June 6, 2022- Pfizer Inc. (NYSE:PFE) and Honeywell International Inc. (NASDAQ:HON)

 

The indices continue struggling to find some consistency. As a result, it’s becoming more and more imperative for investors to deeply research the best stocks to buy now.

Some days when logic says markets should go up, they go down. Other days when markets should reasonably go down, they go up. We’ve reached a point where good news is bad news, and bad news is good news.

For example, markets fell on Friday (June 3, 2022) because the jobs report was stronger-than-expected. Nonfarm payrolls added 390,000 in May compared to the consensus 328,000. Rather than cheering this, investors took it to mean that the Fed would stay aggressive.

On this data, coupled with Elon Musk’s “super bad feeling” about the economy, the Dow Jones fell 348.58 points or 1.1%. The S&P 500 also slipped 1.6%, while the ever-volatile Nasdaq Composite fell nearly 2.5%.

The S&P 500 fell 1.2% for the week, as the Dow and the Nasdaq each lost about 1%. The indices simply could not keep up with the end of May rally.

Markets could move significantly in the coming week as investors brace for the latest CPI inflation report on Friday (June 10, 2022). Companies such as Campbell Soup, Nio, and DocuSign will also report earnings. AMD, Wendy’s, and MongoDB will host Investor Days, and Apple will host its highly-anticipated developer conference.

With the potential for this market to see volatility based on economic fears, geopolitical worries, and COVID, two of the best stocks to buy now are Pfizer Inc. (NYSE:PFE) and Honeywell International Inc. (NASDAQ:HON)

Pfizer is on this list for obvious reasons. Love them or hate them, they are about as blue-chip as blue-chip gets for pharma companies. Pfizer was the first enterprise to have an approved COVID vaccine and COVID antiviral. But beyond this, Pfizer has a treasure trove of legacy assets, rock-solid fundamentals, consistent dividends, and stability. Its 10.75% analyst upside doesn’t hurt either.

Not to mention, this monkeypox scare has caused a renewed interest in pharma and biotech stocks.

Then there’s Honeywell, a manufacturing conglomerate that produces many kinds of industrial products. On June 2, 2022, the stock made headlines after making J.P. Morgan’s monthly top stock ideas list. This list consists of stocks that JPM equity analysts believe in based on near-term factors, growth, value, or potential as a short. Honeywell made this list based on growth. Its 11.69% analyst upside reflects this.

So without further ado, here is why PFE and HON are June 6, 2022’s best stocks to buy now.

Pfizer Inc. (NYSE:PFE)

 

The pharma giant is a model of stability coupled with growth potential. A 10.75% analyst upside indicates more room to run.

Never invest with emotions. If this isn’t the number rule of investing, it should be. Pfizer is a polarizing stock that invokes passionate thoughts from people. And these responses have nothing to do with its stock performance.

Until 2020, Pfizer was a pharmaceutical giant best known for drugs such as Viagra. Nowadays, it’s best known as the pioneering company that unveiled the first COVID-19 vaccine and the first COVID antiviral pill. For better or worse, Pfizer currently has a microscope on it.

Whether or not you are a believer in its vaccine is irrelevant. It is undeniable that Comirnaty, its COVID vaccine, has been a boon for the Company’s revenues. Keep in mind that this product didn’t even exist until the tail end of 2020. In 2021, it was Pfizer’s top product and generated $36.8 billion in alliance revenues and direct sales.

 

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(Source: Statista)

 

As COVID also continues evolving into an endemic annoyance, boosters and antivirals like Pfizer’s Paxlovid could offer more recurring revenue than initially thought. According to the White House, vaccination of young children could also begin ‘in earnest’ by June 21.

Now that Monkeypox is becoming a concern, there is an additional buzz around Pfizer.

Perhaps that’s why Finbox projects Pfizer’s revenue to see a 9.0% 5-year CAGR and net income growth of 70.6%.

If Pfizer’s latest earnings report says anything, it says that Finbox may not be that far off. Pfizer reported Q1 earnings on May 3, 2022, and beat on its top and bottom lines. Adjusted EPS came in at $1.62 per share vs. $1.47 expected, and revenue at $25.66 billion vs. $23.86 billion expected.

During the quarter, Pfizer also said it sold $13.2 billion of its Covid vaccine and $1.5 billion of its antiviral treatment, Paxlovid.

