The Fed raised the benchmark interest rates by 75 basis points this week for the third consecutive time and hinted at two more outsized hikes by the end of this year. The central bank’s aggressive stance increases the risk of recession.
The equity markets have reacted negatively to this news, as analysts and economists reiterated their expectation of a recession in the near term. The S&P 500 index declined 21.1% year-to-date and 3.7% over the past five days.
Meanwhile, the 2-year Treasury yield climbed 4.1%, the highest since October 2007. Also, the yield on the benchmark 10-year Treasury rose to 3.64%. CFRA’s Sam Stovall said, “As a result, bond yield inversions continue to widen, causing equity markets to fall further as recession risks increase.”
Amid this backdrop, investors can look to invest in blue-chip stocks. Blue-chip companies are known to weather market downturns thanks to their substantial cash reserves and wide market reach.
Blue-chip stocks The Procter & Gamble Company (PG), AbbVie Inc. (ABBV), Pfizer Inc. (PFE), Dow Inc. (DOW), and Walgreens Boots Alliance, Inc. (WBA) with their strong fundamentals and solid growth prospects could help investors beat the market downturn and generate stable returns. Therefore, it could be wise to add them to your portfolio.
The Procter & Gamble Company (PG)
PG offers branded consumer packaged goods to consumers across the world. It operates through Beauty, Grooming, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care segments.
On June 8, 2022, PG and Microsoft Corp. (MSFT) announced a multi-year collaboration whereby MSFT will help enhance digital manufacturing at PG. This is expected to accelerate and expand PG's digital manufacturing platform and improve productivity to reduce costs.
For the fourth quarter that ended June 30, 2022, PG’s net sales increased 3% year-over-year to $19.51 billion. Its net earnings attributable to PG came in at $3.05 billion, up 5% year-over-year, while its operating income rose 2% year-over-year to $3.60 billion. Also, its EPS came in at $1.21, up 7% year-over-year.
PG’s EPS and revenue are expected to increase marginally year-over-year to $1.68 and $21.24 billion, respectively, in the second quarter (ending December 31, 2022). It surpassed EPS estimates in three of the trailing four quarters. The stock has lost marginally over the past three months to close the last trading session at $136.21.
PG’s POWR Ratings reflect solid prospects. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Stability and Quality. It is ranked #21 out of 59 stocks in the Consumer Goods industry. Click here to see the other ratings of PG for Growth, Value, Momentum, and Sentiment.
AbbVie Inc. (ABBV)
ABBV is engaged in developing, manufacturing, and selling pharmaceuticals globally. It offers its products in various categories: immunology, oncology, neuroscience, eye care, and women's healthcare. The company markets its products to wholesalers, distributors, government agencies, health care facilities, and independent retailers.
On September 19, 2022, the company received a positive CMHP opinion for Risankizumab (SKYRIZI®) for treating adults with moderate to severe Crohn’s disease who have had an inadequate response and lost response or were intolerant to either conventional therapy or a biologic agent. This approval should strengthen ABBV’s ability to treat patients with Crohn's disease.
ABBV’s net revenues increased 4.5% year-over-year to $14.58 billion in the second quarter that ended June 30, 2022. The company’s non-GAAP net earnings increased 10.7% from the year-ago value to $6 billion, while its adjusted EPS rose 11.2% from the prior-year quarter to $3.37.
Analysts expect ABBV’s EPS and revenue to increase 8.1% and 4.5% year-over-year to $3.60 and $14.99 billion, respectively, in the fiscal third quarter ending September 30, 2022. ABBV has gained 34.4% over the past year to close the last trading session at $143.01.
ABBV’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Quality and a B for Growth and Value. Among the 165 stocks in the Medical – Pharmaceuticals industry, it is ranked #9. To see the other ratings of ABBV for Momentum, Stability, and Sentiment, click here.
Pfizer Inc. (PFE)
PFE specializes in biopharmaceutical products globally. Its portfolio includes medicines and vaccines served to wholesalers, retailers, healthcare providers, government agencies, pharmacies, and local communities.
On September 16, 2022, PFE and BioNTech SE (BNTX) received a positive opinion from CHMP for the conversion of COMIRNATY® conditional marketing authorization to full marketing authorization in the European Union. In addition, CHMP also recommended approval of a booster dose of COMIRNATY in children of 5-11 years of age.
