According to the Fed minutes released Wednesday, the regulating body was en route to delivering a 50bp hike when it met on March 21-22. The strength of the labor market was clearly not expected and inflation was still well above target. However, the banking crisis and increased uncertainty going forward finally convinced them that a 25bp hike would probably be a better idea. 

The post-meeting statement also had some language changes with “ongoing increases” in rates becoming more hikes “may be appropriate.” So while this means that they will continue to carefully monitor the situation, the broad expectation is for another 25bp hike in May followed by a lengthy freeze, before they’re moved down again.

The other significant thing that came to light was the Fed’s expectation of a mild recession starting this year and correcting over the next couple of years. 

The CPI data shows that the Fed’s actions are having the desired impact even if the labor markets refuse to cool. The PPI data is also encouraging (2.7%, down from 4.9% in Feb, the lowest rate since Jan 2021). Particularly because companies are the ones absorbing the labor cost inflation. The moderation in oil prices helped this time round although there could be some changes in the future, stemming from the recent OPEC cut.

At the same time, mortgage rates (30-year fixed) have started coming down again to woo buyers who have already locked in attractive rates the last couple of years. For new owners, inventory, while growing, is still too low and affordability is still too much of an issue.

Inventory rebalancing also continues in the technology sector, with the situation expected to improve gradually, as we move through the year. 

Earnings estimates have been coming down all through 2022 and for most companies, prices have followed suit.

Since we’re no better at looking into the crystal ball today than we were last year, it makes sense to follow some principles of safety if we want to play this market. 

With that in mind, I’ve picked four stocks that analysts are relatively positive about today as well as for the long term. The deal is further sweetened by the dividends you get to earn. All these stocks also carry a Zacks Rank #1 (Strong Buy) or #2 (Buy) and Value Score of A or B, suggesting a reasonable valuation. They’re also set to beat earnings estimates this quarter, which should support prices.

Arcos Dorados Holdings Inc. (ARCO Quick QuoteARCO - Free Report)

Montevideo, Uruguay-based Arcos Dorados is a franchisee of McDonald's restaurants. As Latin America’s largest restaurant chain and the world’s largest independent McDonald’s franchisee, the company has the exclusive right to own, operate and grant franchises of McDonald's restaurants. It currently operates or sub-franchises 2,300 restaurants across 20 countries and territories in Latin America and the Caribbean.

One of the key elements of its success in recent times is its Three-Ds strategy (Drive-thru, Delivery and Digital), which has helped it cater to changing customer preferences as they adjusted with pandemic-related restrictions. The company has also executed on its plan to physically upgrade a number of its restaurants under the Experience of the Future (EOTF) model.

Both strategies have helped strengthen the brand and increase its appeal to customers. Ever since the reopening, footfall at restaurants has steadily increased. Management appears confident that the company has taken an average 4 percentage points of share across all major markets in which it operates.

The 2023 estimate has increased 5 cents (around 8%) in the last 60 days although the 2024 estimate has come down about 4 cents during this period. Analysts, however, expect revenue to continue growing at around 8% both this year and next, with earnings declining this year and growing over 11% in the next.

There are three reasons we may consider the shares to be relatively safe at this point:  First, according to our proprietary model, the Zacks Rank #1 stock with earnings ESP (expected surprise prediction) of 0% has an above average chance of beating estimates when it reports. Therefore, it will likely not be hammered as much as many other stocks.  Second, analysts expect the company to grow 7.8% in the long term, which makes it worth holding in these uncertain times. And if such holding still makes you nervous, there’s also a small dividend that currently yields about 2.67%.

Additionally, according to our style score system, the stock has an A each for Value and Growth, making it suitable for most investors.

Ageas SA/NV (AGESY Quick QuoteAGESY - Free Report)

Brussels, Belgium-based Ageas offers property, casualty and life insurance products, pension products, and reinsurance products in Europe and Asia. The company serves individuals, as well as small, medium and large companies through independent broker and bank channels.

The European non-Life business and Asia business (particularly China) were the drivers in the last quarter. Management is optimistic about delivering on its Impact24 impact investing goals and believes that the company is on track to deliver on its sustainability targets.

Analysts agree that the company should grow strongly in the next couple of years. They’ve taken their 2023 earnings estimate up $1.45 (27.6%) and the 2024 estimate up $2.13 (42.4%) in the last 60 days. Their long-term estimate is for 8.1% growth.

What’s more, the company pays a dividend that yields 6.95%.

The Zacks Rank #1 and earnings ESP 0.0% means it has an above average chance of beating estimates this quarter.

Zacks has allotted an A each for Value and Momentum.

HSBC Holdings plc (HSBC Quick QuoteHSBC - Free Report)

London, UK-based HSBC provides banking and financial services worldwide. The company provides services through 3 segments: Wealth and Personal Banking services, which are provided to individuals (including those with high net worth); Commercial Banking services to SMBs and larger companies; and Global Banking and Markets services to government, corporate and institutional clients, as well as private investors.

HSBC’s business restructuring initiatives include the sale of its American, Canadian and French retail banking businesses, and will help it focus on the more profitable Asia business. The higher interest environment and decent loan demand are positive. The strong financial position also makes this company attractive.

The 2023 estimate has increased 37.3% in the last 60 days to $6.66 while the 2024 estimate increased 23.6% to $5.92. The long-term growth rate assigned by analysts is 17.0%.

While its regular dividend yields 4.46%, management has announced a special dividend of $0.21 a share as a priority use of the proceeds generated from the sale of the Canada business.

The Zacks Rank #1 and ESP of 0.0 also point to the likelihood of an earnings beat this quarter.

Zacks has allotted a B each for Value and Momentum.

Veritiv Corporation

Atlanta-based Veritiv operates as a business-to-business provider of value-added packaging products and services, facility solutions, and print based products and services within the U.S. and abroad. It serves manufacturing, food and beverage, wholesale and retail, healthcare, transportation, property management, higher education, entertainment and hospitality, commercial printing, and publishing sectors.

While the company continues to have a well-diversified portfolio, it has been adjusting its customers with a focus on higher-growth opportunities while exiting businesses with lower growth prospects. This year, management expects to continue this re-alignment of priorities and execution of its commercial and operational efficiency initiatives while also investing in value-added and sustainable solutions that solve complexities for customers.

While current analyst estimates represent earnings declines in both 2023 and 2024, its worth noting that the estimate revisions trend is very encouraging. The 2023 estimate for example has increased $2.55 (15.2%) in the last 60 days. In the long term, analysts expect the company to grow 15.6%.

Zacks has a #2 rating on the stock and the A grade for both Value and Growth is also good. The rank coupled with an ESP of 0.0% points to a strong probability of an earnings beat this quarter.

Veritiv’s dividend yields 2.03%.

One-Month Price Performance

Image Source: Zacks Investment Research