The stock market has officially entered bear market territory with investors' growing concerns over the possibility of harsher movements from the Fed to tame the multi-decade high inflation. The Bureau of Labor Statistics reported that the U.S. consumer price index rose 8.6% last month, the fastest increase since December 1981. This surprising inflation report is expected to force the Federal Reserve to consider a 0.75-percentage-point interest rate increase at their meeting this week.
The major stock market indexes witnessed significant declines following the release of the May inflation data. According to a Financial Times survey, almost 70% of economists expect the U.S. to slide into a recession in 2023 due to the stock market decline and Federal Reserve’s attempt to reduce the rising inflation. However, amid the current market turbulence, investors should secure themselves by investing in stocks that can withstand high inflationary pressures and generate stable returns.
The nature of business and strong fundamentals are expected to help APA Corporation (APA), Genco Shipping & Trading Limited (GNK), and PBF Energy Inc. (PBF) capitalize on the high inflation. So, these stocks could be solid additions to your portfolio.
APA Corporation (APA)
Headquartered in Houston, Texas, APA, along with its subsidiaries, explores for, develops, and produces oil and gas properties. It operates in the United States, Egypt, and the United Kingdom and has exploration activities offshore Suriname. Energy being a pro-inflation asset, APA is expected to perform well amid the high inflation. Historically, oil and gas companies beat inflation 71% of the time.
In March, APA and LongPath Technologies, Inc. expanded their partnership for continuous methane emissions monitoring in the Permian Basin of southeast New Mexico and west Texas. Methane emissions from oil and gas operations are a key point for global greenhouse gas mitigation initiatives. LongPath is a leading 24/7 real-time provider for monitoring methane leaks. APA adopted the LongPath system in the Fall of 2021 by commissioning several dozen sites, leading to low emissions.
For the first quarter ending March 31, 2022, APA’s total revenue increased 42.7% year-over-year to $2.67 billion. Its adjusted EBITDAX (Non-GAAP) grew 50.1% from its year-ago value to $1.71 billion, while its net income improved 385.3% from its prior-year quarter to $1.88 billion. The company’s EPS rose 432.4% from its year-ago value to $5.43.
Analysts expect APA's revenue to increase 48.2% year-over-year to $2.64 billion for the second quarter ending June 2022. The consensus EPS estimate of $2.55 represents a 264.8% improvement year-over-year for the second quarter ending June 2022. The stock has gained 81.5% year-to-date and 161.2% over the past nine months.
APA'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.
The stock also has an A grade for Momentum and Quality and a B for Value. Within the B-rated Energy - Oil & Gas Industry, it is ranked #4 of 101 stocks. To see additional POWR Ratings for Growth, Sentiment, and Stability for APA, click here.
Genco Shipping & Trading Limited (GNK)
Headquartered in New York, GNK is engaged in the ocean transportation of dry bulk cargoes worldwide. The company owns and operates dry bulk carrier vessels to transport iron ore, coal, grains, steel products, and other dry-bulk cargoes. GNK is well-positioned to benefit from soaring shipping costs amid the high inflation.
GNK’s total revenues increased 55.5% year-over-year to $136.23 million for the first quarter ending March 31, 2022. Its operating income grew 567.2% from its year-ago value to $42.09 million, while its net income amounted to $41.69 million, up 2000% from its prior-year quarter. The company’s EPS rose 1840% year-over-year to $0.97.
The $1.16 consensus EPS estimate represents a 55.1% improvement year-over-year for the second quarter ending June 2022. Analysts expect GNK's revenue to increase 30.8% year-over-year to $110.30 million for the second quarter ending June 2022. In addition, the company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters.
The company’s shares have surged 30.6% year-to-date and 38.1% over the past six months.
It is no surprise that GNK has an overall B rating, equating to Buy in our POWR Ratings system. GNK has a B grade for Growth, Momentum, and Quality. In the A-rated Shipping industry, it is ranked #18 of 46 stocks. Click here to see the additional POWR Ratings for GNK (Value, Stability, and Sentiment).
PBF Energy Inc. (PBF)
PBF and its subsidiaries are involved in refining and supplying petroleum products. The company has two operational segments, Refining, and Logistics. It produces gasoline, ultra-low-sulfur diesel, heating oil, diesel fuel, jet fuel, lubricants, petrochemicals, and asphalt, as well as unbranded transportation fuels and feedstocks, blending components, and other petroleum products. PBF is well-positioned to benefit from rising inflation as an energy company.
In April, Planet Based Foods Global Inc. announced a new distribution partnership with U.S. Foods Inc., a leading supplier of foodservice products throughout the United States. The company's popular plant-based options will be initially distributed by two of U.S. Foods' most important divisions, La Mirada and Corona, which supply various products to restaurants, business and industry, healthcare, and many key independent and multi-unit operators throughout the Southern California region.
In the first quarter ending March 31, 2022, PBF’s revenues increased 85.6% year-over-year to $9.14 billion. Its income from operations grew 86% from its year-ago value to $9.05 billion, while its adjusted EBITDA came in at 271.40 million compared to a loss of $190.90 million in the prior-year quarter. The company’s cash and cash equivalent stood at $1.43 billion for the three months ended March 31, 2022.
The consensus EPS estimate of $2.44 during the third quarter ending September 2022 represents a 1931.1% improvement year-over-year. Analysts expect PBF's revenue to increase 51.5% year-over-year to $10.45 billion for the second quarter ending June 2022.
The stock has gained 189.4% year-to-date and 264% over the past nine months.
PBF's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Momentum and a B for Growth and Value. Within the Energy - Oil & Gas industry, it is ranked #36.
In total, we rate PBF on eight different levels. Beyond what we've stated above, we have also given PBF grades for Sentiment, Quality, and Stability. Get all the PBF ratings here.
APA shares were trading at $46.56 per share on Tuesday afternoon, up $0.99 (+2.17%). Year-to-date, APA has gained 74.31%, versus a -21.18% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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