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4 Stocks Value Investors Should Consider Adding to Their Portfolios in January

Rising inflation, supply chain constraints, surging COVID-19 cases, and the Federal Reserve’s hawkish monetary policy have resulted in immense market volatility lately. However, markets have benefited from the Santa Claus Rally over the past week, as major benchmark indexes hit their all-time highs on Monday.

Investors have been focusing on stocks with solid fundamentals and lower valuations to avoid facing losses in the anticipated market correction. The growing investor optimism in large-cap value stocks is evident from the iShares Morningstar Value ETF’s (ILCV) 4.1% gains over the past month versus the SPDR S&P 500 Trust ETF’s (SPY) 4% returns.

Thus, it could be wise to add undervalued large-cap stocks Oracle Corporation (ORCL), Northrop Grumman Corporation (NOC), General Dynamics Corporation (GD), and MetLife, Inc. (MET) to your portfolios now. These large-cap stocks possess significant upside potential to dodge market fluctuations and deliver solid returns in the coming months.

Oracle Corporation (ORCL)

With a market capitalization of $239.11 billion, ORCL provides products and services that address all aspects of corporate IT environments, including application, platform, and infrastructure worldwide. The company operates through four segments—cloud services and license support; cloud license and on-premises license; hardware; and services. It markets and sells its solutions directly to businesses in various industries, government agencies, educational institutions, and indirect channels.

ORCL announced an agreement to acquire Cerner Corporation (CERN), a leading supplier of health information technology services, devices, and hardware, for $28.30 billion in equity value. The companies are looking forward to providing medical professionals a new generation of easier-to-use digital tools that gives access to information via a hands-free voice interface, lower overall healthcare costs, and help make better treatment decisions resulting in better patient outcomes.

For its fiscal second quarter, ended November 30, 2021, ORCL’s total revenues increased 5.7% year-over-year to $10.36 billion. The company’s non-GAAP operating income came in at $4.86 billion, indicating a 5.8% rise from the prior-year period. While its non-GAAP net income increased 4.5% year-over-year to $3.38 billion, its non-GAAP EPS increased 14.2% to $1.21. As of November 30, 2021, the company had $17.94 billion in cash and cash equivalents.

Analysts expect the company’s EPS to increase 3.2% year-over-year to $4.82 in the current year. The consensus revenue estimate of $42.34 billion for the current year represents a 4.6% rise from the prior-year period. In addition, it surpassed Street EPS estimates in each of the trailing four quarters. ORCL’s EPS is expected to grow at a rate of 9.6% per annum over the next five years.

The stock has gained 37.8% over the past year and 14.1% over the past six months. It closed yesterday’s trading session at $89.54. ORCL’s 18.65x non-GAAP forward P/E is 24.2% lower than the 24.60x industry average. In terms of forward EV/EBIT, ORCL is currently trading at 15.44x, 25.5% lower than the industry average of 20.73x.

ORCL’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a B grade for Sentiment, Value, and Quality. Click here to see the additional ratings for ORCL’s Growth, Stability, and Momentum. ORCL is ranked #11 of 169 stocks in the Software – Application industry.

Northrop Grumman Corporation (NOC)

Having a $60.45 billion market cap, NOC is a global aerospace and defense technology company. The company operates through four segments—aeronautics systems; defense systems; mission systems; and space systems. It provides systems, products, and solutions in aerospace, electronics, information systems, and technical services and serves government and commercial customers worldwide.

On December 27, 2021, NOC’s Northrop Grumman Systems Corp business unit was awarded a $1.382 billion contract from the U.S. Army until December 23, 2026, to produce the Integrated Battle Command System. The system uses integrated hardware and software products and sensors, and other systems to identify, track, and neutralize air and missile threats. NOC is looking forward to nurturing a long-term partnership with the U.S. Army.

NOC’s total operating income for its fiscal third quarter, ended September 30, 2021, increased 5.9% year-over-year to $1.04 billion. The company’s non-GAAP net income came in at $1.06 billion, indicating a 7.8% rise from the prior-year period. Its non-GAAP EPS came in at $6.63, up 12.6% from its year-ago period. As of September 30, 2021, the company had $4.06 billion in cash, cash equivalents, and restricted cash.

The consensus EPS estimate of $25.59 for the current year represents an 8.2% rise from the prior-year period. NOC surpassed the consensus EPS estimates in each of the trailing four quarters. Analysts expect the company’s EPS is expected to grow at a rate of 6% per annum over the next five years.

