While the economy witnessed a rapid recovery last year, the Russia-Ukraine war might slow or even halt U.S. economic growth this year. The hostilities between the two nations have come amid multi-decade high inflation and the Fed’s plans to raise interest rates multiples times this year. Russia’s actions have already brought strict economic sanctions on the nation. Furthermore, experts expect new sanctions to be imposed on Russia because it has so far refused to halt its Ukraine invasion.
Crude oil prices have skyrocketed recently, with the WTI and Brent benchmarks hitting multi-year highs amid fears of a complete embargo on Russian oil. Historically, the U.S. economy has slipped into recession amid high oil prices.
Given this backdrop, we think it could be wise to bet on shares of defensive companies because of the near-inelastic demand for their products and services. As such, Vertex Pharmaceuticals Incorporated (VRTX), Ambev S.A. (ABEV), AmerisourceBergen Corporation (ABC), Coca-Cola FEMSA, S.A.B. de C.V. (KOF), and Petco Health and Wellness Company, Inc. (WOOF) could be good bets now because the defensive nature of their businesses could help them survive the uncertain economic conditions. These stocks have an overall rating of Strong buy or Buy in our proprietary rating system.
Vertex Pharmaceuticals Incorporated (VRTX)
Boston-based VRTX is a biotechnology company that focuses on developing and commercializing therapies to treat cystic fibrosis (CF) and advancing its research and development programs in other areas. The company’s marketed medicines include TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, ORKAMBI, and KALYDECO.
On Jan. 11, 2022, VRTX announced that the European Commission had approved the label extension of KAFTRIO (ivacaftor/tezacaftor/elexacaftor) in a combination regimen with ivacaftor for treating patients in the 6 - 11 age group with cystic fibrosis in who have at least one F508del mutation in the cystic fibrosis transmembrane conductance regulator gene.
VRTX’s product revenues increased 27% year-over-year to $2.07 billion for the fourth quarter, ended Dec. 31, 2021. The company’s non-GAAP operating income increased 27% year-over-year to $1.12 billion. Also, its non-GAAP net income increased 31% year-over-year to $866 million. In addition, its non-GAAP EPS came in at $3.37, representing a 34% increase year-over-year.
Analysts expect VRTX’s EPS and revenue for the quarter ending March 31, 2022, to increase 15.8% and 25.4%, respectively, year-over-year to $3.45 and $2.08 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. And over the past six months, the stock has gained 22.5% in price to close the last trading session at $235.54.
VRTX’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which equates to a 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.
It has an A grade for Quality and a B grade for Growth, Value, and Sentiment. It is ranked first among 429 stocks in the Biotech industry. Click here to see the additional ratings of VRTX for Momentum and Stability.
Click here to checkout our Healthcare Sector Report for 2022
Ambev S.A. (ABEV)
Headquartered in Sao Paulo, Brazil, ABEV is in the brewing sector. The company produces, distributes, and sells beer, carbonated soft drinks, and other non-alcoholic and non-carbonated beverages across the Americas. It markets products under Adriatica, Brahma, Leffe, Budweiser, Corona, PepsiCo, and Lipton.
For the fiscal fourth quarter, ended Dec. 31, 2021, ABEV’s revenue increased 18.6% year-over-year to R$22.01 billion ($4.33 billion). The company’s net income declined 46.8% year-over-year to R$3.61 billion ($0.71 billion). Also, its EPS came in at R$0.23, representing a 46.5% decline year-over-year.
For its fiscal year 2022, ABEV’s revenue is expected to increase 7.8% year-over-year to $15.35 billion. Over the past year, the stock has declined 3.3% in price to close the last trading session at $2.62.
ABEV’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has an A grade for Quality and a B grade for Stability. Within the B-rated Beverages industry, it is ranked #10 of 37 stocks. To see the other ratings of ABEV for Growth, Value, Momentum, and Sentiment, click here.
AmerisourceBergen Corporation (ABC)
ABC sources and distributes pharmaceutical products. The Chesterbrook, Pa., company’s segments include Pharmaceutical Distribution Services and Other. It provides services to healthcare providers and pharmaceutical and biotech manufacturers.
