The Fed’s historic pace of interest rate hikes to cool down the hot economy and bring the multi-decade high inflation under its 2% target level has continuously raised fears of an economic recession. However, with the latest CPI report settling in lower than expected, analysts believe a downturn would be less severe.
The Conference Board CEO Steve Odland told CNBC that any potential downturn is expected to be mild. “Wages are rising quite rapidly. This could be a much less painful experience with the Fed trying to tame inflation than it has been in the past,” he added.
Moreover, amid signs of an easing in inflation, lower oil prices, and the Fed’s much-anticipated dialing back of its aggressive rate hikes, the stock market has seen a rally since its October lows. Deutsche Bank strategist Binky Chadha also believes the rally isn’t over yet.
Thus, investors should scoop up more shares of quality stocks Johnson & Johnson (JNJ), The Coca-Cola Company (KO), and Clearwater Paper Corporation (CLW), which are considered to be safe havens when market volatility is rife.
Johnson & Johnson (JNJ)
JNJ, the world’s largest and most broad-based healthcare conglomerate, researches, develops, manufactures, and sells a wide range of healthcare products. Its business segments include Consumer Health Products; Pharmaceutical Products; and MedTech.
On November 1, 2022, JNJ entered a definitive agreement to acquire Abiomed Inc. (ABMD), a diversified healthcare products company. This should help the company enhance its position in MedTech and to provide breakthrough treatments for cardiovascular diseases while driving value for its shareholders.
The company has increased its dividend for 60 consecutive years. Its dividend payouts have grown at a 6% CAGR over the past five years, and the current dividend yields 2.57%.
JNJ’s sales increased 1.9% year-over-year to $23.8 billion, with adjusted operational growth of 8.2% in the fiscal 2022 third quarter ended September 30, 2022. Its net earnings grew 21.6% year-over-year to $4.45 billion, while its EPS increased 22.6% from the year-ago value to $1.68.
Analysts expect JNJ’s revenue to increase 1.4% year-over-year to $95.04 billion in fiscal 2022. The company’s EPS for the current fiscal year is expected to increase 2.5% year-over-year to $10.05. It has surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 10.2% to close the last trading session at $175.51.
JNJ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Stability and a B for Value and Quality. Within the Medical-Pharmaceuticals industry, it is ranked #5 among a total of 161 stocks.
To get JNJ’s ratings for Growth, Sentiment, and Momentum, click here.
The Coca-Cola Company (KO)
KO is a popular beverage company that manufactures, markets, and sells various nonalcoholic beverages worldwide. The company offers sparkling soft drinks, flavored and enhanced water, sports drinks, juice, dairy, plant-based beverages, and energy drinks.
On September 29, KO and Molson Coors Beverage Company (TAP) entered into an exclusive agreement to develop and commercialize Topo Chico Spirited, a line of spirit-based, ready-to-drink cocktails inspired by the bright and refreshing taste of tequila and vodka-based beverages. The new product will be launched in more than 20 markets across the country in 2023 and should bolster the company’s revenue stream.
On October 20, KO announced its regular quarterly dividend of $0.44 per common share, payable on December 15. The company pays $1.76 per share dividends annually, which translates to a 2.82% yield at the current price. It has a four-year average dividend yield of 3.08%. The company has raised its dividend for the past 60 years.
For the fiscal third quarter ended September 30, KO’s non-GAAP net operating revenue came in at $11.05 billion, up 10% year-over-year. The company’s non-GAAP gross profit increased 6.5% year-over-year to $6.54 billion. Moreover, its non-GAAP net income per share increased 6.2% year-over-year to $0.69
KO’s EPS is estimated to improve by 7.1% year-over-year to $2.48 for the fiscal year ending December 2022. Similarly, its revenue estimate of $42.65 billion represents a 10.3% growth from the prior year. Moreover, KO has surpassed EPS estimates in all four trailing quarters.
The stock has gained 14.5% over the past year to close its last trading session at $61.69.
It’s no surprise that KO has an overall B rating, which translates to Buy in our proprietary rating system.
KO is rated a B in Stability, Sentiment, and Quality. Within the A–rated Beverages industry, it is ranked #17 out of 34 stocks.
Beyond what we’ve stated above, we have also given KO grades for Value, Momentum, and Growth. Get all KO ratings here.
Clearwater Paper Corporation (CLW)
CLW is a premier supplier of private brand tissue to major retailers and wholesale distributors, including grocery, drug, mass merchants, and discount stores in the United States and internationally. The company operates through two segments – Consumer Products; and Pulp and Paperboard.
CLW’s net sales increased 20% year-over-year to $539 million in the third quarter of fiscal 2022. Its net earnings grew 984% year-over-year to $20.60 million, while its EPS increased 1,000% from the year-ago value to $1.21.
Street expects CLW’s revenue to increase 17.9% year-over-year to $2.09 billion in fiscal 2022. Over the past nine months, the stock has gained 33.6% to close the last trading session at $38.26.
CLW’s POWR Ratings reflect a promising outlook. It has an overall rating of B, equating to a Buy in our POWR Rating system.
The stock also has a B grade for Value and Momentum. Among the 11 stocks in the Industrial – Paper industry, it is ranked #5.
Click here to get the additional POWR Ratings for Growth, Quality, Stability, and Sentiment.
JNJ shares were trading at $176.10 per share on Wednesday afternoon, up $0.01 (+0.01%). Year-to-date, JNJ has gained 5.64%, versus a -14.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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