With the market being so uncertain, investors tend to shift towards these defensive names to protect their capital. Defensive stocks provide stability during market downturns, making them a crucial addition to any portfolio before a potential crash. These stocks belong to sectors that generate steady revenue regardless of economic conditions, such as consumer staples, healthcare, and utilities.
Amid this backdrop, investors could consider buying three solid defensive stocks, Walmart Inc. (WMT), UnitedHealth Group Incorporated (UNH), and Johnson & Johnson (JNJ), which are well-positioned to capitalize on the uncertain market conditions.
According to the U.S. Department of Commerce, the real GDP grew at a 2.3% annual rate in the fourth quarter of 2024, which was from 3.1% in the third quarter but nonetheless represented an encouraging end to a year.
Yet, there’s a lot going around the U.S. economy at the moment. The news of the Trump administration’s plan to impose reciprocal tariffs on trading partners was not taken kindly by the stock market. There is also some indication that inflation might again be on a spike.
Companies in food, beverages, and household products, along with pharmaceutical companies, health insurers, and the utility service sector, see consistent demand, even in recessions. Companies in these sectors tend to experience less severe losses during market corrections, offering a cushion against volatility. Therefore, for investors, focusing on defensive stocks can provide downside protection while maintaining portfolio stability.
Considering these conducive trends, let’s examine the above-mentioned stocks in detail.
Walmart Inc. (WMT)
WMT is a technology-powered omnichannel retailer that engages in the operation of retail, wholesale, other units, and e-commerce worldwide. The company functions as supercenters, supermarkets, hypermarkets, warehouse clubs, and cash and carry stores. It operates through three segments: Walmart U.S.; Walmart International; and Sam’s Club.
On January 30, WMT announced same-day pharmacy delivery in 49 states. This significant milestone is a tech-powered store-to-door service using a combination of highly complex in-store and cloud-based technology platforms, AI capabilities, and a new geospatial platform.
In the same month, buoyed by strong financial performance, the company paid its shareholders a quarterly dividend of $0.21 per share. WMT pays an annual dividend of $0.83, which translates to a yield of 0.82% at the current share price. Its four-year average dividend yield is 1.44%. Moreover, the company’s dividend payouts have increased at a CAGR of 4.2% over the past three years.
On December 3, 2024, WMT completed the acquisition of VIZIO. This acquisition should allow WMT to use VIZIO’s SmartCast Operating System, enhancing customers’ shopping journeys and serving them in new ways. It should help connect customers at scale and boost product discovery.
During the fiscal third quarter, which ended on October 31, 2024, WMT’s total revenue increased by 5.5% year-over-year to $169.59 billion. The company reported an operating income of $6.71 billion, indicating 8.2% growth from the prior year’s quarter. WMT’s attributable net income stood at $4.58 billion, up 910.4% year-over-year, while its earnings per share grew 850% from the year-ago value to $0.57.
According to the company’s updated fiscal year 2025 guidance, WMT expects consolidated net sales growth of 4.8% to 5.1%. Its consolidated adjusted operating income is expected to increase 8.5% - 9.3%. The company’s adjusted EPS is set in the range of $2.42 to $2.47.
The consensus revenue estimate of $178.74 billion for the fiscal fourth quarter (ended January 2025) represents a 3.9% increase year-over-year. The consensus EPS estimate of $0.64 for the same quarter indicates a 7.4% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 81.7% over the past year and 71.8% over the past nine months to close the last trading session at $102.85.
WMT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
WMT has an A grade for Stability and Sentiment and a B for Momentum. It is ranked #13 out of 35 stocks in the A-rated Grocery/Big Box Retailers industry. Click here to access the other WMT ratings for Growth, Value, and Quality.
UnitedHealth Group Incorporated (UNH)
UNH operates as a diversified healthcare company. The company operates through four segments: UnitedHealthcare; Optum Health; Optum Insight; and Optum Rx.
On December 17, demonstrating its commitment to returning value to shareholders, the company paid a quarterly dividend of $2.10 per common share.
