High inflation, the Fed’s interest rate hikes to handle it, the economic fallout from Russia’s invasion of Ukraine, and recessionary fears have kept the stock market volatile for most of 2022.
October Consumer Price Index (CPI) data came in lower than expected, indicating some signs that inflationary pressures could be easing. Furthermore, Federal Reserve chairman Jerome Powell’s recent remarks regarding smaller interest rate hikes boosted investors’ confidence and led to a solid market recovery until the end of November.
However, the stronger-than-expected jobs report in November dented investor sentiment and added fuel to fears over rising inflation and the Fed’s persistent hawkish stance. After the latest jobs report, the Fed could raise interest rates beyond a widely anticipated 5% terminal rate and might push the economy into a recession in its fight against inflation.
Citigroup Inc. (C) Chief Executive Officer Jane Fraser warns that the U.S. economy is on track to enter a recession in the second half of next year. Also, the New York Fed’s Recession Probability model is flashing alarms for an incoming economic downturn, with the odds of a recession at 38%.
Since the stock market is expected to remain highly volatile in the near term, adding fundamentally sound stocks, The Coca-Cola Company (KO), Elevance Health Inc. (ELV), and Ingles Markets, Incorporated (IMKTA), to your portfolio could be wise.
The Coca-Cola Company (KO)
KO is a famous beverage company that manufactures, markets, and sells various nonalcoholic beverages worldwide. The company offers sparkling soft drinks, flavored and enhanced water, sports drinks, juice, dairy, plant-based beverages, and energy drinks. It operates through a network of independent bottling partners, distributors, wholesalers, and retailers.
On October 20, KO announced its regular quarterly dividend of $0.44 per common share, payable on December 15.
The company pays a dividend of $1.76 per share annually, which translates to a 2.77% yield at the current price. Its four-year average dividend yield is 3.08%. The company has raised its dividend for the past 60 years. Moreover, its dividend payouts have grown at a CAGR of 3.2% over the past three years and a CAGR of 3.5% over the past five years.
On September 29, KO and Molson Coors Beverage Company (TAP) entered an exclusive agreement to develop and commercialize Topo Chico Spirited, a line of spirit-based, ready-to-drink cocktails inspired by the bright and refreshing taste of tequila and vodka-based beverages. It will be launched in more than 20 markets across the country in 2023 and might boost the company’s revenue stream.
For the fiscal 2022 third quarter ended September 30, 2022, KO’s net operating revenues increased 10.2% year-over-year to $11.05 billion. The company’s gross profit grew 7.1% year-over-year to $6.50 billion. Its operating income came in at $3.09 billion, up 6.6% year-over-year.
Furthermore, the net income attributable to shareholders of KO was $2.83 billion, up 14.3% year-over-year. Its non-GAAP net income per share grew 6.2% from the year-ago value to $0.69.
Analysts expect KO’s EPS to increase 7.4% year-over-year to $2.49 for the fiscal year ending December 2022. Likewise, the revenue estimate of $42.70 billion represents a 10.5% growth from the previous year. Also, the company has surpassed the consensus EPS and revenue estimates in all four trailing quarters.
The stock has gained 6.8% over the past month and 15.1% over the past year to close its last trading session at $63.54.
KO’s POWR Ratings reflect this promising outlook. The stock’s overall B rating translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
KO is rated a B in Stability, Sentiment, and Quality. Within the A–rated Beverages industry, it is ranked #16 out of 34 stocks.
Beyond what we’ve stated above, we have also given KO grades for Value, Momentum, and Growth. Get all KO ratings here.
Elevance Health Inc. (ELV)
ELV is a holistic health benefits company that supports consumers, families, and communities throughout their care journey by connecting to critical care, support, and resources to lead healthier lives. The company serves approximately 118 million people through a portfolio of medical, digital, pharmacy, behavioral, clinical, and care solutions.
On November 9, ELV announced that it had entered an agreement with CarepathRx, a portfolio company of Nautic Partners, to acquire BioPlus. BioPlus is a comprehensive specialty pharmacy that provides a holistic range of specialty pharmacy services for patients with complex and chronic conditions.
The acquisition is expected to deepen ELV’s capabilities in specialty pharmacy and should be strategically beneficial for the company.
On October 18, ELV announced its quarterly dividend of $1.28 per share, payable to its shareholders on December 21, 2022. ELV’s $5.12 annual dividend yields 0.97% at its current share price. Its dividend payouts have increased at a 17% CAGR over the past three years and a 13.7% CAGR over the past five years. The company has a record of 11 consecutive years of dividend growth.
In the fiscal 2022 third quarter ended September 30, 2022, ELV’s operating revenue increased 11.5% year-over-year to $39.63 billion. Its operating gain rose 10.2% year-over-year to $2.27 billion. The company’s income before income taxes stood at $2.15 billion, a rise of 7.5% year-over-year.
In addition, the company’s adjusted net income and net income per share came in at $1.82 billion and $7.53, up 9.1% and 10.9% year-over-year, respectively.
Analysts expect ELV’s EPS for the fiscal year 2022 to come in at $29.02, indicating an 11.7% year-over-year increase. The consensus revenue estimate of $155.67 billion for the same period represents a 13.7% year-over-year rise. The company also beat the consensus EPS estimates in each of the trailing four quarters, which is commendable.
Shares of ELV have gained 14% year-to-date and 28.9% over the past year to close the last trading session at $529.90.
ELV’s fundamental strength and strong outlook are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
ELV has a B grade for Growth, Value, Stability, Sentiment, and Quality. It tops the list of 11 stocks in the A-rated Medical – Health Insurance industry.
To access all the POWR Ratings for ELV, click here.
Ingles Markets, Incorporated (IMKTA)
IMKTA operates a chain of supermarkets in the southeast United States. It offers several food products and non-food products.
On September 26, IMKTA paid a cash dividend of $0.165 per share on all its Class A Common Stock and $0.15 per share on all its Class B Common Stock to shareholders on October 13, 2022. It pays a $0.66 per share dividend annually, which translates to a 0.66% yield on the current share price. Its four-year dividend yield is 1.40%.
During the fiscal 2022 fourth quarter ended September 24, 2022, IMKTA’s net sales increased 8.7% year-over-year to $1.45 billion, while gross profit grew 6.9% from the year-ago value to $364.78 million. For the year ended September 24, 2022, the company’s cash and cash equivalents were $267.20 million, up 280% year-over-year, and its total assets rose 13.7% from the prior year to $2.30 billion.
The consensus revenue estimate of $4.84 billion for the next fiscal year (ending September 2024) indicates a 3% year-over-year improvement. Also, analysts expect the company’s EPS to grow 14.5% per annum over the next five years.
The stock has gained 7.3% over the past month and 13.8% year-to-date to close its last trading session at $99.43.
IMKTA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
IMKTA has a grade of A for Quality and a B for Stability and Value. In the 39-stock A-rated Grocery/Big Box Retailers industry, it is ranked #2.
Click here to access the additional POWR Ratings for IMKTA (Growth, Momentum, and Sentiment).
KO shares were trading at $63.60 per share on Thursday morning, up $0.06 (+0.09%). Year-to-date, KO has gained 10.59%, versus a -15.79% 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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