Investors’ concerns over the Fed's hawkish interest rate hikes are expected to keep the stock market under immense pressure going forward. Earlier this week, the Fed Bank of St. Louis President James Bullard said he would lean toward a 75-basis-point increase in interest rates in September. Anything more would surely send the market reeling.
As it is difficult to predict if the market can return to its recovery rally, it could be wise to invest in established companies that have the potential to generate solid long-term returns. Even better if the stocks are currently trading at affordable prices.
With higher-than-industry profit margins and underlying strength of businesses, The Coca-Cola Company (KO), Gilead Sciences, Inc. (GILD), and Packaging Corporation of America (PKG) could rebound from their current price levels surviving any fluctuations the market may witness in the near term. So, these stocks could be solid investments now.
The Coca-Cola Company (KO)
KO owns or licenses, and markets beverage concentrates, finished sparkling soft-drinks brands, energy drinks, dairy, and syrups to fountain retailers such as restaurants and convenience stores. It operates through independent bottling partners, distributors, wholesalers, retailers, and bottling and distribution operators.
For its fiscal 2022 second quarter ended July 1, 2022, KO’s net operating revenues increased 11.6% year-over-year to $11.30 billion. The company’s non-GAAP gross profit came in at $6.67 billion, representing a 7.2% rise from the year-ago period. Its non-GAAP operating income came in at $3.47 billion for the quarter, representing an 8% rise from the prior-year period.
While its non-GAAP net income increased 4.4% year-over-year to $3.06 billion, its non-GAAP EPS rose 2.9% to $0.70. As of July 1, 2022, the company had $8.98 billion in cash and cash equivalents.
Analysts expect the company’s EPS to be $2.46 for fiscal 2022 ending December 31, 2022, indicating a 6% increase from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.
The consensus revenue estimate of $42.13 billion for the same fiscal year represents a 9% year-over-year improvement. Its EPS is expected to grow at a rate of 5.5% per annum over the next five years.
Its 58.9% trailing-12-month gross profit margin is 81.2% higher than the 32.5% industry average. The company’s trailing-12-month EBITDA margin of 32% is 160.2% higher than the industry average of 12.3%. Over the past month, the stock has gained 5.4% to close the last trading session at $65.22, down 3% from its 52-week high of $67.20.
KO’s POWR Ratings reflect this promising outlook. It has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Stability, Quality, and Sentiment. Click here to see the additional ratings for KO’s Value, Growth, and Momentum. KO is ranked #20 of 35 stocks in the A-rated Beverages industry.
Gilead Sciences, Inc. (GILD)
GILD is a research-based biopharmaceutical company that discovers, develops, and commercializes medicines in areas of unmet medical need. The company’s primary focus areas include treatments for HIV/AIDS, liver diseases, cancer, inflammatory and respiratory diseases, and cardiovascular conditions.
On August 15, 2022, GILD announced to acquire all development and commercialization rights for Trodelvy worldwide from its co-developer Everest Medicines, a Chinese late clinical-stage biopharmaceutical company engaged in licensing, clinical development, and commercialization of therapies for oncology, immunology, cardio-renal and infectious disease.
For its fiscal 2022 second quarter ended June 30, 2022, GILD’s total revenues grew marginally year-over-year to $6.26 billion. As of June 30, 2022, the company had $4.74 billion in cash and cash equivalents.
GILD surpassed Street EPS estimates in three of the trailing four quarters. Its 79.5% trailing-12-month gross profit margin is 45.2% higher than the 54.8% industry average. The company’s trailing-12-month EBITDA margin of 48% is 1358.5% higher than the industry average of 3.3%. Over the past month, the stock has gained 6.5% to close the last trading session at $65.18, down 12.1% from its 52-week high of $74.12.
GILD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has an A grade for Value and a B for Quality and Sentiment. Click here to see the additional ratings for GILD (Stability, Growth, and Momentum). GILD is ranked #9 of 400 stocks in the Biotech industry.
Packaging Corporation of America (PKG)
PKG manufactures and sells containerboard and corrugated packaging products through its Packaging and Paper segments to protect goods during shipment. It also produces multi-color boxes, displays, and meat and wax-coated boxes for the agricultural industry.
PKG’s net sales for its fiscal 2022 second quarter ended June 30, 2022, increased 19% year-over-year to $2.24 billion. The company’s gross profit came in at $588.80 million, up 31.2% from the prior-year period. Its adjusted pre-tax income came in at $403.60 million for the quarter, indicating a 47.4% rise from the year-ago period.
PKG’s adjusted net income came in at $303.70 million, representing a 47% year-over-year improvement. Its adjusted EPS grew 48.9% from the year-ago period to $3.23. The company had $667.30 million in cash and equivalents as of June 30, 2022.
The consensus EPS estimate of $11.48 for fiscal 2022 ending December 31, 2022, represents a 22.3% year-over-year improvement. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.
Analysts expect the company’s revenue to be $8.77 billion for the same fiscal year, representing a 13.5% rise from the prior-year period. Its EPS is expected to grow at a rate of 10.1% per annum over the next five years.
Its 23.6% trailing-12-month EBITDA margin is 12.7% higher than the 20.9% industry average. The company’s trailing-12-month ROA margin of 12.3% is 123.2% higher than the industry average of 5.5%. Over the past month, the stock has gained 8.1% to close the last trading session at $145.14, down 13.9% from its 52-week high of $168.50.
PKG’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system.
It has a B grade for Quality. In addition to the POWR Ratings grades we have just highlighted, one can see PKG’s Value, Stability, Growth, Sentiment, and Momentum rating here. PKG is ranked #8 of 22 stocks in the A-rated Industrial - Packaging industry.
KO shares were trading at $65.16 per share on Friday afternoon, down $0.06 (-0.09%). Year-to-date, KO has gained 11.69%, versus a -10.43% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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