Concerns over the potential for the economy to slide into a recession if the Fed tightens its monetary policy too aggressively have driven substantial selloffs across almost all market segments. Because inflation is expected to remain high for an extended period, the Fed may have no option but to raise interest rates further. Given this backdrop, it could be wise to bet on shares of blue-chip companies, because the significant market reach, pricing power, and liquidity of these companies help them perform steadily irrespective of market fluctuations.
According to Securities and Exchange Commission filings for 100 U.S. corporations, the overall net profits of top companies are up by a median of 49%. Consumers continue to demand more and spend big. Consequently, the businesses of blue-chip companies should not be significantly affected even if the economy slows down.
Given this backdrop, we think it could be wise to bet on fundamentally sound blue-chip stocks Walmart Inc. (WMT), The Coca-Cola Company (KO), and The Procter & Gamble Company (PG), which have witnessed price dips of late.
Walmart Inc. (WMT)
WMT in Bentonville, Ark., operates retail, wholesale, and other units worldwide. The company has three segments: Walmart U.S.; Walmart International; and Sam's Club. It is a leader in sustainability, corporate philanthropy, and employment opportunities.
On May 23, 2022, Symbotic LLC and WMT announced their agreement to implement Symbotic’s robotics and software automation in all WMT’s regional distribution centers. David Guggina, Senior Vice President of Innovation and Automation, WMT U.S., said, “Using high-speed robotics and intelligent software to organize and optimize inventory, the Symbotic System helps us get products to our customers quickly and seamlessly by revolutionizing how we receive and distribute products to stores.”
For the first quarter ended April 30, 2022, WMT’s total revenues came in at $141.57 billion, up 2.4% year-over-year. Its total current assets were $83.22 billion for the period ended April 30, 2022, compared to $81.07 billion for the period ended Jan. 31, 2022. Also, its long-term debt was $32.17 billion, compared to $34.86 billion, for the same period.
Analysts expect WMT’s revenue to be $595.58 billion in its fiscal year 2023, representing a 4% year-over-year increase. The company’s EPS is expected to rise 9.5% per annum for the next five years. In addition, it has surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past month, the stock has declined 20.9% in price to close yesterday’s trading session at $124.13.
WMT has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
In addition, it has a B grade for Stability. WMT is ranked #14 of 37 stocks in the A-rated Grocery/Big Box Retailers industry. Click here to see the additional POWR Ratings for WMT (Growth, Value, Momentum, Sentiment, and Quality).
Click here to checkout our Retail Industry Report for 2022
The Coca-Cola Company (KO)
Atlanta, Ga.-based KO, a beverage company, manufactures, markets, and sells various non-alcoholic beverages worldwide. The company provides sparkling soft drinks; flavored and enhanced water, sports drinks; juice, dairy, plant-based drinks; tea and coffee; and energy drinks.
On April 25, 2022, James Quincey, KO’s Chairman and CEO, said, “We remain true to our purpose and are staying close to consumers. We are confident in our full-year guidance, and we are well-equipped to win in all types of environments as we fuel strong topline momentum and create value for our stakeholders.”
KO’s net operating revenues increased 16.3% year-over-year to $10.49 billion for the first quarter, ended April 1, 2022. The company’s non-GAAP net income came in at $2.79 billion, up 16.6% year-over-year, while its non-GAAP EPS came in at $0.64, up 16.4% year-over-year.
For its fiscal year 2022, analysts expect KO’s revenue to be $41.87 billion, representing an 8.3% year-over-year rise. In addition, the company’s EPS is expected to increase by 6.9% to $2.64 in 2023. It surpassed EPS estimates in each of the trailing four quarters. Over the past month, the stock has declined 1.9% to close yesterday’s trading session at $64.02.
KO has an overall B rating, which equates to a Buy in our POWR Ratings system. Also, the stock has a B grade for Stability, Sentiment, and Quality. Within the A-rated Beverages industry, it is ranked #14 of 35 stocks. Click here to see the additional POWR Ratings for Growth, Value, and Momentum for KO.
The Procter & Gamble Company (PG)
PG in Cincinnati, Ohio, provides branded consumer packaged goods to consumers in North and Latin America, Europe, the Asia Pacific, Greater China, India, the Middle East, and Africa. It operates in five segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care.
On April 20, 2022, Jon Moeller, President, and CEO, said, “Our focus remains on the strategies of superiority, productivity, constructive disruption and continually improving P&G’s organization and culture. They remain the right strategies to manage through the near-term cost and operational challenges we’re facing and to deliver long-term balanced growth and value creation.”
PG’s net sales increased 7% year-over-year to $19.38 billion for its third quarter ended March 31, 2022. The company’s net earnings came in at $3.35 billion, up 2.6% year-over-year, while its EPS came in at $1.33, up 5.6% year-over-year.
Analysts expect PG’s revenue to grow 5.3% year-over-year to $80.16 billion in fiscal 2022. Its EPS is estimated to grow 7% to $6.25 in 2023. It surpassed EPS estimates in each of the trailing four quarters. The stock has lost 8.5% over the past month to close yesterday’s session at $147.63.
PG’s strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which translates to a Buy in our proprietary rating system.
In addition, it has a B grade for Stability, Sentiment, and Quality. It is ranked #5 of 61 stocks in the Consumer Goods industry. Click here to see the additional POWR Ratings for PG (Growth, Value, and Momentum).
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WMT shares were trading at $123.24 per share on Wednesday morning, down $0.89 (-0.72%). Year-to-date, WMT has declined -14.18%, versus a -16.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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