Inflation for January 2023 increased 6.4% year-over-year, higher than the consensus estimate of 6.2%. Stubbornly high prices have increased the odds of continued rate hikes this year. Goldman Sachs expects the U.S. Federal Reserve to raise interest rates three more times in 2023 by 25 bps each.
However, the still-tight labor market is raising optimism. Kristalina Georgieva, managing director of the IMF, said, "The markets have good reason to be more upbeat because what they are finally seeing is the U.S. economy is likely to avoid recession."
Moreover, President Biden believes that the nation will most likely avoid recession and that the risk for the same is pretty low. Furthermore, JPMorgan doubled its 2023 first-quarter GDP growth forecast to a 2% annualized rate.
Given the backdrop, investors could consider buying top-quality stocks Johnson & Johnson (JNJ), Pfizer Inc. (PFE), and Walmart Inc. (WMT) now and hold them for the long term.
Johnson & Johnson (JNJ)
JNJ and its subsidiaries research, develop, manufacture, and sell various products in the healthcare field worldwide. Its segments are Consumer Health and MedTech.
On December 22, 2022, JNJ completed its acquisition of Abiomed, Inc. (ABMD). The acquisition will help the company expand its capabilities in the MedTech sector in the coming years.
JNJ has paid dividends for 60 consecutive years. Its dividend payouts have increased at 6.1% CAGR for the past five years. Its current dividend yield is 2.84%, and its four-year average yield is 2.60%.
JNJ's U.S. sales came in at $12.52 billion for the 2022 fourth quarter, up 2.9% year-over-year. Its adjusted net earnings increased 9.5% year-over-year to $6.22 billion, while its adjusted EPS came in at $2.35, representing a 10.3% year-over-year rise.
Analysts expect JNJ's revenue to increase 3.1% year-over-year to $97.85 billion in the current fiscal year, 2023. Its EPS is expected to rise 3.5% year-over-year to $10.51 for the same period. It surpassed EPS estimates in all four trailing quarters. JNJ's shares have lost marginally intraday to close the last trading session at $158.24.
JNJ's POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our POWR Rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
JNJ has an A grade for Stability and Quality and a B for Value. JNJ is ranked #7 out of 174 stocks in the Medical – Pharmaceuticals industry. Click here for additional JNJ ratings (Growth, Momentum, and Sentiment).
Pfizer Inc. (PFE)
PFE discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas.
On January 31, 2023, Dr. Albert Bourla, Chairman and CEO, said, "As we turn to 2023, we expect to once again set records, with potentially the largest number of new product and indication launches that we've ever had in such a short period of time."
PFE has paid dividends for 12 consecutive years. Its dividend payouts have increased at 5.5% CAGR over the past five years. Its current dividend yield is 3.79%, while its four-year average yield is 3.63%.
PFE's revenues came in at $24.29 billion for the 2022 fourth quarter, up marginally year-over-year. Its non-GAAP net income increased 44.2% year-over-year to $6.55 billion, while its non-GAAP EPS came in at $1.14, up 44.3% year-over-year.
Street expects PFE's revenue and EPS to come in at $69.29 billion and $3.47 for the current fiscal year, 2023. PFE's shares have lost marginally intraday to close the last trading session at $42.95.
PFE's overall B rating equates to a Buy in our proprietary rating system.
It has an A grade for Value and a B for Quality. PFE is ranked #26 in the same industry. Get all PFE ratings for Growth, Momentum, Stability, and Sentiment here.
Walmart Inc. (WMT)
WMT engages in the operation of retail, wholesale, and other units worldwide. The company operates through three segments: Walmart U.S.; Walmart International; and Sam's Club.
On January 12, 2023, WMT Commerce Technologies and WMT GoLocal announced their partnership with Salesforce Inc. (CRM) to provide retailers access to new technologies and solutions, enabling frictionless local pickup and delivery for shoppers. This collaboration is expected to enhance the company's customer service.
WMT has paid dividends for 49 consecutive years. Its dividend payouts have increased at a marginal CAGR over the past five years. Its current dividend yield is 1.53%, while its four-year average yield is 1.68%.
WMT's net sales came in at $151.47 billion for the third quarter that ended October 31, 2022, up 8.8% year-over-year. Its membership and other income increased % year-over-year to $1.34 billion. Also, its total revenues came in at $152.81 billion, representing an 8.7% year-over-year rise.
WMT's revenue is expected to increase 5.9% year-over-year to $606.66 billion in the current fiscal year, 2023. Its EPS is expected to increase by 3.7% per annum for the next five years. It surpassed EPS estimates in three of the four trailing quarters. Over the past year, the stock has gained 8% to close the last trading session at $144.27.
It's no surprise that WMT has an overall A rating, equating to a Strong Buy in our proprietary rating system.
Also, the stock has a B grade for Stability and Sentiment. Within the A-rated Grocery/Big Box Retailers industry, WMT is ranked #10 out of 39 stocks. To see WMT's additional POWR Ratings for Growth, Value, Momentum, and Quality, click here.
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JNJ shares were unchanged in premarket trading Friday. Year-to-date, JNJ has declined -10.42%, versus a 6.76% 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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