With the latest CPI report coming in lower than expected, policymakers signaled smaller interest rate hikes ahead. However, Fed Chair Jerome Powell cautioned that the monetary policy would continue to stay restrictive until some real signs of progress in inflation are seen and indicated that the final level of interest rates would be higher than previously expected.
Moreover, according to the data released by the Labor Department last week, the jobs report came in hotter than expected, with nonfarm payrolls increasing by 263,000 in November, against Dow’s estimates of 200,000. This might prompt the Fed to raise benchmark rates further.
“The labor market is hot, hot, hot, heaping pressure on the Fed to continue raising policy rates,” said Seema Shah, the chief global strategist at Principal Asset Management.
Since the economy is widely expected to tip into a recession next year, it could be best for investors to own quality and resilient stocks, Walmart Inc. (WMT) and Waste Management, Inc. (WM).
Walmart Inc. (WMT)
WMT operates retail, wholesale, and other units worldwide and offers an assortment of merchandise and services at everyday low prices (EDLP). The company operates through three segments Walmart U.S., Walmart International, and Sam’s Club.
Over the last three years, WMT’s dividend payouts have grown at a 2.4% CAGR. Its four-year average dividend yield is 1.71%, and its annual dividend of $2.24 translates to a 1.50% yield.
On October 31, WMT and Popable, a pop-up shop marketplace platform, announced a strategic partnership that allows small businesses to rent retail space in WMT stores across the country for short-term leasing. The partnership is expected to help small business owners thrive, keeping excess inventory moving and creating greater built-in foot traffic. This should be strategically beneficial for WMT.
For the fiscal third quarter ended October 31, 2022, WMT’s total revenues increased 8.7% year-over-year to $152.81 billion. Its adjusted operating income increased 3.9% year-over-year to $6.02 billion. In addition, its adjusted EPS came in at $1.50, representing a 3.4% increase from the year-ago quarter.
WMT’s revenue for the quarter ending January 31, 2023, is expected to increase 4.1% year-over-year to $157.76 billion. Its EPS for the quarter ending April 30, 2023, is expected to grow 9% year-over-year to $1.42, while the revenue for the same period is expected to come in at $145.17 billion, reflecting a 3.5% year-over-year rise.
The company has an impressive earnings surprise history as it surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 3.1% year-to-date to close the last trading session at $149.11. It has a beta of 0.53.
WMT’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the A-rated Grocery/Big Box Retailers industry, it is ranked #7 out of 39 stocks. The company has an A grade for Sentiment and a B for Stability and Quality.
Click here to see the additional POWR Ratings of WMT for Growth, Value, and Momentum.
Waste Management, Inc. (WM)
WM provides waste collection, transfer, disposal, recycling, and resource recovery and owns landfill gas-to-energy facilities in the United States. The company serves residential, commercial, industrial, and municipal customers.
On November 15, WM and Dow Inc. (DOW) announced a new collaboration to improve residential recycling for hard-to-recycle plastic films by allowing consumers to recycle them directly in their curbside recycling. Once operating at full capacity, this program is expected to help WM divert more than 120,000 metric tons (MT) of plastic film from landfills annually.
On November 8, WM declared a quarterly cash dividend of $0.65 per share, which is payable to shareholders on December 16, 2022. The company has a record of 19 consecutive years of dividend growth. The company’s annual dividend of $2.60 yields 1.57% at its current share price.
For the fiscal third quarter that ended September 30, 2022, WM’s revenue came in at $5.08 billion, up 8.8% year-over-year. Its net income came in at $639 million, up 18.8% year-over-year, while its EPS came in at $1.54, indicating an increase of 20.3% year-over-year.
WM’s revenue is expected to increase by 10.1% year-over-year to $19.74 billion in fiscal 2022. Its EPS is expected to grow 18.1% year-over-year to $5.71 in the same period. It also surpassed EPS estimates in three of four trailing quarters.
Over the past nine months, the stock has gained 6% to close the last trading session at $165.21. It has a beta of 0.72.
WM’s overall A rating indicates a Strong Buy in our proprietary rating system. The stock has a B grade for Stability and Quality.
In the A-rated, 15-stock Waste Disposal industry, WM is ranked #4.
Beyond what is stated above, one can access WM’s additional POWR Ratings for Growth, Value, Sentiment, and Momentum here.
WMT shares were trading at $148.45 per share on Thursday morning, down $0.66 (-0.44%). Year-to-date, WMT has gained 3.82%, versus a -15.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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