PFE’s revenue increased 47% year-over-year to $27.74 billion in the fiscal second quarter (ended June 2022). Its non-GAAP net income grew 93.5% from the year-ago value to $11.65 billion. The company’s non-GAAP EPS increased 92.4% from the year-ago value to $2.04.
The consensus EPS estimate of $1.35 for its fiscal fourth quarter (ending December 31, 2022) represents a 24.7% improvement year-over-year. The consensus revenue estimate of $24.66 billion for the next quarter indicates a 3.5% increase from the same period last year.
The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained marginally to close its last trading day at $44.57.
PFE’s POWR Ratings reflect this promising outlook. The company's overall A rating translates to Strong Buy in our proprietary rating system.
It has an A grade for Value and a B for Sentiment and Quality. Within the Medical – Pharmaceuticals industry, it is ranked #8. Click here to see the additional POWR ratings of PFE for Growth, Momentum, and Stability.
Dow Inc. (DOW)
DOW is the holding company for the Dow chemical company and its subsidiaries. The company’s portfolio of plastics, industrial intermediates, coatings, and silicones businesses delivers science-based products and solutions for its customers in various market segments like packaging, infrastructure, mobility, and consumer care.
On September 14, 2022, DOW and Mura Technology, the pioneer of an advanced plastic recycling solution, collaborated to build Europe’s largest advanced recycling facility at Dow’s site in Böhlen, Germany. This collaboration is expected to help solve the global plastics waste issue and rapidly scale advanced plastics recycling.
DOW’s net sales increased 12.8% year-over-year to $15.66 billion for its second quarter ended June 30, 2022. For six months ended June 30, 2022, its net income increased 11.7% year-over-year to $3.23 billion, while its EPS amounted to $4.37, representing an increase of 14% year-over-year.
Analysts expect DOW’s revenue for fiscal 2022 to increase 4.7% year-over-year to $57.56 billion. It has surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has declined 14.5% over the past three months to close the last trading session at $44.77.
DOW’s POWR Ratings reflect solid prospects. According to our proprietary rating system, it has an overall B rating, which translates to a Buy.
It has an A grade for Value and a B for Momentum and Quality. It is ranked #33 out of 88 stocks in the B-rated Chemicals industry. Click here to see the other ratings of DOW for Growth, Stability, and Sentiment.
Walgreens Boots Alliance, Inc. (WBA)
WBA operates as a pharmacy-led health and beauty retailer. It operates through Retail Pharmacy USA, Retail Pharmacy International, and Pharmaceutical Wholesale.
On September 20, 2022, the company announced the acceleration of its plans for the full acquisition of high-performing Shields Health Solutions, which is delivering strong financial performance, clinical excellence, and value-add contributions to WBA's business.
Roz Brewer, CEO of WBA, said, "Our full acquisition of Shields will complete another major milestone as part of our consumer-centric healthcare strategy to drive sustainable long-term growth, and we are very pleased with our partnership and integration with Shields."
WBA’s sales increased 2% year-over-year to $100.25 billion for the nine months ended May 31, 2022. Its gross profit grew 6.3% from the year-ago value to $21.86 billion, while its operating income rose 54.3% year-over-year to $2.21 billion.
The company’s net earnings amounted to $4.75 billion, representing a 148.1% increase year-over-year. Also, its EPS increased 148.9% year-over-year to $5.49 for the same period.
For fiscal 2022, WBA’s EPS is expected to increase 2% year-over-year to $5.01. Its revenue estimate of $134.63 billion for fiscal 2023 represents a marginal increase year-over-year. WBA has surpassed consensus EPS estimates in each of the trailing four quarters.
Over the past month, the stock has lost 10.7% to close the last trading session at $33.32.
WBA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
It has a B grade for Value. Within the A-rated Medical - Drug Stores industry, it is ranked #2 out of 4 stocks. To see the other ratings of WBA for Growth, Momentum, Stability, Sentiment, and Quality, click here.
PG shares were trading at $134.74 per share on Friday afternoon, down $1.47 (-1.08%). Year-to-date, PG has declined -16.18%, versus a -22.08% 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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