U.S. stocks are on track to finish this week in the red as investors weigh the sluggish economic data and consumers curtail their spending. Given this backdrop, it could be ideal to invest in quality stocks W.W. Grainger, Inc. (GWW), Jerónimo Martins, SGPS, S.A. (JRONY), and Hugo Boss AG (BOSSY) which seem relatively stable and offer steady returns.
The U.S. Consumer Price Index (CPI) has significantly declined from its summer highs last year and currently stands at 5%, the lowest since May 2021. Some market experts believe that the inflation rates have reached an inflection point and painful interest rate hikes could soon ease.
Ryan Sweet, the chief U.S. economist at Oxford Economics, said in a note, "Though inflation has moderated, the March consumer price data keeps a 25bps rate hike by the Fed clearly on the table for May. However, the odds of a pause in June are rising."
However, the aftershocks from the recent banking turmoil make a recession more likely, as Jamie Dimon, chief executive of JPMorgan Chase, warned of tighter finance conditions and slow lending activity. The International Monetary Fund (IMF) recently lowered its global growth forecast by nearly a full percentage point, citing “seismic waves” from Russia's war in Ukraine and high inflation.
Adding to the gloom, a Bloomberg survey of forecasters pegs recession odds at 65%, up from 60% in February.
Against this backdrop, let’s take a closer look at the featured stocks to evaluate their fundamentals.
W.W. Grainger, Inc. (GWW)
GWW is a B2B distributor of maintenance, repair, and operating (MRO) products and services. Its product offering includes safety and security, material handling and storage, pumps and plumbing equipment, cleaning, and maintenance, metalworking, and hand tools. The company operates through two segments: High-Touch Solutions N.A; and Endless Assortment.
Recently, GWW was named one of the Fortune 100 Best Companies to Work For® in 2023 for the second consecutive year. In addition, On February 4, it was ranked No. 1 among diversified wholesalers on Fortune magazine's 2023 list of the World's Most Admired Companies™ for the 10th consecutive year.
Such recognitions demonstrate the company’s unwavering commitment and support for its fellow team members.
On March 1, backed by its strong financials, GWW paid a quarterly dividend of $1.72 per share to its shareholders. It pays $6.88 as dividends annually, yielding 1.03% on its current share price. Its dividend payouts have grown at CAGRs of 6.1% over the past three and five years. GWW has a record of 51 consecutive years of dividend growth.
In terms of trailing-12-month GWW’s net income margin of 10.16% is 53.3% higher than the industry average of 6.63%. Likewise, its trailing-12-month ROCE, ROTC, and ROTA of 71.72%, 26.74%, and 20.39% are 418.4%, 279.2%, and 295.2% higher than the 13.84%, 7.05%, and 5.16% industry averages, respectively.
In its fiscal fourth quarter (ended December 31, 2022), GWW’s sales increased 13.2% year-over-year to $3.80 billion. Its gross profit increased 20.2% from the year-ago value to $1.51 billion, while its adjusted net earnings grew 28.8% year-over-year to $363 million. The company’s adjusted EPS came in at $7.14, representing a 31.3% year-over-year improvement.
The consensus revenue estimate of $4.08 billion for the fiscal first quarter (ended March 31, 2023) represents an 11.7% improvement year-over-year. The consensus EPS estimate of $8.53 for the to-be-reported quarter indicates a 20.6% year-over-year increase. The company has a promising earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past nine months, the stock has gained 41.5% to close the last trading session at $667.17.
GWW’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
GWW also has an A grade for Quality and a B for Momentum and Stability. Out of 89 stocks in the B-rated Industrial – Equipment industry, it is ranked #28. Click here to see the Growth, Value, and Sentiment ratings of GWW.
Jerónimo Martins, SGPS, S.A. (JRONY)
JRONY operates in the food distribution and specialized retail sectors in Portugal, Poland, and Colombia. The company operates through Portugal Retail; Portugal Cash & Carry; Poland Retail; Colombia Retail; and Others, Eliminations and Adjustments segments. It is headquartered in Lisbon, Portugal.
In March, JRONY was ranked 47th among the world’s largest retailers in the Global Powers of Retailing 2023 report published by Deloitte, climbing two positions compared to last year's edition. According to the list published in the report, the Group is Europe's 19th largest food retailer and 31st largest worldwide.
