3 Value Stocks to Buy This Earnings Season

  • Value stocks perform slightly better than growth in times of red-hot inflation and high-interest rates.
  • Manulife Financial Corp (MFC): Record core earnings plus double digit growth in global wealth and asset management business in 2021
  • Western Midstream Partners (WES): Declining leverage means a strengthening balance sheet
  • Westlake (WLK): Benefits from the strength in residential construction and remodeling markets
value stock A large amount of SALE signs.
Source: akamakis / Shutterstock.com

Value stocks, our topic for today, are getting increased attention in the second quarter. 2022 is fast becoming the year when investors unload growth stocks, and instead search for safer heavens.

While companies are releasing their quarterly metrics, many investors are looking at shares that offer intrinsic value. Such names typically trade at a discount to what they are worth making most investors to allocate a portion of their portfolios to both growth and value names.

For example, the SPDR Portfolio S&P 500 Growth ETF (NYSEARCA:SPYG), which tracks the S&P® 500 Growth Index, is about flat within the last 12 months but has declines over 17% year-to-date (YTD). Meanwhile, the SPDR S&P 500 Value ETF (NYSEARCA:SPYV), which tracks the S&P 500 Value Index, is up 4.9% over the past year but has declined just 2.5% since January.

However, InvestorPlace.com readers should also remember that some stocks are cheap for a good reason, such as weak earnings growth. Thus, as always, further due diligence is crucial before investing.

With that information, here are three value stocks to buy this earnings season:

MFC Manulife Financial Corp $19.45
WES Western Midstream Partners $24.51
WLK Westlake $129.37

Value Stocks: Manulife Financial Corp (MFC)

Man in suit with hands over paper cutouts of family, car and home. Represents insurance.
Source: thodonal88 / Shutterstock.com

Our first value stock is the Canada-based life insurance firm Manulife (NYSE:MFC). The company operates in Asia, Canada and Europe, and primarily as John Hancock in the U.S.

Manulife reported fourth-quarter 2021 results on Feb. 9. Total new business value (NBV) increased from $489 million to $555 million, up 17% year-over-year (YOY). Total annualized premium equivalent (APE) sales were up 5%.

As a result, core earnings on a constant exchange basis were up 20% and reached $1.7 billion Meanwhile, global wealth and asset management (WAM) net inflows $8.1 billion  compared to $2.8 billion of Q4 2020. Finally, diluted core earnings per share was 84 cents vs. 74 a year ago.

The company has identified several strategic priorities. For instance, management wants to generate two thirds of core earnings from highest potential businesses, and achieve a less than 50% expense efficiency ratio in 2022. Investors will be watching the outcome of these efforts closely.

So far in 2022, MFC stock is up around 7.5%. Shares are trading at 7.41 times forward earnings, 1.03 times its book value and 4.95% forward annual dividend rate.

Meanwhile, the 12-month median price forecast for MFC stock is $24.36 We like the Manulife shares around these levels.

Western Midstream Partners (WES)

wes stock image of fuel being poured into a vehicle fuel system
Source: shutterstock.com/Me dia

Next up on the list of value stocks is Western Midstream Partners (NYSE:WES), a subsidiary of Occidental Petroleum (NYSE:OXY). WES processes and transports natural gas liquids (NGLs) and crude oil.

The energy group reported Q4 2021 figures on Feb. 23. Revenue increased more than 11% YOY and came in at $719.2 million. Adjusted EBITDA was $480.9 million. Net income attributable to limited partners was $238.2 million, or 58 cents per share, a decline of 6.5% compared to the prior-year quarter. Finally, the company generated $1.490 billion free cash flow in 2021.

This year, management expects to achieve adjusted EBITDA of $1.925 billion -2.025 billion and full year distributions of at least $2.00 per unit.

WES stock has returned 14.1% since the beginning of this year. It currently supports a hefty dividend yield of over 8.21%.

Meanwhile, shares are changing hands at 9.35 times forward earnings and 3.64 times trailing sales. Finally, the 12-month median price forecast for WES stands at $29.00. Despite the rally in the past several months, we believe midstream group deserves your attention.

Value Stocks: Westlake (WLK)

PVC pipes, Close-up., Westlake (WLK) is a major producer of PVC
Source: koosen / Shutterstock.com

Our final value stock for today is the chemical name Westlake (NYSE:WLK). It operates mainly in two segments: Performance & Essential Materials, including polyethylene, PVC, caustic soda, and chlorinated derivative materials, and Housing & Infrastructure Products, including pipes and fittings.

Westlake issued robust Q4 2021 results on Feb.22. Sales, EBITDA and net income figures of WLK were at record levels thanks to strength in residential construction, repair and remodeling markets.

Net sales grew almost 80% year over year to $3.5 billion. As a result, net income jumped from $123 million of Q4 2020 level to $661 million in the last quarter of 2021. Diluted EPS was $4.98 vs. 87 cents a year earlier. The company ended the year with $1.941 billion cash.

WLK stock is up 33% YTD and the dividend yield is 0.94%. Despite the run-up in price, shares still offer value. They are trading at 1.39 times trailing sales and 8.19 times its trailing P/E.

Finally, the 12-month median price forecast for WLK stands at $135.00. Interested readers could wait for short-term profit-taking before including Westlake in their portfolios.

On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.


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