The U.S. economy is regaining its stride after recovering significantly from pandemic woes in the second quarter. The government is trying to maximize its vaccination program through booster shots to help bolster the nation’s recovery from the public health crisis-led downturn to pre-pandemic economic levels. The stock market has remained bullish since the beginning of 2021; the S&P 500 index had reported seven consecutive months of gains as of August 30.
With improving macroeconomic conditions, strong consumer spending, and decelerating inflation, the United States may be entering an economic boom bolstered by increased productivity. Historically, mid-cap companies tend to outperform the broader markets during such periods.
Thus, we think fundamentally sound mid-cap stocks KT Corporation (KT) and LG Display Co., Ltd. (LPL) should be solid bets now.
KT Corporation (KT)
KT is a telecom service provider based in Seongnam, South Korea. The company’s offerings comprise fixed-line telephone services, broadband internet services, other data communication services, and media and content services.
On June 14, KT entered a strategic partnership with NeuroSigma, Inc., a California-based life-sciences company, to develop an electronic treatment for neuropsychological and neurological disorders. Regarding this, KT Head of Future Value Promotion Office Kim Hyung-Wook, said, “We are eager to work with NeuroSigma to integrate this industry-leading digital therapy into our growing digital healthcare platform and to develop the next generations of digital therapy.”
In the second quarter of its fiscal year 2021, KT’s operating revenue increased 2.6% year-over-year to KRW6.03 trillion ($5.15 billion). Its operating income increased 38.5% from the prior-year quarter to KRW475.80 billion ($406.83 million). The company’s net income came in at KRW370.80 billion ($317.05 million), up 77.4% from the same period last year. Its EBITDA margin rose 1.4 percentage points year-over-year to 22.8%.
The consensus EPS estimate of $1.63 for the next year (fiscal 2022) reflects a 5.1% year-over-year increase. Likewise, the $21.68 billion consensus revenue estimate for the next year indicates a rise of 2.1% from the current year. The stock has gained 39.7% in price over the past year and 26.3% year-to-date.
KT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
KT has a Value and Stability grade of A, and a Sentiment grade of B. In the 49-stock Telecom – Foreign industry, it is ranked #5. And this industry is rated A.
Click here to see the additional POWR Ratings for KT (Growth, Momentum, and Quality).
LG Display Co., Ltd. (LPL)
LPL is a Seoul, South Korea-based manufacturer of Thin-Film Transistor Liquid Crystal Display (TFT-LCD) and Organic Light Emitting Diode (OLED) technology embedded display panels used in devices such as televisions; notebooks; computers, and mobile devices.
Recently, LPL displayed its new transparent OLED technology at the International Motor Show (IAA) 2021. The product was born from a collaboration with material science technology company Gauzy Ltd. regarding the new technology, Cho Min-Woo, head of the Transparent OLED business at LPL, said, “LG Display will bring new possibilities with its Transparent OLED to the signage and mobility markets while delivering innovative and trendy new ways for all kinds of companies to display information through eye-catching spatial designs and interior effects.”
In June, LPL held the OLEDs Go! Competition for creating unique display designs for OLED. The award-winning ideas from the competition could be commercialized once reviewed. This open-source integration of new and innovative ideas should allow the company to diversify its product portfolio, appealing to a larger customer base.
LPL’s revenue increased 31.3% year-over-year to KRW6.97 trillion ($5.96 billion) in the second quarter, ended June 30, 2021. The gross margin improved by 18.4 percentage points from the same period last year to 20.8%. Its net income and EPS came in at KRW424 billion ($362.54 million) and KRW1,185, respectively, up from their negative year-ago values, respectively.
Analysts expect LPL’s EPS to increase 900% year-over-year to $1.68 in the current year (fiscal 2021). Likewise, the Street’s $26.71 billion revenue estimate for the current year reflects a 29.9% rise from the prior year. LPL’s stock has gained 25.4% in price over the past year to close yesterday’s trading session at $8.65.
It’s no surprise that LPL has an overall B grade, which translates to Buy in the POWR Ratings system.
LPL has an A grade for Value, and a B grade for Growth and Stability. It is ranked #5 of 44 stocks in the B-rated Technology – Electronics industry.
To see additional POWR Ratings for Momentum, Sentiment, and Quality for LPL, click here.
KT shares were trading at $13.83 per share on Thursday afternoon, down $0.07 (-0.50%). Year-to-date, KT has gained 25.61%, versus a 20.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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