The stock market has been facing heightened volatility lately due to skyrocketing inflation and aggressive monetary tightening in response. Last week, the S&P 500 index registered its worst week since March 2020. As a result, the valuations of many quality stocks have declined.
Amid increasing recessionary concerns, investing in fundamentally sound blue-chip stocks could be a good strategy. These companies are known to weather economic downturns due to their superior pricing power, market reach, and liquidity.
Quality blue-chip stocks Enterprise Products Partners L.P. (EPD), Flowers Foods, Inc. (FLO), The Kroger Co. (KR), Altria Group, Inc. (MO), and Comcast Corporation (CMCSA) are currently trading at significant discounts to their peers. Therefore, it could be wise to add them to your portfolio.
Enterprise Products Partners L.P. (EPD)
EPD provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products in North America. It operates through four segments: NGL Pipelines & Services; Crude Oil Pipelines & Services; Natural Gas Pipelines & Services; and Petrochemical & Refined Products Services.
On February 17, EPD acquired Navitas Midstream Partners, LLC. This acquisition gives the company a foothold for gathering, treating, and processing natural gas in the Midland Basin of the Permian.
EPD’s fiscal first quarter (ended March 31, 2022), revenues increased 42.1% year-over-year to $13.01 billion. Its adjusted EBITDA increased marginally from the year-ago value to $2.26 billion.
The stock’s forward EV/Sales multiple of 1.61 is 11.7% lower than the industry average of 1.83. In addition, its forward Price/Sales ratio of 1.05 is 31.1% lower than the industry average of 1.52.
The consensus EPS estimate of $0.62 for the fiscal second quarter (ending June 2022) represents a 21.8% improvement year-over-year. The consensus revenue estimate of $12.90 billion for the ongoing quarter indicates a 36.5% increase from the same period last year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
Over the past six months, the stock has gained 16.6% to close yesterday’s trading session at $24.45.
EPD’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has a B grade for Value, Momentum, Stability, and Sentiment. Among the 34 stocks in the A-rated MLPs - Oil & Gas industry, it is ranked #10.
Click here to see the POWR ratings of EPD for Growth and Quality.
Flowers Foods, Inc. (FLO)
FLO is one of the largest producers and marketers of packaged bakery foods. Its offerings, including bread, buns, rolls, snack cakes, and tortillas, are sold under six brand names: Nature’s Own, Dave’s Killer Bread (DKB), Wonder, Canyon Bakehouse, Tastykake, and Mrs. Freshley’s.
On May 26, FLO’s Board of Directors declared the quarterly dividend of $0.22 per share, representing an increase of 4.8% year-over-year. In addition, the Board also increased the share repurchase authorization by 20 million shares. This reflects the company’s strong cash flows and might boost shareholder returns.
In the fiscal first quarter (ended April 23, 2022), FLO’s sales increased 10.3% year-over-year to $1.44 billion. Its adjusted net income increased 6.3% from the year-ago value to $93.13 million, while adjusted EBITDA grew 2.4% year-over-year to $165.45 million. The company’s adjusted net income per common share came in at $0.44, representing a 7.3% year-over-year improvement.
In terms of forward EV/Sales, FLO is currently trading at 1.30x, 28% lower than the industry average of 1.81x. Its forward Price/Sales multiple of 1.11 is 5.7% lower than the industry average of 1.17x.
For the fiscal 2022 fourth quarter (ending December 2022), FLO’s revenue is expected to increase 11.1% from the prior-year period to $1.09 billion. The Street expects its EPS to increase 20.8% year-over-year to $0.24 in the same quarter. FLO has surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 8.2% over the past nine months to close the last trading session at $24.99.
FLO's strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy. It also has a B grade for Growth and Quality. The stock is ranked #10 of 87 stocks in the B-rated Food Makers industry.
Click here to see the other ratings of FLO for Value, Momentum, Stability, and Sentiment.
The Kroger Co. (KR)
KR is a food retailer that owns and operates combination food and drug stores, supermarkets, multi-department stores, and fulfillment centers. It sells its products under seven brand names: Private Selection, The Kroger, Big K, Check This Out, Heritage Farm, Simple Truth, and Simple Truth Organic.
On June 21, KR introduced a new customer fulfillment center in the Denver metro area. The company is expected to accelerate and expand its delivery services through this network.
On June 8, KR expanded its footprint in South Florida by opening a new hub in Miami-Dade County. With this expansion, the company should be able to serve more customers and boost its revenues.
KR’s total revenue increased 8% year-over-year to $44.60 billion in the first quarter ended May 21, 2022. Its operating profit increased 87% year-over-year to 1.51 billion. The company’s adjusted EBITDA grew 9.5% year-over-year to $7.44 billion, while its adjusted net earnings attributable to The Kroger Co. rose 17% from the prior-year quarter to $1.07 billion. KR’s adjusted net earnings per common share came in at $1.45, representing 21.9% year-over-year.