The stock has gained 28.2% over the past year and 2.9% over the past six months. It ended yesterday’s trading session at $384.21. In terms of non-GAAP forward P/E, NOC is currently trading at 14.91x, 29.1% lower than the 21.03x industry average. In terms of forward EV/EBIT, NOC is currently trading at 12.03x, 32.7% lower than the industry average of 17.88x.

It is no surprise that NOC has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has a B grade for Value, Quality, and Stability. Click here to see the Momentum, Stability, and Growth ratings. The stock is ranked #2 of 73 in the Air/Defense Services industry.

General Dynamics Corporation (GD)

GD is a diversified defense company that offers a broad portfolio of products and services in business aviation, combat vehicles, weapons systems, munitions, shipbuilding design and construction, information systems, and technologies. It has a market capitalization of $57.84 billion.

On November 3, 2021, GD’s General Dynamics Information Technology (GDIT) business unit was awarded a five-year, $190 million contract from the United States Patent and Trademark Office (USPTO) for enterprise cloud modernization. By leveraging strong relationships with leading commercial cloud service providers, including Amazon.com, Inc.’s (AMZN) Amazon Web Services (AWS), Alphabet Inc. (GOOGL), and Microsoft Corporation (MSFT), GDIT looks forward to delivering a scalable, hybrid multi-cloud platform and accelerate the agency’s cloud adoption and migration. This will allow USPTO to directly support inventors, entrepreneurs, and organizations to file trademark and patent applications easily.

For its fiscal third quarter, ended October 3, 2021, GD’s revenue increased 1.5% year-over-year to $9.57 billion. The company’s operating earnings came in at $1.08 billion for the quarter, up 0.7% from the year-ago period. Its net earnings of $860 million represent a 3.1% rise from the prior year. Its EPS came in at $3.07, up 5.9% from the year-ago period. It had $3.14 billion in cash and equivalents as of October 3, 2021.

Analysts expect the company’s EPS to be $11.53 for the current year, representing a 4.8% rise from the prior-year period. It surpassed the consensus EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $38.86 billion the current year indicates a 2.5% year-over-year improvement. GD’s EPS is expected to grow at a rate of 8.6% per annum over the next five years.

The stock has gained 39% over the past year and 9.1% over the past three months. It closed yesterday’s trading session at $207.13. GD’s 17.77x non-GAAP forward P/E is 15.5% lower than the 21.03x industry average. In terms of forward EV/EBIT, GD is currently trading at 16.55x, 7.4% lower than the industry average of 17.88x.

GD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The stock has a B grade for Value, Stability, and Sentiment. Click here to see the additional ratings for GD (Quality, Momentum, and Growth). GD is ranked #11 in the Air/Defense Services industry.

MetLife, Inc. (MET)

MET is a financial services company that provides insurance, annuities, employee benefits, and asset management services worldwide. The company offers personal property and casualty insurance, group insurance, pension products, accident and health products, regular savings products, whole and term life, endowments, and protection against long-term health care services. It has a $52.56 billion market capitalization.

MET’s total revenues for its fiscal third quarter, ended September 30, 2021, increased 5.6% year-over-year to $16.91 billion. The company’s pre-tax income came in at $2.04 billion for the quarter, representing a 121.2% year-over-year improvement. Its adjusted net earnings came in at $2.06 billion, up 30.7% from the prior-year period. Its adjusted EPS increased 38.2% year-over-year to $2.39. The company had $18.96 billion in cash and cash equivalents as of September 30, 2021.

The consensus EPS estimate of $8.47 for the current year represents a 37.5% rise from the prior-year period. For the current year, analysts expect MET’s revenue to rise marginally from the prior year to $67.03 billion. It surpassed Street EPS estimates in each of the trailing four quarters. The company’s EPS is expected to grow at an 8.5% rate per annum over the next five years.

The stock has gained 34.9% over the past year and 2.41% over the past three months. It closed yesterday’s trading session at $62.49. In terms of non-GAAP forward P/E, MET is currently trading at 7.34x, 35.4% lower than the 11.37x industry average. In terms of forward Price/Sales, MET is currently trading at 0.78x, 76.8% lower than the industry average of 3.38x.

MET’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which equates to Buy in our proprietary rating system. MET has a B grade for Growth, Sentiment, and Value. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for MET’s Stability, Momentum, and Quality here. MET is ranked #5 of 30 stocks in the Insurance – Life industry.

 


ORCL shares fell $0.04 (-0.05%) in after-hours trading Tuesday. Year-to-date, ORCL has gained 39.15%, versus a 29.25% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More…

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