3 Stocks Thriving Despite a Shaky Market Environment The Fed appears to be on track to increase interest rates as early as March. Furthermore, disappointing quarterly earnings reports from big U.S. banks have caused the Dow Jones Industrial...
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The Fed appears to be on track to increase interest rates as early as March. Furthermore, disappointing quarterly earnings reports from big U.S. banks have caused the Dow Jones Industrial Average (DJIA) to retreat of late. So, with stock market volatility not expected to subside anytime soon, we think the shares of fundamentally strong Walmart (WMT), PepsiCo (PEP), and Kroger (KR) might be ideal bets. Moreover, these stocks have outperformed the broader market over the past month. Let's discuss.
The Federal Reserve is expected to be to raise interest rates as early as March. Stephen Juneau, an economist at Bank of America Corp. (BAC), said, "All of the data is pointing to a very tight labor market. That all support the idea, the Fed will move forward with a March hike."
On top of this, the disappointing fourth-quarter earnings of major U.S. banks have led the Dow Jones Industrial Average (DJIA) to a 3.3% decline over the past week. And according to "Shark Tank' investor Kevin O'Leary, stock market volatility is expected to be apparent in 2022.
Given this backdrop, we think it might be reasonable to bet on stocks with sound fundamentals, namely Walmart Inc. (WMT), PepsiCo, Inc. (PEP), and The Kroger Co. (KR), that are thriving despite the shaky market environment. Their 1.5%, 2.7%, and 3.9% respective price gains over the past month compare with the broader SPDR S&P 500 ETF Trust's (SPY) 1.8% decline over the same period.
Walmart Inc. (WMT)
WMT in Bentonville, Ark., is a retail industry giant that engages in retail, wholesale, and other unit businesses globally. The company operates through the three broad segments of Walmart U.S.; Walmart International; and Sam's Club.
On Jan. 5, WMT announced that it had decided to bring its InHome delivery service to even more customers this year. The company intends to make the service accessible to 30 million households in the United States by the end of 2022. The venture is expected to be profitable for the company.
On December 21, Veriteque USA, Inc. announced the launch of its Verifique brand as a registered seller on the Walmart marketplace. The offering of presumptive field tests for a specific use inside homes and schools on the company's marketplace should add to its revenue stream.
WMT's total revenues increased 4.3% year-over-year to $140.53 billion in its fiscal third quarter, ended October 31. Its operating income improved 0.2% from the same period last year to $5.79 billion. And its adjusted EPS rose 8.2% from the prior-year quarter to $1.45.
The Street's $6.41 EPS estimate for its fiscal 2022 indicates a 17% year-over-year increase. And the Street's $571.25 billion revenue estimate for the same year reflects a 2.2% rise from the same period prior year. Furthermore, WMT has topped consensus EPS estimates in three of the trailing four quarters, which is impressive.
WMT's stock has gained 1.5% in price over the past month to close yesterday's trading session at $141.22.
WMT'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 distinct factors, with each factor weighted to an optimal degree.
WMT has a Growth, Value, Stability, and Quality grade of B. In the 39-stock Grocery/Big Box Retailers industry, it is ranked #5. The industry is rated A. To see the additional POWR Ratings for Sentiment and Momentum, click here.
PepsiCo, Inc. (PEP)
PEP is a popular food and beverage company operating worldwide. The Harrison, N.Y.-based company's brand names include Cheetos, Doritos, Fritos, Lay's Pepsi, 7UP, and Mountain Dew.
On January 5, Lay's®, one of the marquee brands from PEP's Frito-Lay division, introduced its brand-new product line of Lay's Layers. And on December 21, PEP brand Doritos announced the availability of its new flavor of tortilla chip. The additions are expected to expand the company's portfolio and add to its sales.
On November 18, PEP declared a $1.075 per share quarterly dividend on its common stock, which marked a 5% increase from its year-ago value. The dividend was payable on January 7. The dividend increase reflects the company's ability to pay back shareholders.
For the fiscal third quarter, ended Sept. 4, PEP's net revenue increased 11.6% year-over-year to $20.19 billion. Its non-GAAP operating profit rose 6.5% from the prior-year quarter to $3.24 billion. Its net income and net income per common share attributable to PEP improved 7.4% and 7.8%, respectively, from the same period prior year to $2.48 billion and $1.79.
The $1.51 consensus EPS estimate for the fourth fiscal quarter indicates a 2.7% year-over-year increase. And the $24.21 billion consensus revenue estimate for the same period reflects a 7.8% improvement from the prior-year quarter. In addition, PEP has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 23.1% in price over the past year and 11.6% over the past six months to close yesterday's trading session at $173.94.
It is no surprise that PEP has an overall B rating, which translates to Buy in our POWR Rating system. PEP has a B grade for Stability and Quality. It is ranked #10 of 35 stocks in the Beverages industry. The industry is rated B.
Click here to see the additional POWR Ratings for PEP (Growth, Value, Momentum, and Sentiment).
The Kroger Co. (KR)
KR is a Cincinnati, Ohio-based retailer that operates a combination of food and drug stores, multi-department stores, marketplace stores, and price-impact warehouses. The company's offerings also include manufactured and processed food products and fuel.
On January 12, KR and robotics company Nuro announced an expanded collaboration with the introduction of Nuro's third-generation autonomous delivery vehicle. Regarding this, KR's Senior Vice President and Chief Information Officer, Yael Cosset, said, "The role of autonomous vehicles in our seamless ecosystem continues to increase, contributing to meeting our customers in the context of their day without compromising on the quality or value, while contributing to our long-term growth and sustainability goals."
KR announced the authorization of a $1 billion share repurchase program on December 30. It replaces its existing authorization. The new share repurchase program reflects upon the company's confidence in its free cash flow and ability to deliver strong shareholder returns.
KR's sales increased 7.2% year-over-year to $31.86 billion in its fiscal third quarter, ended November 6. Its adjusted net earnings attributable to KR came in at $589 million, up 5.7% from the prior-year quarter. And its adjusted net earnings attributable to KR per common share improved 9.9% from the same period last year to $0.78.
Analysts expect KR's EPS to increase 0.3% year-over-year to $3.48 in its fiscal year 2022. And the Street expects its revenue to rise 3.6% from the prior year to $137.33 billion for the same period. In addition, KR has beaten consensus EPS estimates in each of the trailing four quarters.
KR's shares have gained 42.9% in price over the past year and 16.5% over the past six months to close yesterday's trading session at $47.27.
KR's POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. KR has an A grade for Growth and a B grade for Value and Quality. It is ranked #9 in the Grocery/Big Box Retailers industry.
In addition to the POWR Ratings grades we have stated above, one can see KR ratings for Momentum, Stability, and Sentiment here.
WMT shares fell $0.92 (-0.65%) in premarket trading Friday. Year-to-date, WMT has declined -3.03%, versus a -6.31% rise in the benchmark S&P 500 index during the same period.
Walmart Inc. (WMT) is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.
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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