In terms of forward non-GAAP P/E, KR is currently trading at 12.39x, 27.3% lower than the industry average of 17.05x. Its forward Price/Sales multiple of 0.24 is 79.9% lower than the industry average of 1.17x. In addition, the stock’s forward Price/Cash Flow and EV/EBITDA ratios of 5.68 and 7.26 compare with industry averages of 12.90 and 11.50, respectively.
The consensus EPS estimate of $0.78 for the fiscal third quarter (ending October 2022) represents a marginal improvement year-over-year. The consensus revenue estimate of $33.74 billion for the next quarter indicates a 5.9% increase from the same period last year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 22.3% to close yesterday’s trading session at $48.40.
KR’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The company has a B grade for Growth, Value, and Quality. Within the A-rated Grocery/Big Box Retailers industry, it is ranked #5 of 38 stocks.
To see additional POWR Ratings for Momentum, Stability, and Sentiment for KR, click here.
Altria Group, Inc. (MO)
MO is engaged in manufacturing and selling smokeable and oral tobacco products in the United States. It offers its products under six brand names, including Marlboro, Black & Mild, Copenhagen, Skoal, Red Seal, and Husky, to wholesalers, distributors, and chain stores.
On April 5, MO signed a virtual power purchase agreement (VPPA) for energy produced by Inertia Wind Energy Centre. This might accelerate progress towards its goal of achieving 100% renewable electricity and reducing operational greenhouse gas emissions by 55% by 2030.
During the fiscal 2022 first quarter (ended March 31, 2022), MO’s gross profit rose 3.1% from the year-ago value to $3.37 billion. Its operating income increased 7.2% year-over-year to $2.88 billion. Net earnings attributable to Altria grew 37.6% from the same period last year to $1.96 billion, while its adjusted earnings per share came in at $1.12, representing a 4.7% increase year-over-year.
The stock’s forward non-GAAP P/E multiple of 9.42 is 44.8% lower than the industry average of 17.05. In addition, MO’s forward Price/Cash Flow and EV/EBITDA ratios of 9.20 and 8.34 are significantly lower than the industry averages of 12.90 and 11.50, respectively.
Analysts expect MO’s EPS to increase 8.1% year-over-year to $1.32 in the fiscal third quarter (ending September 2022). MO’s revenue is expected to increase marginally year-over-year to $5.58 billion in the next quarter. It surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive.
Over the past year, the stock has declined 3.4% to close the last trading session at $45.70.
MO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. MO also has an A grade for Quality. The stock is ranked #3 of 10 stocks in the A-rated Tobacco industry.
Click here to see the other ratings of MO for Growth, Value, Momentum, Stability, and Sentiment.
Comcast Corporation (CMCSA)
CMCSA is a global media and technology company operating through five segments: Cable Communications; Media; Studios; Theme Parks; and Sky.
On April 27, CMCSA and Charter Communications, Inc. (CHTR) formed a joint venture to develop and offer a next-generation streaming platform nationally. This partnership is expected to bring innovative entertainment offerings to the company’s vast customer base and boost its revenue streams.
CMCSA’s revenues increased 14% year-over-year to $31.01 billion in the fiscal first quarter (ended March 31, 2022). The company’s adjusted EBITDA increased 8.8% from the year-ago value to $9.15 billion. Its adjusted net income grew 10.5% from the year-ago value to $3.90 billion, while its adjusted EPS increased 13.2% from the year-ago value to $0.86.
The stock’s forward non-GAAP P/E multiple of 10.70 is 35.2% lower than the industry average of 16.50. In addition, CMCSA’s forward EV/EBIT and EV/EBITDA ratios of 11.55 and 7.15 are significantly lower than the industry averages of 14.42 and 8.19, respectively.
Analysts expect CMCSA’s EPS and revenue to increase 9.8% and 4.6% year-over-year to $0.92 and $29.87 billion, respectively, in the fiscal 2022 second quarter (ending June 2022). The company has surpassed the consensus EPS estimates in each of the trailing four quarters, which is excellent.
Shares of CMCSA declined 8.4% over the past month to close yesterday’s trading session at $34.48.
CMCSA has an overall rating of A, which translates to Strong Buy in our proprietary rating system. It has a B grade for Growth, Stability, and Quality. Also, it is ranked #1 of 9 stocks in the Entertainment - TV & Internet Providers industry.
In addition to the POWR Ratings grades I’ve just highlighted, you can see the CMCSA ratings for Value, Momentum, and Sentiment here.
EPD shares were trading at $24.11 per share on Wednesday afternoon, down $0.34 (-1.39%). Year-to-date, EPD has gained 13.96%, versus a -20.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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