As the Federal Reserve prepares for another interest rate hike, the economy is expected to face a recession. Experts suggest selling Owens & Minor, ASOS, and Kaleyra before it’s too late. Here’s why:
- With the hike in interest rates, tighter lending standards will make it difficult for consumers and businesses to borrow money.
- Inflation is still high, with core consumer prices rising 0.4% sequentially and 5.6% year-over-year, as per March’s Consumer Price Index.
- The Federal Reserve’s minutes indicate a mild recession is likely to start later this year, with a recovery over the next two years.
- Owens & Minor, Inc. (OMI) operates as a healthcare solutions company. It’s trailing-12-month gross profit margin is 67% lower than the industry average, while its adjusted EPS declined 65.4% year-over-year to $0.28.
- ASOS Plc (ASOMY), the online fashion retailer, has a negative trailing-12-month EBIT margin compared to the industry average. Its Capex/Sales is 41.8% lower than the industry average of 3.21%.
- Kaleyra, Inc. (KLR), which provides cloud communication services, has had a negative net income for the past three years. Its EPS declined 68.4% year-over-year to $0.17 for the quarter ended December 31, 2022.
Experts suggest avoiding these stocks as they appear fundamentally weak. OMI, ASOMY, and KLR have received an overall D rating, equivalent to a Sell, as per POWR Ratings, a proprietary rating system that considers 118 different factors. These stocks are expected to face significant challenges amidst the economic downturn.