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During the past three months, the S&P 500 index pulled back 11% due to the uncertain economic and geopolitical outlook. While most of our stocks also pulled back with the market, the following high-quality stocks generated modest total returns during the same time period.
 

Genuine Parts Genuine Profits (GPC)

Genuine Parts reported record first-quarter sales that motored ahead 19% to $5.3 billion with net income increasing 13% to $246.8 million and EPS up 15% to $1.72. By segment, Automotive Parts sales increased 11% to $3.3 billion on a 10% increase in comparable sales while Industrial Parts sales increased 34% to $2.0 billion, reflecting an 18% contribution from the KDG acquisition and a 16% increase in comparable sales. Despite higher than anticipated inflation, segment operating profits increased 50 basis points to 8.6%, boosted by price increases, ongoing expense management, and execution of operational initiatives to improve productivity.

During the quarter, the company returned $189 million to shareholders through dividend payments of $116 million and share repurchases of $73 million. The company announced a 10% increase in the 2022 dividend to $3.58 per share, marking the 66th consecutive increase in the dividend that has been paid every year since the company’s founding in 1928. Given the strong first quarter, Genuine Parts raised its 2022 guidance with sales now expected to increase in the 10%-12% range with EPS in the $7.56-$7.71 range. Free cash flow is expected in the $1.2-$1.4 billion range. Over the last 22 years, Genuine Parts’ stock has provided genuine profits to long-term investors with a 518% gain. Buy.
 

Johnson & Johnson Healthy Gains (JNJ)

Johnson & Johnson reported that first-quarter revenues increased 5% to $23.4 billion with net earnings and EPS each down 17% to $5.1 billion and $1.93, respectively. Net earnings were down primarily due to an increase in the cost of goods sold, marketing expenses, and research and development expenses.

Worldwide Pharmaceutical sales increased 6% to $12.8 billion, driven by market share gains in Oncology, Immunology, and Neuroscience. Sales increased 5.9% in Medical Devices to $6.9 billion with growth driven by the COVID-19 market recovery driving market expansion and innovation. Worldwide Consumer Health Sales decreased 1.5% to $3.5 billion due to supply constraints in Skin Health/Beauty and Baby Care. These declines were partly offset by a 15% increase in over-the-counter products.

During the quarter, the company generated approximately $3.4 billion in free cash flow, invested $3.5 billion in research and development to advance its promising pipeline, and paid $2.8 billion in healthy dividends to shareholders.

Because of foreign exchange headwinds, Johnson & Johnson lowered 2022 guidance for estimated reported sales to $94.8 billion to $95.8 billion, representing a 3.8% to 4.8% increase over the prior year. Adjusted EPS for 2022 is expected in the range of $10.15 to $10.35, a 3.6% to 5.6% increase over the prior year. Over the last 22 years, Johnson & Johnson’s stock has provided a nearly fivefold gain. Buy.

ADP Distributed $2.7 Billion (ADP)

ADP reported that third-quarter fiscal 2022 revenues increased 10% to $4.5 billion with net earnings increasing 15% to $929 million as the employment market remained strong. Interest on funds held for clients increased 10% to $118 million on a 15% increase in Average Client Funds to $38.1 billion. During the quarter, ADP generated $2.1 billion in free cash flow with the company distributing $2.7 billion to investors through dividends of $1.2 billion and share repurchases of $1.5 billion. Given the strong fiscal third quarter and the improving U.S. economy, ADP raised its fiscal 2022 guidance with revenue now expected to increase in the 9% to 10% range and EPS growth of 14% to 16%. ADP’s stock price has provided a 144% gain over the last six years along with generous and steadily growing dividends. Hold.
 

UnitedHealth Expects $24 Billion In Cash Flow (UNH)

UnitedHealth Group reported first-quarter revenue rose a healthy 14%, to $80.1 billion with net earnings up 3% to $5.0 billion. Management’s response to inflation is an innovation that increases productivity in the business. Digital tools, virtual visits, and home care reduce costs by 15% which enables the company to lower premiums for patients. During the quarter, the company paid $1.4 billion in dividends and repurchased $2.5 billion of its stock. In 2022, operating cash flow is expected to approximate

$24 billion. Return on equity of 27.8% in the quarter reflects the firm’s consistent and diverse earnings profile and efficient capital structure. Given the strong start to the new year, UnitedHealth increased its full-year net earnings outlook to $20.30- $20.80 per share. During the past three years, UNH has provided a healthy 116% total return. Hold
 

Quarterly Rating Change From Buy To Hold

Intel Watching The Chips (INTC)

Intel reported first-quarter revenue declined 7% to $18.4 billion with net income and EPS up more than 140% to $8.1 billion. Excluding unrealized gains in equity investments, restructuring charges, and other special items, net income and EPS declined 35% to $3.59 billion and $0.87, respectively.

