AT&T AT&T (NYSE: T) just posted quarterly results whereby it grew revenues, earnings per share (EPS), and cash flows by double digits. However, concerns revolving around M&A, debt, and cord cutting have pushed the stock's valuation down to generational lows. AT&T is trading for less than 9x earnings while its long-term average price to earnings ratio is roughly 15x. Source: F.A.S.T. Graphs United Parcel Service United Parcel Service (NYSE: UPS) just posted 7.9% revenue growth, in-line earnings growth, and raised its free cash flow guidance. This earnings report wasn't great, but I also don't think it should have sparked a sell-off in UPS shares. UPS's recent sell-off has driven its P/E multiple down to 15x. The company's long-term average P/E multiple is 22.5x. UPS hasn't traded for 15x earnings since 2011. Source: F.A.S.T. Graphs Caterpillar Caterpillar (NYSE: CAT) recently beat on the top and bottom lines, posting 18.4% revenue growth. This is fantastic growth for such a mature company, yet the market sold off CAT shares and now they're trading for less than 12x earnings. Caterpillar's long-term average P/E ratio is 17x. Caterpillar hasn't traded this cheaply since 2013. Source: F.A.S.T. Graphs Northrop Grumman One of the most impressive earnings reports that I saw this quarter came from Northrop Grumman (NYSE: NOC). The company had a big EPS beat and posted 23.1% sales growth. Northrop increased guidance and announced a share buyback. However, shares sold off. NOC shares are now trading in-line with their long-term average P/E multiple of 15x. I have a hard time believing that a company posting numbers like these deserves a sub-market multiple. Source: F.A.S.T. Graphs With all of this being said, I think it's important to echo the common risk-related mantra, "past results do not indicate future returns." However, when it comes to high-quality blue-chip names, predictability is the name of the game. Sure, from time to time a well-known company is disrupted and the market was right to sell-off the stock. In my personal experience, though, I've found that more often than not, it's business as usual after a sell-off. A company doesn't become best-in-breed on accident. Over time, blue-chips build competitive moats around themselves with the cash that their products and services generate. Cash attracts talent and talent produces results. This is why I'm more than happy to set fear and anxiety aside during market sell-offs and buy the dips in the blue-chip space. An analyst with an uncanny knack for spotting investment value is my colleague Jim Fink, chief investment strategist of Options for Income. Jim's team recently put together a free tutorial that walks you through one of his live trades. This presentation demonstrates how you can collect $1,732.05 in under two minutes! Watch it by clicking here. |
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