The economy is witnessing runaway prices, as consumers try to finds ways to keep up. In June, the Consumer Price Index (CPI) accelerated 9.1% year-over-year, driven by surging costs for fuel, food, and other necessities. It also marked the largest increase since 1981.
“Inflation is above 9%, but the breadth of the price pressures concerns the Federal Reserve. With supply conditions showing little improvement, the onus is on the Fed to hit the brakes via higher rates to allow demand to better match supply conditions. The recession threat is rising,” said James Knightley, ING’s Chief International Economist.
Last week, the positive market sentiment got restored owing to better-than-expected corporate earnings. And all the major indices are on track for their best month of the year. However, as concerns related to inflation linger, Fed officials have signaled to raise interest rates by 75 basis points this week, increasing the odds of the economy sliding into a recession.
Given an uncertain market backdrop, we think quality stocks The Coca-Cola Company (KO), Marathon Oil Corporation (MRO), and Weis Markets, Inc. (WMK) could be solid investments to hedge your portfolio against the market volatility and high inflation.
The Coca-Cola Company (KO)
KO is a leading beverage company that manufactures, markets, and sells various nonalcoholic beverages worldwide. The company offers sparkling soft drinks, flavored and enhanced water, dairy and plant-based beverages, and energy drinks. It operates through a network of independent bottling partners, wholesalers, distributors, retailers, and bottling distribution operators.
On June 13, KO and Brown-Forman Corporation announced a global relationship to debut the iconic Jack & Coke cocktail. “We keep consumers at the center of everything we do as we continue to develop our portfolio as a total beverage company, and that includes new products with our iconic Coca-Cola brand,” said KO’s Chairman and CEO, James Quincey.
“We are excited about our new relationship with Brown-Forman and look forward to the introduction of Jack Daniel’s & Coca-Cola,” he added.
In the fiscal 2022 first quarter ended April 1, 2022, KO's on-GAAP net operating revenues grew 16.4% year-over-year to $10.50 billion, while its non-GAAP gross profit improved 14.8% from the year-ago value to $6.27 billion. The company's non-GAAP income before income taxes increased 17.1% from the prior-year period to $3.49 billion.
In addition, KO’s non-GAAP net income and non-GAAP net income per share came in at $2.80 billion and $0.64, registering increases of 16.6% and 16.4% from the prior-year period, respectively.
The consensus revenue estimate of $41.83 billion for the fiscal year 2022 (ending December 2022) represents an increase of 8.2% from the prior-year period. The consensus EPS estimate of $2.46 for the ongoing year indicates a 6.1% year-over-year rise. Furthermore, it has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 4.9% year-to-date and 9% over the past year to close the last trading session at $62.19.
KO's POWR Ratings reflect this promising outlook. It has an overall grade of B, equating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
KO has a grade of B for Stability and Quality. Within the A-rated Beverages industry, it is ranked #16 of 35 stocks. Click here to access additional POWR Ratings (Value, Momentum, Sentiment, and Growth) for KO.
Marathon Oil Corporation (MRO)
MRO explores, produces, and markets crude oil and condensate, natural gas, and natural gas liquids in the United States and internationally. The company owns and operates 32 central gathering and treating facilities and the Sugarloaf gathering system, a 42-mile natural gas pipeline through Karnes and Atascosa Counties.
In April, MRO’s Board of Directors declared a dividend of 8 cents per share on MRO common stock, paid on June 10, 2022. It represents an increase of approximately 15% from the company’s last quarterly dividend payment of 7 cents per share.
“This is the fifth consecutive increase to our quarterly base dividend, representing a cumulative increase of 167% since the beginning of 2021, consistent with our commitment to pay a competitive and sustainable base dividend and to return a significant amount of cash flow to our shareholders,” said Chairman, President, and CEO Lee Tillman.
MRO’s revenues and other income increased 63.7% year-over-year to $1.75 billion for the fiscal 2022 first quarter ended March 31, 2022. The company’s income from operations grew 588% year-over-year to $805 million, while its adjusted net income came in at $749 million, representing a 351.2% year-over-year increase. Also, its adjusted income per share came in at $1.02, up 385.7% year-over-year.
Analysts expect MRO's revenue for the fiscal 2022 second quarter (ended June 2022) to come in at $2.10 billion, representing an 84% rise from the same period in 2021. Also, Street expects the company's EPS for the to-be-reported quarter to come in at $1.26, representing an increase of 474.6% year-over-year.
It’s no surprise that the company has surpassed the consensus revenue estimates in three of the trailing four quarters and consensus EPS estimates in each of the trailing four quarters.
MRO’s shares have gained 37.4% year-to-date and 95.9% over the past year to close the last trading session at $23.18.
MRO's POWR Ratings reflect a strong outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
MRO has a grade of A for Momentum and Quality. It is ranked #27 of 97 stocks in the B-rated Energy-Oil & Gas industry. Click here to see MRO's POWR Ratings for Stability, Value, Growth, and Sentiment.
Weis Markets, Inc. (WMK)
WMK engages in the retail sale of food through a chain of supermarkets in Pennsylvania and surrounding states. The company operates stores primarily under the Weis Markets name and Weis, Weis 2 Go, Weis Great Meals Start Here, Weis Gas-n-Go, and Weis Nutri-Facts. It owns and operates more than 197 stores.
In the fiscal 2022 first quarter ended March 26, 2022, WMK's net sales increased 9.7% year-over-year to $1.10 billion. Its income from operations grew 30.1% from the year-ago value to $41.41 million. Its income before provision for income taxes amounted to $42.04 million, up 28.7% year-over-year.
Furthermore, the company's net income and earnings per share came in at $31.39 million and $1.17, registering increases of 29.4% and 30% from the prior-year period, respectively.
The stock has gained 25.3% over the past six months and 44.8% over the past year to close the last trading session at $76.47.
WMK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of A, equating to a Strong Buy in our proprietary rating system.
WMK has an A grade for Stability and a B for Growth and Quality. Within the A-rated Grocery/Big Box Retailers industry, it is ranked #5 of 38 stocks. Click here to see additional POWR Ratings (Value, Sentiment, and Momentum) for WMK.
KO shares rose $0.91 (+1.46%) in premarket trading Tuesday. Year-to-date, KO has gained 7.87%, versus a -16.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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