With the Federal Reserve’s intention to continue raising rates through 2023, the U.S. and the interconnected global economy are in trepidation of a recession. While the central bank has lowered the magnitude of the increase this month and may not increase it further, the potential terminal rate of more than 5% could push the economy into a recession.
Lingering concerns regarding the magnitude of future rate hikes and the declining probability of a soft landing for the economy will keep the market volatile in the foreseeable future. Hence, it could be wise to invest in businesses providing essential goods and services to capitalize on their inelastic demand.
To that end, it could be wise to invest in fundamentally strong stocks, The Coca-Cola Company (KO), Abbott Laboratories (ABT), and Waste Management, Inc. (WM).
The Coca-Cola Company (KO)
As a world-renowned beverage company, KO manufactures, markets, and sells various non-alcoholic beverages. The company operates through six segments: Europe, the Middle East, and Africa; Latin America; North America; Asia Pacific; Global Ventures; and Bottling Investments.
On December 15, KO paid its regular quarterly dividend of $0.44 per common share. The company pays a dividend of $1.76 per share annually. This translates to a 2.74% yield at the current price, compared to the 4-year average dividend yield of 3.07%. The company has raised its dividend for the past 60 years.
For the third quarter of fiscal 2022 ended September 30, KO’s net operating revenue increased 10% year-over-year to $11.1 billion. The company’s non-GAAP gross profit increased 6.5% year-over-year to $6.54 billion, while its non-GAAP net income improved 6.7% year-over-year to $3.01 billion.
As a result, non-GAAP net income per common share increased 6.2% from its year-ago value to $0.69.
Analysts expect KO’s revenue for the fiscal year ending December 2023 to increase 2.7% from the previous year to $43.88 billion. During the same period, the company’s EPS is expected to increase 1.7% year-over-year to $2.53. Additionally, the company has continued its impressive feat by surpassing consensus EPS estimates in each of the trailing four quarters.
The stock has gained 2% over the past month and 9.5% over the past year to close its last trading session at $64.21.
KO’s stable outlook has earned it an overall Rating of B, which translates to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
KO also has an A grade for Sentiment and a B for Stability and Quality. It is ranked #16 of 34 stocks in the A-rated Beverages industry.
Click here to see additional POWR Ratings for Growth, Value, and Momentum for KO.
Abbott Laboratories (ABT)
ABT discovers, develops, manufactures, and sells diversified healthcare products. The company operates through four segments: Established Pharmaceutical Products; Diagnostic Products; Nutritional Products; and Medical Devices.
On December 19, ABT announced that the U.S. Food and Drug Administration (FDA), the world's smallest implantable, rechargeable spinal cord stimulation (SCS) system for chronic pain, Eterna, launched by the company.
The Eterna platform has the lowest recharge burden platform on the market since it needs to be recharged less than five times a year under normal use. This makes a big difference in comfort for many patients who can now access the best of both worlds.
On December 9, ABT declared its quarterly common dividend of $0.51 per share to be paid on February 15, 2023, marking an increase of 8.5% from $0.47 per share paid previously. This also marks the company's 51st consecutive year of dividend growth and the 396th consecutive quarterly dividend since 1924.
ABT pays a $2.04 per share dividend annually. This translates to a yield of 1.88% at the current price, better than the 4-year average dividend yield of 1.50%.
For nine months of the fiscal year that ended September 30, 2022, ABT’s net sales increased 6.2% year-over-year to $33.56 billion. During the same period, the company’s operating earnings grew 16.7% year-over-year to $7.06 billion, while its net earnings increased 16.1% year-over-year to $5.9 billion, up 17.3% year-over-year.
Analysts expect ABT to report revenue of $43.18 billion for the current fiscal year, indicating a marginal year-over-year increase. The company has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 1.6% to close the last trading session at $108.57.
ABT’s POWR Ratings reflect its fundamental strength. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. It also has a grade B for Stability, Sentiment, and Quality.
ABT is ranked #8 of 140 stocks in the Medical – Devices & Equipment industry. Click here to see ABT’s Growth, Value, and Momentum ratings.
Waste Management, Inc. (WM)
WM, through its subsidiaries, provides waste collection, transfer, disposal services, and recycling and resource recovery and operates and owns landfill gas-to-energy facilities in the United States. Through its offerings, the company serves residential, commercial, industrial, and municipal customers throughout North America.
On December 16, WM paid its shareholders a quarterly cash dividend of $0.65 per share. The company currently pays a $2.60 per share dividend annually, which translates to a yield of 1.63% at the current price. Its 4-year average dividend yield is 1.72%.
On December 8, WM announced a 7.7% increase in the quarterly dividend from $0.65 to $0.70 for 2023, marking its 20th consecutive year of dividend increase. Its payouts have grown at an 8.9% CAGR over the past five years.
On the same day that WM announced that it had received authorization from its Board of Directors to repurchase up to $1.5 billion of the company’s common stock, over and above the prior authorization of $1.5 billion, which was utilized in 2022.
These positive steps underscore the management’s confidence in the company’s prospects and financial strength to return capital to its shareholders consistently.
On November 15, WM and Dow Inc. (DOW) announced the launch of their collaboration to improve residential recycling for hard-to-recycle plastic films by allowing consumers in select markets to recycle these materials directly in their curbside recycling.
This move aims to synergize WM's broad reach as a comprehensive environmental solutions provider with DOW’s leadership in material science to build new infrastructure to help close existing recycling gaps. This is expected to drive a more circular value chain in the U.S. for plastic materials.
On September 13, WM announced that it had agreed to acquire a controlling interest in Avangard Innovative’s U.S. business, which will operate as Natura PCR. Natura PCR is expected to scale and grow its recycling capacity to produce an estimated 400 million pounds per year of post-consumer resin (PCR) in five years.
Through this acquisition, the company expects to deliver new recycling capabilities for its customers and provide commercially used circular solutions for films and clear plastic wrap.
For the third quarter of the fiscal year 2022 ended September 30, WM’s revenue increased 8.8% year-over-year to $5.08 billion. The company’s adjusted income from operations increased 19.9% year-over-year to $950 million, while its adjusted net income grew 21.7% year-over-year to $645 million. As a result, WM’s adjusted EPS for the quarter rose 23.8% year-over-year to $1.56.
Analysts expect WM’s revenue and EPS for the fiscal year 2023 (ending December 2023) to increase 5.5% and 7.8% year-over-year to $20.82 billion and $6.16, respectively. Moreover, WM’s impressive earnings surprise history is testified by the company surpassing consensus EPS estimates in three of the trailing four quarters.
WM’s stock has gained 6.7% over the past six months to close the last trading session at $159.50.
WM’s stable performance and steady growth have earned it an overall rating of B, which translates to a Buy in our POWR Ratings system. It also has a grade B for Quality and Stability.
WM is ranked #5 of 15 stocks in the B-rated Waste Disposal industry.
Click here for additional ratings for Growth, Value, Momentum, and Sentiment for WM.
KO shares were trading at $63.87 per share on Wednesday afternoon, down $0.34 (-0.53%). Year-to-date, KO has gained 11.06%, versus a -18.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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