European shares have recently risen, driven by soft business activity data that strengthens the case for more monetary easing by the European Central Bank (ECB) this year. As the economy gradually finds its footing, adding fundamentally sound European companies such as Novartis AG (NVS), Unilever PLC (UL), and Siemens Aktiengesellschaft (SIEGY) to your watchlist could be wise.
In early 2024, the euro area saw modest growth, with GDP expanding by 0.2% in the second quarter. While this may not seem like much, the fact that the economy has shifted from stagnation to growth is a promising signal for investors. However, this recovery has been uneven. While sectors like exports and government spending have bolstered growth, domestic demand remains sluggish, with consumers hesitant and businesses cautious about new investments.
As interest rates fall, the cost of borrowing will decrease, encouraging both consumers and businesses to start spending more freely. Christine Lagarde, President of the ECB, expressed optimism that as real incomes rise and inflation cools, we could see stronger consumption in the coming years. The ECB projects the economy to grow by 0.8% in 2024, 1.3% in 2025 and 1.5% in 2026.
Moreover, with inflation dropping to 2.2% in August 2024 and further declines expected due to falling energy prices, consumer spending could increase as savings become less attractive. This, in turn, could drive future economic growth.
With that in mind, let’s look at the fundamental aspects of the above-mentioned stocks in detail:
Novartis AG (NVS)
Headquartered in Basel, Switzerland, NVS researches, develops, manufactures, and markets healthcare products worldwide through two segments: Innovative Medicines and Sandoz.
On August 28, the company’s subsidiary Novartis Pharma AG entered into a global licensing agreement with Lindy Biosciences to access its innovative microglassification technology for biologic drugs. This partnership grants NVS exclusive global rights across multiple biologic targets, focusing on developing high-concentration, self-administered treatments.
The collaboration aims to improve patient outcomes and compliance by enabling at-home treatments. Further, it strengthens the company’s position in innovative drug delivery and enhances its ability to offer patient-friendly solutions.
NVS pays an annual dividend of $3.74 per share, translating to a yield of 3.25% at the current price level, while its four-year average yield is 3.49%. Its dividend payouts have increased at a 7.3% CAGR over the past three years and a 6.9% CAGR over the past five years.
In the fiscal second quarter that ended June 30, 2024, NVS’ net sales increased 9.4% year-over-year to $12.51 billion. Its operating income from continuing operations grew 43% from the year-ago value to $4.01 billion. The company’s net income and EPS came in at $3.25 billion and $1.60, representing a 40.1% and 44.1% year-over-year improvement, respectively. In addition, its free cash flow stood at $4.62 billion, up 40.9% year-over-year.
The consensus EPS estimate of $1.96 for the fiscal third quarter (ended September 2024) represents a 12.5% improvement year-over-year. The consensus revenue estimate of $12.52 billion for the same quarter represents a 6.3% increase from last year. The company has an impressive surprise history; it surpassed the consensus revenue estimates in three of the trailing four quarters.
NVS shares have surged 18.2% over the past six months to close the last trading session at $115.02.
NVS’ bright prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
NVS has a B grade for Growth, Value, Stability, Sentiment, and Quality. It is ranked #2 out of 159 stocks in the Medical - Pharmaceuticals industry. Click here to see NVS’ ratings for Momentum.
Unilever PLC (UL)
UL is a United Kingdom-based fast-moving consumer goods (FMCG) company that operates through five segments: Beauty & Wellbeing; Personal Care; Home Care; Nutrition; and Ice Cream.
In July, the company announced the sale of its stake in Qinyuan Group to Yong Chao Venture Capital Co., Ltd., aiming to refine its portfolio for higher-growth sectors under its Growth Action Plan. Qinyuan.
In the same month, UL also sold its water purification business, Pureit, to A. O. Smith, enhancing its global water technology offerings.
Such transactions enable the company to focus on more lucrative opportunities while leveraging the expertise of specialized companies to enhance the growth potential of its former water purification brands.
For the first half of the year ended June 30, 2024, UL’s turnover increased 2.3% year-over-year to €31.12 billion ($34.74 billion). Its operating profit rose 7.8% from the prior year’s quarter to €5.95 billion ($6.64 billion), while its net profit stood at €4.02 billion ($4.48 billion), up 3.5% year-over-year. Also, its earnings per share for the period came in at €1.47, representing an increase of 5.4% year-over-year.
Analysts expect UL’s revenue for the current year (ending December 2024) to grow 5.1% year-over-year to $67.50 billion, while its EPS for the same period is expected to increase 11.2% from the prior year to $3.12. For the fiscal year 2025, both revenue and EPS are anticipated to register a year-over-year growth of 3.6% and 8.5%, respectively.
Over the past nine months, the stock has gained 32.8%, closing the last trading session at $64.96.
UL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Stability and Sentiment. UL is ranked #9 out of 55 stocks in the B-rated Consumer Goods industry. Click here to see the additional UL ratings (Growth, Value, Momentum, and Quality).
Siemens Aktiengesellschaft (SIEGY)
Headquartered in Munich, Germany, SIEGY is a leading technology company that emphasizes automation and digitalization worldwide. The company operates through Digital Industries; Smart Infrastructure; Mobility; Siemens Healthineers; and Siemens Financial Services (SFS) segments.
On September 26, the company’s Mobility segment signed a framework agreement with RS Lease, Slovakia’s leading private lessor of railway vehicles, for the delivery of up to 65 Vectron locomotives. The agreement includes the swift delivery of 30 Vectron MS locomotives, with an option for an additional 35 locomotives across Vectron Multi System and Vectron Dual Mode variants.
This deal is expected to boost SIEGY’s presence in Europe and drive revenue growth through increased demand for its Vectron locomotives.
In the same month, Siemens Mobility and U.S. Senate Majority Leader Chuck Schumer, Brightline West, announced plans to establish North America’s first high-speed rail production facility in Horseheads, New York. This $60 million investment will produce the American Pioneer 220 high-speed trains, set to operate on the Las Vegas to Southern California route. Production at the facility is expected to begin in 2026.
For the fiscal 2024 third quarter that ended June 30, 2024, SIEGY’s revenue increased 4.2% year-over-year to €18.90 billion ($21.09 billion). The company’s gross profit rose 9% from the year-ago value to €7.75 billion ($8.65 billion). Its income from continuing operations came in at €2.16 billion ($2.41 billion), up 55.7% from the prior year’s quarter.
In addition, SIEGY’s net income for the quarter amounted to €2.13 billion ($2.38 billion), or €2.48 per share, representing a 48.1% and 55.9% year-over-year growth, respectively. Its free cash flow from continued and discontinued operations came in at €2.12 billion ($2.37 billion).
Street expects SIEGY’s revenue for the fiscal year (ending September 2024) to increase 2% year-over-year to $86.02 billion. The company’s EPS for the current year is expected to grow 70.9% year-over-year to $9.68. Moreover, the company topped the EPS estimates in each of the trailing four quarters, which is excellent.
Shares of SIEGY have surged 38.9% over the past year to close the last trading session at $101.06.
It is no surprise that SIEGY has an overall rating of B, equating to Buy in our POWR Ratings system. It also has a B grade for Value, Stability, and Sentiment. Out of 34 stocks in the B-rated Industrial – Manufacturing industry, it is ranked #3.
In addition to the POWR Rating grades I’ve just highlighted, you can see SIEGY’s Growth, Momentum, and Quality ratings here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
NVS shares were trading at $114.29 per share on Tuesday afternoon, down $0.73 (-0.63%). Year-to-date, NVS has gained 15.94%, versus a 20.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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