5 US software stocks to watch for retirees

December 14, 2022 04:36 AM PST | By Mridul Gogoi
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  • IBM posted revenue of US$ 14.1 billion in Q3 2022, up 6% YoY.
  • Salesforce Inc. has a market cap of US$ 131.11 billion.
  • Cisco Systems paid a quarterly dividend of US$ 0.38 per share.

The US stock market went through a turbulent time in 2022 as some of the most sought-after sectors plunged during the year until there were some positives in the third quarter. Tech and software stocks were also not spared, with some of the biggest firms in the category suffering losses. Now that the US economy is likely to regain after a bearish 2022, investors are anticipating some respite in the coming year.

The US software sector comprises some of the biggest names in the world. It includes companies like- International Business Machines Corporation (NYSE: IBM), Salesforce Inc. (NYSE: CRM), Microsoft Corporation (NASDAQ: MSFT), Cisco Systems Inc. (NASDAQ: CSCO), and Automatic Data Processing Inc. (NASDAQ: ADP). So, how will the market behave for software companies in 2023?

Here, we look at five software stocks in the US and analyze their recent financial performances:

International Business Machines Corporation (NYSE: IBM)

One of the foremost software firms in the world, International Business Machine, popularly known as IBM, holds a dividend yield of 4.488 per cent.

IBM primarily sells software, hardware, IT services, and consulting in over 175 countries. The company, with over 350,000 employees distributes a quarterly dividend of US$ 1.65 per share.

IBM posted revenue of US$ 14.1 billion in Q3 2022, up six per cent and a jump of 15 per cent at a constant currency basis compared to US$ 13.2 billion in the year-ago quarter.

Its gross profit in the reported quarter was US$ 7.4 billion compared to US$ 7.1 billion in Q3 2021. The IT major also said that its consulting revenue in the three months that ended September 30, 2022, was up 5 per cent and up 16 per cent at constant currency.

Salesforce Inc. (NYSE: CRM)

Salesforce Inc offers enterprise cloud computing solutions to clients through its 360-degree platform.

The company that provides Service Cloud for customer support as an e-commerce engine, Salesforce, is a US$ 131.11 billion market cap company. Its EPS is 0.26 and has a P/E ratio of 504.30.

Salesforce registered Q3 2023 revenue of US$ 7.84 billion, up 14 per cent YoY. The company posted a full-year FY23 revenue guidance of US$ 30.9 billion to US$ 31.0 billion.

Salesforce Inc. also mentioned in its Q3 2023 financial reports that it returned US$ 1.7 billion to its shareholders in the reported quarter by repurchasing shares. It said that the operating cash flow in Q3 2023 was US$ 0.31 billion, which shrank by 23 per cent YoY.

Microsoft Corporation (NASDAQ: MSFT)

Microsoft is a global leader in providing enterprise software to some of the most coveted clients across the world. Microsoft, known for its Windows operating systems and Office productivity suite, posted its first quarter 2023 results reporting an operating income of US$ 21.5 billion which was up six per cent and 15 per cent on a constant currency basis.

The revenue in the reported quarter was US$ 50.1 billion, a growth of 11 per cent compared to the year-ago quarter. The company said its diluted earnings per share were US$2.35 in Q1 2023.

Microsoft’s net income in the reported quarter was US$ 17.6 billion, a decrease of 14 per cent from the same quarter of FY22. However, its revenue in Intelligent Cloud surged 20 per cent to US$ 20.3 billion in Q1 2023.

Cisco Systems Inc. (NASDAQ: CSCO)

Cisco Systems is among the largest software firms in the world. The San Jose, California-based company has more than 80, 000 employees spanning 90 countries. The largest networking equipment provider, Cisco has a market cap of US$ 199.07 billion. With a dividend yield of 3.137 per cent, Cisco paid out a quarterly dividend of US$ 0.38 per share. Shareholders would likely receive the next dividend on January 25, 2023.

In its first quarter of fiscal 2023 financial report, Cisco registered a six per cent growth in its revenue to US$ 13.6 billion compared to US$ 12.9 billion in the same quarter a year ago.

Its net income (GAAP) in Q1 2023 decreased 10 per cent to US$ 2.7 billion versus US$ 3 billion in the year-ago quarter. It reported an EPS (non-GAAP) of US$ 0.86 in the first quarter of FY23 versus US$ 0.82 in the corresponding quarter in 2021.

Market capitalization of IBM, CRM, MSFT, CSCO, ADPSource: ©Kalkine Media®; © Canva via Canva.com

Automatic Data Processing Inc. (NASDAQ: ADP)

ADP offers payroll and human capital management solutions to clients ranging from micro to global enterprises. The EPS of the company is 7.22, while the P/E ratio was 35.60.

The US$ 106.69 billion market company paid a dividend of US$ 1.25 apiece. Its three-year dividend growth is 6.85.

ADP’s net earnings in the first quarter of fiscal 2023 were reported at US$ 779 million compared to US$ 700.5 million in the year-ago period. Its revenue also soared 10 per cent YoY in the first quarter of FY23 to US$ 4.2 billion.

The diluted earnings in the reported quarter for ADP rose by 13 per cent to US$ 1.87, while adjusted diluted EPS grew to US$ 1.86. The ADP stock peaked at its 52-week highest price of US$ 270.87 on December 2, 2022, while it hit its lowest price of US$ 192.26 on February 24, 2022.

Bottom line:

As an investor in a volatile market, it is always advisable to have a long-term goal to avoid short-term losses. Whether it is the stock of a large company or a smaller one, the chance of losing money is quite high when there is instability in the equity market. This year has already seen mega-large-cap stocks plunge. So, always do in-depth market research before investing your money in any sector or stock. Another way to mitigate risks is to diversify your portfolio. 


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