On Jan. 25, 2022, ABC and TrakCel announced an integrated technology platform to accelerate patient access to prescribed cell and gene therapies and deliver complete visibility throughout the treatment journey. This offering adds to ABC’s portfolio of services and solutions that support the needs of the cell and gene therapy innovators, providers, and patients, rom pre-clinical to market access and reimbursement consulting and patient support services.
For its fiscal first quarter, ended Dec. 31, 2021, ABC’s revenues increased 13.5% year-over-year to $59.62 billion. The company’s non-GAAP operating income increased 21.4% year-over-year to $749.14 million. Also, its non-GAAP net income increased 21% year-over-year to $545.38 million. In addition, its non-GAAP EPS came in at $2.58, representing an increase of 18.3% year-over-year.
Analysts expect ABC’s EPS for the quarter ending June 30, 2022, to increase 21.8% year-over-year to $2.63. Its revenue for its fiscal year 2022 is expected to grow 11% year-over-year to $237.44 billion. It surpassed consensus EPS estimates in each of the trailing four quarters. And over the past year, the stock has gained 38.1% in price to close the last trading session at $144.84.
ABC’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.
It has a B grade for Growth, Value, Stability, and Sentiment. It is ranked #5 out of 84 stocks in the Medical – Services industry. Click here to see the other ratings of ABC for Momentum and Quality.
Click here to checkout our Healthcare Sector Report for 2022
Coca-Cola FEMSA, S.A.B. de C.V. (KOF)
KOF is based in Mexico City, Mexico. The company is the largest franchise bottler of Coca-Cola trademark beverages globally by sales volume. It produces, distributes, and markets certain Coca-Cola beverages. Its segments include its Mexico and Central America division; its South America division; and its Asian division.
KOF’s total revenues increased 8.4% year-over-year to Mex$53.27 billion ($2.51 billion) for the fourth quarter, ended Dec. 31, 2021. The company’s gross profit increased 9.3% year-over-year to Mex$23.98 billion ($1.13 billion). Also, its net income increased 82.8% year-over-year to Mex$5.80 billion ($0.27 billion).
For its fiscal year 2023, KOF’s EPS and revenue are expected to increase 11.3% and 6.5%, respectively, year-over-year to $3.74 and $10.44 billion. It surpassed the Street’s EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 10.1% in price to close the last trading session at $51.21.
KOF’s POWR Ratings reflect solid prospects. The company has an overall A rating, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Stability and a B grade for Value and Quality. Within the Beverages industry, it is ranked #2. To see the other ratings of KOF for Growth, Momentum, and Sentiment, click here.
Petco Health and Wellness Company, Inc. (WOOF)
WOOF operates as a retailer of premium pet consumables, supplies, companion animals, and services. The San Diego, Calif.-based company also offers grooming, in-store and online training, tele-veterinarian, pet health insurance services, and veterinary services through Vetco clinics. It also offers pet consumables, supplies, and services through petco.com, petcoach.co, petinsurancequotes.com, and pupbox.com.
On March 3, 2022, WOOF announced that it would purchase the remaining stake in its joint venture with Thrive Pet Healthcare to advance its veterinary and services focus. WOOF CEO, Ron Coughlin said, “As we continue delivering on Petco’s mission to improve lives, executing on one of the fastest veterinary expansions in history is enabling us to help keep more pets healthy, welcome new veterinary professionals into our family, drive additional pet care center traffic and deliver tremendous shareholder value.”
WOOF’s net sales increased 14.6% year-over-year to $1.44 billion for the third quarter, ended Oct.30, 2021. The company’s gross profit came in at $594.71 million, indicating a 9.8% increase year-over-year. Also, its adjusted income increased 296.6% year-over-year to $53.98 million.
Analysts expect WOOF’s EPS and revenue for its fiscal year 2022 to increase 217.9% and 17.7%, respectively, year-over-year to $0.89 and $5.79 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past month, the stock has declined 4.4% in price to close the last trading session at $17.69.
WOOF’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has a B grade for Growth. It is ranked #10 out of 62 stocks in the Consumer Goods industry. Click here to see the additional ratings of WOOF for Value, Momentum, Stability, Sentiment, and Quality.
VRTX shares were unchanged in premarket trading Tuesday. Year-to-date, VRTX has gained 7.26%, versus a -11.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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