Amid widespread macroeconomic headwinds, the global economic outlook looks uncertain. However, the Fed has finally begun to contemplate smaller rate hikes. While uncertainties remain, we believe fundamentally strong stocks Walmart (WMT), Centene Corporation (CNC), and Kroger (KR) are quality investments. Keep reading.
The outlook for the global economy remains highly uncertain. The central bank raised rates this year at the fastest pace since the 1980s. With many economists expecting borrowing costs to hurt spending more strongly in the coming months, the pace of growth in the economy looks alarming.
Moreover, China is now fighting its own worst outbreak of COVID-19and growing stringent and widespread government lockdowns are stifling hopes for an economic recovery and stoking concern about the disruption of global supply chains.
On the positive side, as recent economic data shows signs of cooling inflation, the Fed minutes released Wednesday added support to the notion that future monetary policy could be less aggressive. “A substantial majority of participants felt that a slowing of the pace of increase would likely be appropriate soon,” the minutes said.
Despite future uncertainties, we believe that Walmart Inc. (wmt extension), Centene Corporation (CNC) and Kroger Co. (KR file) are quality investments.
Walmart Inc. (wmt extension)
WMT has retail, wholesale and other units around the world. The company operates through three segments: Walmart US; international Walmart; and Sam’s club.
On Oct. 31, WMT and Popable, a marketplace platform for pop-up stores, announced a strategic partnership to offer small businesses pop-up store opportunities in their stores across the country for short-term leasing.
Darryl Spinks, senior director of retail services for Walmart, said, “This is a great example of our focus on offering unique services to the neighborhoods we serve through our community initiative store.”
On October 17, WMT and Straight Talk Wireless introduced Straight Talk Home Internet, an affordable, no contract, no credit check, prepaid landline wireless Internet service available exclusively at Walmart. The partnership is in line with WMT’s commitment to making wireless products and services more accessible.
In February, WMT declared an annual dividend of $2.24 per share to be paid in four quarterly installments of $0.56 per share. Its $2.24 annual dividend yields 1.47% on prevailing prices. The company’s dividend payments have increased at a CAGR of 1.9% over the past three years.
For the fiscal third quarter ended Oct. 31, WMT’s total revenues increased 8.7 percent year-over-year to $152.81 billion. Its adjusted operating income increased 3.9% year over year to $6.02 billion and adjusted EPS increased 3.4% year over year to $1.50.
The consensus estimate of EPS of $1.43 for the fiscal first quarter ending April 2023 represents a 10.1% year-over-year improvement. Consensus revenue estimates of $145.48 billion for the same quarter indicate a 3.7 percent increase over the prior year quarter. The company has an impressive track record of earnings surprises, as it topped consensus EPS estimates in three of the previous four quarters.
Its shares gained marginally intraday to close the latest trading session at $152.42. It has gained 9.3% in the last month. WMT has a monthly beta of 0.67.
wmt extension POWR ratings reflect this promising perspective. The stock’s overall A rating translates into a Strong Buy in our proprietary ratings system. POWR ratings evaluate stocks based on 118 different factors, each with its own weighting.
It has a grade of A for Sentiment and B for Stability. In class A Grocery Retailers/Big Boxes industry, WMT ranks 10th out of 39 stocks.
To see additional POWR ratings for WMT for growth, value, quality and momentum, Click here.
Centene Corporation (CNC)
CNC is a multinational healthcare company that offers programs and services to underinsured and uninsured individuals. The company operates through the Managed Care and Specialty Services segments.
On October 25, Evernorth and CNC’s Express Scripts announced a new strategic partnership to make prescription drugs more accessible and convenient for customers. Both companies will work together to improve early detection of health episodes, close treatment gaps and improve clinical outcomes. The collaboration is expected to expand the customer base of both companies.
On September 15, CNC announced that a new six-year contract was awarded to Superior by the Texas Health and Human Services Commission (HHSC) to provide foster children and youth with health coverage through the STAR Health Medicaid program.
Total CNC revenues were $35.87 billion for the fiscal third quarter ended September 30, 2022, an increase of 11% year over year. Its adjusted net income increased 1.3% year-over-year to $755 million, while adjusted EPS increased 3.2% year-over-year to $1.30. .
Analysts expect CNC revenue for the current fiscal year ending December 2022 to improve 14.8 percent year over year to $144.59 billion. The company’s EPS for the current year is expected to increase 11.2% year over year to $5.73. Additionally, CNC topped consensus estimates for EPS in each of the trailing four quarters.
CNC has gained 10.3% over the past month to close its latest trading session at $83.63. The stock has a 24-month beta of 0.76.
Unsurprisingly, CNC has an A overall rating, which translates to Strong Buy in our POWR ratings system. The stock is graded B for value and quality. In class A Doctor – Health Insurance sector, ranks sixth out of 11 stocks.
In addition to what we stated above, we also gave CNC grades for growth, momentum, stability and sentiment. Get all CNC ratings here.
Kroger Company (KR file)
KR operates as a reseller in the United States. The company operates food and drug combination stores, multi-department stores, market stores, and price impact warehouses.
On October 14, KR and Albertsons Companies (ACI) announced that it has entered into a definitive agreement under which the companies will merge, with the goal of broadening customer reach and enhancing proximity to provide fresh, convenient food to approximately 85 million households with an omnichannel experience of first-rate.
The company expects this partnership to drive profitable growth and sustainable value for all.
On Sept. 15, KR declared a quarterly dividend of 26 cents per share to be paid to shareholders on Dec. 1, 2022. Its annual dividend of $1.04 yields 2.17% on prevailing prices. The company’s dividend payments have increased at a CAGR of 16.1% over the past three years and 13.9% over the past five years. The company has a 16-year record of consecutive dividend growth.
KR sales increased 9.3% year over year to $34.64 billion in the fiscal second quarter ended Aug. 13. operational profit increased 13.7% year over year to $954 million. The company’s adjusted EBITDA increased 10.9% year-over-year to $7.63 billion, while adjusted EPS improved 12.5% year-over-year to $0.90.
Street expects KR’s revenue for the fiscal year ending January 2023 to reach $148.25 billion, indicating a 7.5% year-over-year increase. The company’s EPS is expected to grow 10.9% year over year to $4.08 for the same year. Additionally, the company topped consensus EPS and revenue estimates in each of the prior four quarters.
KR has gained 12.5% over the past year to close the last trading session at $47.84. The stock has a monthly beta of 0.54.
KR’s strong fundamentals are reflected in its POWR ratings. It has an overall rating of A, which translates to Strong Buy in our POWR rating system. KR has a B grade in value and quality. It ranks sixth in the grocery/big box retailer sector.
Click here to access additional POWR ratings for KR for growth, momentum, stability and sentiment.
WMT shares were up $0.53 or 0.35% in premarket trading on Friday. Since the beginning of the year, WMT has gained 6.60%, against a -14.29% increase in the benchmark S&P 500 index over the same period.
About the author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika a financial analyst and journalist. She holds a bachelor’s degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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