Moreover, the Company reported mind-blowing growth figures.

  • Revenue grew 77% to more than $25 billion year-over-year.
  • Net income increased 61% over Q1 2021 to $7.8 billion.
  • Adjusted first-quarter earnings grew 72% to $1.62 per share year-over-year.

 

Yet Pfizer refuses to box itself into an exclusive COVID play. It continues expanding its reach to other medical needs. For example, its latest $11.6 billion acquisition of Biohaven positions Pfizer with a complete portfolio of potentially disruptive migraine treatments.

Pfizer is a long-time favorite stock for value investors and remains that way despite its tantalizing growth potential. First of all, the stock remains more than 11% below its early-year highs.

 

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Pfizer’s multiples and valuation imply that the stock is severely undervalued and offers a robust free cash flow yield. These figures include an 11.7x trailing P/E, 7.7x forward P/E, and 0.09 PEG.

Investors can also count on consistent yields, with a 3.0% dividend yield projected to see a 4.6% 5-year CAGR.

Additionally, Pfizer’s cash flows can also sufficiently cover interest payments. It also boasts strong margins indicating efficiency and profitability, such as its

  • 6% ROA
  • 6% unlevered ROA
  • 6% ROCE
  • 5% gross margin
  • 7% operating margin

Barchart also rates Pfizer as an 88% BUY based on the following technical indicators.

  • 20 Day Moving Average
  • 20 – 50 Day MACD Oscillator
  • 20 – 100 Day MACD Oscillator
  • 20 – 200 Day MACD Oscillator
  • 50 Day Moving Average
  • 50 – 100 Day MACD Oscillator
  • 50 – 200 Day MACD Oscillator
  • 100 Day Moving Average
  • 150 Day Moving Average
  • 200 Day Moving Average
  • 100 – 200 Day MACD Oscillator

TipRanks notes that 15 Wall Street analysts offered 12-month price targets for Pfizer in the last 3 months. The average price target is $58.92, with a high forecast of $76.00 and a low forecast of $50.00. The average price target represents a 10.75% upside from the June 3, 2022, close of $53.20

PFE’s year-to-date low and high are $45.40 and $59.80, respectively.

 

Honeywell International Inc. (NASDAQ:HON)

 

Investors can’t ignore this industrial giant’s 11.69% analyst upside and inclusion in J.P. Morgan’s top stock ideas for the month.

Honeywell is a prominent player as an industrial conglomerate. It operates worldwide and boasts business segments in Aerospace, Building Technologies, Performance Materials & Technologies, and Safety & Productivity Solutions.

The bottom line is Honeywell is everywhere in more ways than one.

Keep an eye on this stock as it continues to trade with solid fundamentals and attractive multiples amidst bullish catalysts. Several weeks ago, for instance, Airbus selected Honeywell to produce the aircraft maker’s upgraded flight management system.

Pay close attention on Thursday, June 16, 2022, as well. The Company will host a leadership webcast for investors focused on sustainable building solutions.

So with such stable and diversified operations, it’s surprising to see HON -12.2% below January 13, 2022’s high of $221.89.

 

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Especially when it’s evident that Honeywell’s fundamentals indicate that cash flows can sufficiently cover interest payments.

The Company also boasts strong margins indicating efficiency and profitability, such as its

  • 3% ROA
  • 4% unlevered ROA
  • 9% ROCE
  • 9% gross margin
  • 0% operating margin

Moreover, Honeywell offers a solid 2.0% dividend yield projected to grow at a 5-year CAGR of 8.1%.

On April 29, 2022, Honeywell also raised its full-year Adjusted EPS Range and the midpoint of its sales guidance. Finbox data corroborates this based on a net income growth forecast of 7.5%, expected to average 10.4% over the next five fiscal years.

Additionally, on the technical side, Barchart sees its 20 Day Moving Average, 50 Day Moving Average, and 100 Day Moving Average as BUY signals.

According to Tipranks, 10 Wall Street analysts offered 12-month price targets for Honeywell International in the last 3 months. The average price target is $217.60, with a high forecast of $235.00 and a low forecast of $194.00. The average price target represents an 11.69% upside from June 3, 2022’s closing price of $194.82.

Mizuho Securities notably has a street-high price target of $235 and recently maintained a BUY rating.

HON’s year-to-date low and high are $174.42 and $221.89, respectively.