mart also has locations in several countries, including Argentina, Brazil, Canada, China, Japan, Mexico, and the United Kingdom.
Each week, nearly 260 million customers and members visit the company’s 11,535 stores under 72 banners in 28 countries and e-commerce websites in 11 countries. The company had fiscal year 2019 revenue of $514.4 billion. Walmart employs roughly 2.2 million associates worldwide.
Walmart gave a surprise update after the closing bell on Monday and while U.S. same-store-sales are expected to come in above forecasts, the company negatively preannounced for the second quarter and cut fiscal year 2022 earnings-per-share guidance by almost 10%, noting that food inflation is weighing on discretionary spending. The company also warned of gross-margin pressures that are expected to remain in place for the rest of 2022.
Shareholders are paid a 1.84% dividend. The BofA Securities analysts lowered their price target to $145 from $160, but once again, stay with a Buy rating on the legacy discount retailing giant. That compares to the higher consensus target that is posted at $154.04 for now. Walmart shares were last seen trading Tuesday at $121.98 down almost a stunning 9%.
Needless to say, none of these top companies are going out of business, and none of them had drastically bad reports, but with a nervous market expecting more downside when it is finally announced we are in a recession, many investors are shooting first and asking questions later.
The good news for patient investors with a long-term horizon and some dry powder in the form of cash, these blue chips are on sale, and since they could remain under scrutiny for a while there is no need to rush out to buy full positions. Scale buy shares by grabbing some now, and adding more should they dip some over the next few weeks and months.
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