The stock market is enjoying some holiday cheer. Amid signs that inflation is letting up and the Federal Reserve may finally put an end to its rate hikes, traders are piling into all sorts of investments right now.
That might leave bargain shoppers wondering what’s left at a good price today. Fear not. There are still some great values to be had this winter. These are three top-rated value stocks that have great prospects for 2024 and beyond. All are Morningstar 5-star stocks, meaning that they are among their analysts’ most compelling value picks going forward.
Pfizer (PFE)
Pfizer (NYSE:PFE) is one of the world’s largest pharmaceutical companies. It has a track record dating back to 1849 and has developed countless blockbuster prescription drugs throughout its history.
Its most recent was its COVID-19 vaccine, which led to a record run of revenues and profits for Pfizer. Indeed, Pfizer’s revenues skyrocketed from $41 billion in 2019 to a jaw-dropping $100 billion in 2022. Not surprisingly, however, as the pandemic is largely behind us, demand for vaccines has plunged. In sympathy, PFE stock has given back all its gains and is actually trading about 20% lower now than it was prior to the onset of the pandemic.
This seems like a severe overreaction. While vaccine sales have tapered off, Pfizer reinvested the profits wisely.
It is now set to generate about $60 billion annually in revenues going forward – the business is way larger today than it was in 2019, even if the stock is selling at a lower price. PFE stock has dropped 38% over the last year alone. This has made it a compelling value and also driven the firm’s dividend yield up to 5.4%. Morningstar believes shares are worth $48 compared to today’s $30 price.
Medtronic (MDT)
Medtronic (NYSE:MDT) is a global medical devices company. It has a long history in the cardiology space, and has since broadened its medical device line-up to cover a wide range of ailments and injuries.
It’s been a rough couple of years for the medical device industry. First, the pandemic caused many folks to delay elective surgeries, which in turn lowered revenues for device makers. Then, once hospitals returned to normal hours, supply chain shortages made it difficult to produce enough devices to meet demand at an acceptable cost.
And now, adding to the worries, the GLP-1 weight loss drugs have caused investors to shun device makers due to the possibility that a decline in obesity will lead to fewer surgeries.
However, it appears the narrative is finally turning. Medtronic’s recent quarterly earnings were much stronger than expected, with the firm reporting upbeat numbers across the board and raising guidance.
Perhaps most importantly, the firm’s diabetes-related treatment revenues jumped and hit new highs, which should ease concerns about the impact of the GLP-1 drugs on treatment volumes. MDT stock has jumped over the past month but remains undervalued. Morningstar puts fair value at $112 versus today’s $79 stock price.
Verizon Communications (VZ)
Verizon Communications (NYSE:VZ) is one of America’s three primary telecom providers. Income investors have long counted telecommunications firms for their consistent cash flows, recession-resistant nature, and large dividend payouts.
These beliefs have come into question over the past few years, however. Rival AT&T (NYSE:T) went on an acquisition spree that left it heavily indebted. It ultimately had to sell assets and slash its dividend to reposition the firm going forward.
Investors have feared that Verizon might fall into the same trap as AT&T. But the situations are actually quite different. Verizon has had a more prudent M&A strategy over the years. The company has maintained a better balance sheet and a credit rating of either A- or BBB+ depending on the issuing agency.
The firm’s heavy spending has been on core assets such as its 5G rollout. Admittedly, 5G has been slow to deliver expected returns on investment, but it’s only a matter of time until it pays off given the inexorable climb in demand for mobile data.
Verizon’s management has signaled that it is through the worst of its CAPEX cycle and that spending will come down starting in 2024. This combined with a stabilization in interest rates and the firm’s steady profitability should lead the company’s stock price back to a more favorable trajectory next year. Morningstar believes shares are worth $54 each compared to today’s $37 stock price. And VZ stock pays a massive 7.1% dividend yield.
On the date of publication, Ian Bezek held a long position in VZ and MDT stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