UNH pays an annual dividend of $8.40, which translates to a yield of 1.56% at the current share price. Its four-year average dividend yield is 1.32%. Moreover, its dividend payouts have increased at a CAGR of 14.6% over the past five years.
In the fiscal fourth quarter that ended on December 31, 2024, UNH’s total revenue increased 6.8% year-over-year to $100.81 billion. The company’s adjusted net earnings attributable came in at $6.31 billion, up 9.7% year-over-year, while its adjusted EPS grew 10.6% from the year-ago value to $6.81.
As per the outlook for fiscal year 2025, the company’s adjusted net earnings are projected to be between $450 billion and $455 billion, with adjusted earnings per share anticipated to range from $29.50 to $30.
Street expects UNH’s revenue for the fiscal first quarter (ending March 2025) to increase 11.9% year-over-year to $111.64 billion. Its EPS for the current quarter is expected to improve by 5.6% from the year-ago value of $7.29. Moreover, it beat the EPS estimates in each of the trailing four quarters, which is promising.
UNH shares have surged 7.2% over the past year and 4.8% year-to-date to close the last trading session at $530.04.
UNH’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
UNH has a B grade for Growth, Stability, and Quality. It is ranked first out of 10 stocks in the A-rated Medical - Health Insurance industry. Click here to see the additional ratings for UNH (Value, Momentum, and Sentiment).
Johnson & Johnson (JNJ)
JNJ is engaged in the research and development, manufacture, and sale of healthcare products primarily focused on human health and well-being. The company offers a diversified range of products through the Innovative Medicine segment and MedTech segment.
On January 21, JNJ announced that the European Commission (EC) has approved a Marketing Authorisation (MA) for LAZCLUZE in combination with RYBREVANT for the first-line treatment of patients with EGFR-mutated advanced non-small cell lung cancer. This chemotherapy-free regimen is for adult patients and also marks a significant step forward in the treatment of EGFR-mutated NSCLC.
In the same month, JNJ received approval from the U.S. Food and Drug Administration (FDA) for SPRAVATO® (esketamine) CIII nasal spray, the first and only monotherapy for adults living with major depressive disorder (MDD). This innovative treatment is only available through a restricted program called the SPRAVATO® Risk Evaluation and Mitigation Strategy (REMS) Program to facilitate safe and appropriate use.
On January 2, the company declared a quarterly dividend of $1.24 per share, payable on March 4, to shareholders of record on February 18. With 62 years of consecutive dividend growth, JNJ pays an annual dividend of $4.96, which translates to a yield of 3.21% at the current share price. Its four-year average dividend yield is 2.76%. Also, the company’s dividend payouts have increased at a CAGR of 5.5% over the past five years.
For the fiscal year 2024 period that ended December 31, 2024, JNJ's sales to customers increased 4.3% year-over-year to $88.82 billion. Its gross profit rose 4.7% from the year-ago value to $61.35 billion.
The company’s net earnings from continuing operations amounted to $14.07 billion, representing a 5.6% increase from the same period last year. Also, its net earnings per share from continuing operations for the period increased marginally year-over-year to $9.98.
Per the updated guidance for the fiscal year 2025, JNJ forecasts operational sales between $90.90 billion and $91.70 billion, reflecting a 3% increase from 2023, primarily driven by recent acquisitions. The company also expects adjusted EPS between $10.50 and $10.70.
Analysts expect JNJ’s revenue for the current year (ending December 2025) to grow marginal year-over-year to $89.88 million. However, the consensus EPS estimate of $10.55 for the same period indicates an increase of 5.7% year-over-year.
Shares of JNJ have gained 6.9% over the past month, closing the last trading session at $153.51.
JNJ’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It also has a B grade for Growth, Value, Stability, Sentiment, and Quality. Within the Medical - Pharmaceuticals industry, it is ranked #4 out of 150 stocks. Click here to see JNJ’s ratings for Momentum.
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WMT shares closed at $101.15 on Friday, down $-1.70 (-1.65%). Year-to-date, WMT has gained 11.95%, versus a 2.51% rise in the benchmark S&P 500 index during the same period.
About the Author: ShreyaRathi