During the quarter, Intel generated $1.3 billion in free cash flow with the company returning $1.5 billion to shareholders through dividend payments. Intel ended the year with $38.7 billion in cash and investments, $32.8 billion in long-term debt, and $103.1 billion in shareholder equity. For 2022, Intel expects revenues of about $76.0 billion, adjusted EPS of $3.60, and a negative cash flow of $1 to $2 billion after an estimated $27 billion in capital expenditures. Given declining sales, earnings, and negative cash flows, we are placing Intel on hold to watch if business fundamentals improve. Hold.
 

Ross Stores Clearance Sale (ROST)

Ross Stores reported first-quarter sales declined 4% to $4.3 billion with net income falling 29% to $338 million. Traffic trends, which started strong, dropped as the quarter progressed as discretionary spending by customers was squeezed by food and fuel inflation. During the quarter, Ross returned $349 million to shareholders through dividends of $109 million and $240 million of share repurchases. The company remains on pace to repurchase $950 million of its shares during the full year. With the company now expecting sales and earnings to be lower for the full year, we are placing Ross Stores on hold despite the clearance sale in the stock price which makes the stock appear undervalued. Hold.
 

Quarterly Rating Change From Hold To Buy

Accenture Double-digit Growth (ACN)

Accenture reported second-quarter revenues increased 24% to $15 billion with net income increasing 13% to $1.6 billion. Accenture raised its business outlook for the full fiscal 2022 year. Management expects full-year local currency revenue growth of 24% to 26% with double-digit earnings growth and EPS in the range of $10.61 to $10.81. Free cash flow for 2022 is expected in the range of $8 billion to $8.5 billion with the company returning at least $6.5 billion to shareholders through dividends and share repurchases. Buy.

Apple $90 Billion Share Buyback (AAPL)

Apple reported second-quarter revenue rose 9% to a record $97.3 billion with net income up 6% to $25.0 billion. Apple set an all-time revenue record for Services, which jumped 17% to $19.8 billion with more than 825 million paid subscriptions, which increased by 165 million in the last 12 months. March quarter revenue records were set by iPhone with revenues ringing up a 6% gain to $50.6 billion; Mac with a 15% increase in revenues to $10.4 billion; and Wearables, Home, and Accessories which had sales tick up 12% to $8.8 billion.

Free cash flow increased 23% during the first half of the year to $69.8 billion with the company paying $7.3 billion in dividends and repurchasing $43.1 billion of its common shares.

Given the company’s strong financial position with nearly $193 billion in cash and investments as of quarter-end, the company announced a 5% increase in its dividend and an increase of $90 billion to its existing share buyback program. Buy.
 

Factset Increased Dividend 8.5% (FDS)

FactSet announced that its Board approved an 8.5% increase in the regular quarterly cash dividend from $0.82 per share to $0.89 per share. The increase marks the twenty-third consecutive year the company has increased dividends, demonstrating its commitment to providing value to shareholders. Buy.
 

Microsoft Free Cash Flow Up 19% (MSFT)

Microsoft reported third-quarter revenues increased 18% to $49.4 billion with net income up 8% to $16.7 billion. Year-to-date, free cash flow increased 19% to $47.4 billion. Microsoft paid $13.5 billion in dividends and repurchased $24 billion of its common stock. Microsoft ended the quarter with $104.7 billion in cash and investments. Buy.

Raytheon $154 Billion Backlog (RTX)

Raytheon reported first-quarter revenues rose 3% to $15.7 billion with net income increasing 43% to $1.1 billion. Backlog at the end of the quarter was $154 billion, including $92 billion from commercial aerospace and $62 billion from the defense. The company returned nearly $1.5 billion to shareholders in the first quarter through dividends of $745 million and share repurchases of $743 million. Buy.
 

General Dynamics Flying High With Gulfstream (GD)

General Dynamics reported that first-quarter revenues were relatively flat at $9.4 billion with net earnings up 3% to $730 million. Aerospace backlog grew to the highest in more than a decade, driven by strong Gulfstream demand. Free cash flow during the quarter was extremely strong at $1.8 billion. Buy.