This reflects the company’s strong performance despite the strong macroeconomic headwinds and shifts in consumer behavioral patterns.
JRONY’s net sales and services came in at €6.99 billion ($7.67 billion) for the fourth quarter of 2022, representing a 23% year-over-year growth. Its EBITDA grew 14.8% from the prior-year quarter to €506 million ($554.78 million). Net profit attributable to JRONY rose 23% year-over-year to €171 million ($187.48 million), while EPS increased 22.7% from the prior-year quarter to €0.27.
The company pays an annual dividend of $1.65 that yields 3.44% on prevailing prices. It has a four-year average dividend yield of 2.40%. The company has raised its dividend payouts at a CAGR of 4.3% over the past three years.
Analysts expect JRONY’s revenue for the first quarter that ended on March 31, 2023, to increase 26.7% year-over-year to $7.34 billion, while its EPS is expected to be $0.42 in the same period. In addition, it topped the consensus revenue estimates in three of the trailing four quarters.
The stock’s trailing-12-month ROCE and ROTC of 25.60% and 11.92% are 142.3% and 88.4% higher than the 10.57% and 6.33% industry averages, respectively. Likewise, its levered FCF margin of 3.83% compares to the industry average of 2.29%.
Over the past six months, the stock has gained 23.1% to close the last trading session at $47.99.
JRONY’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which translates to Buy in our proprietary rating system.
It has an A grade for Stability and Quality and a B for Growth. Among the 37 stocks in the A-rated Grocery/Big Box Retailers industry, it is ranked #11. Click here to see the additional ratings for JRONY (Value, Momentum, and Sentiment).
Hugo Boss AG (BOSSY)
Headquartered in Metzingen, Germany, BOSSY and its subsidiaries create, develop, and distribute clothing, shoes, and accessories for men and women worldwide. It sells business, casual, athleisure, evening attire, shoes and accessories, licensed items, and children’s apparel.
In 2022, HUGO BOSS also recorded significant bottom-line improvements as the robust topline performance more than compensated for ongoing brand, product, and digital investments as part of “CLAIM 5.” This also includes a step-up in marketing investments of 41%, largely reflecting the successful campaigns and fashion events over the course of the year, which drove brand relevance globally.
Buoyed by the stellar performance and determined execution of its ‘CLAIM 5’ strategy, BOSSY aims to further drive its top and bottom-line growth to pursue its ambition to become one of the top 100 global brands ultimately.
BOSSY’s trailing-12-month gross profit margin of 61.79% is 75.4% higher than the industry average of 35.23%. Likewise, its trailing-12-month ROCE and ROTA of 20.52% and 6.70% are 74% and 72.2% higher than the 11.79% and 3.89% industry averages, respectively.
For the fiscal fourth quarter that ended December 31, 2022, BOSSY’s sales increased 18% year-over-year to €1.07 million ($1.17 billion), and its gross profit grew 15.1% year-over-year to €655 million ($718.14 million).
Its operating EBIT increased 4% from the previous-year quarter to €104 million ($114.03 million). The company’s net income came in at €75 million ($82.23 million), up 2.7% year-over-year. Also, its EPS remained flat year-over-year at €1.02.
Also, it pays $0.21 as dividends annually, yielding 1.44% on the current price, while its four-year average yield is 2.19%.
Street expects BOSSY’s revenue for the first quarter, which ended on March 31, 2023, to increase 19.6% year-over-year to $979.21 million. Moreover, it surpassed the revenue estimates in each of the trailing four quarters, which is excellent.
Shares of BOSSY have gained 58.8% over the past six months and 28% year-to-date to close the last trading session at $14.84.
It’s no surprise that BOSSY has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It also has an A grade for Quality and a B for Stability. Within the B-rated Fashion & Luxury industry, it is ranked first of 67 stocks.
In addition to the POWR Ratings we stated above, we also have BOSSY’s ratings for Growth, Value, Momentum, and Sentiment. Get all BOSSY ratings here.
What To Do Next?
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GWW shares were trading at $666.28 per share on Friday afternoon, down $0.89 (-0.13%). Year-to-date, GWW has gained 20.09%, versus a 8.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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