The Fed’s interest rate hikes last year have already weighed heavily on stocks, with the S&P 500 tanking about 20% as financial conditions tightened. Although favorable results at the beginning of 2023 charmed investors, the Federal Reserve’s continuing hawkish stance could affect the market rally.
Fed Chair Jerome Powell said recently that the stronger-than-expected booming job report and similar data in the near term could require an even sharper rise in rates than projected until the 2% inflation target is achieved. This could lead to a stock market collapse in the near future.
In addition, Gerald Celente, a 40-year market veteran, believes that higher rates could spark significant volatility, and the market could face a meltdown this year. Moreover, Michael Burry anticipates both the S&P 500 and the Fed funds rate to eventually tumble, similar to the dot-com crash, with the Fed cutting rates as the economy weakens and asset prices slump.
Amid such turbulence, fundamentally strong large-cap stocks Walmart Inc. (WMT), The Coca-Cola Company (KO), and Centene Corporation (CNC), which can sustain volatilities, could be wise additions to your portfolio now.
Walmart Inc. (WMT)
WMT, with a market capitalization of $387.58 billion, engages in the operation of retail, wholesale, and other units worldwide. The company operates through three segments: Walmart U.S.; Walmart International; and Sam’s Club.
WMT’s drone delivery is soaring and operating in seven States, which completed 6,000 drone deliveries over the past year. The new offering should benefit the company’s prospects. Vik Gopalakrishnan, vice president, innovation & automation at Walmart U.S., said, "We’re encouraged by the positive response from customers and look forward to making even more progress in 2023."
On January 12, 2023, Walmart Commerce Technologies, one of WMT’s companies, and Walmart GoLocal recently announced a partnership with Salesforce, Inc. (CRM) to give retailers access to the tools and services that enable frictionless local pickup and delivery for customers worldwide.
WMT’s trailing-12-month ROCE of 11.61% is 11.6% higher than the 10.40% industry average. Its trailing-12-month ROTC of 10.10% is 63.9% higher than the 6.17% industry average.
WMT’s total revenue increased 8.7% year-over-year to $152.81 billion in the fiscal third quarter that ended October 31, 2022. Also, its net sales came in at $151.47 billion, up 8.8% year-over-year. Its adjusted EPS came in at $1.50, representing a 3.4% year-over-year rise.
Analysts expect WMT’s revenue to increase 3.9% year-over-year to $145.72 billion for the fiscal first quarter ending April 2023. Its EPS for the same quarter is estimated to be $1.38, up 6.5% year-over-year. It surpassed EPS estimates in three out of four trailing quarters, which is impressive.
Over the past six months, the stock has gained 8.7% to close the last trading session at $143.72. Over the past year, it has gained 6.2%.
WMT’s POWR Ratings reflect this promising outlook. It has an overall A rating, equating to a Strong Buy in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Stability and Sentiment. Within the A-rated Grocery/Big Box Retailers industry, it is ranked #8 out of 39 stocks.
Click here for the additional POWR Ratings for Growth, Value, Momentum, and Quality for WMT.
The Coca-Cola Company (KO)
KO is a popular beverage company that manufactures, markets, and sells various non-alcoholic beverages worldwide. The company provides sparkling soft drinks, flavored and enhanced water, sports drinks, juice, dairy, plant-based beverages, tea and coffee, and energy drinks. It has a $257.83 billion market capitalization.
KO’s trailing-12-month EBIT margin of 28.90% is 280.3% higher than the industry average of 7.60%. Also, its trailing-12-month net income margin of 23.44% is 487.3% higher than the industry average of 3.99%.
For the fiscal third quarter that ended September 30, 2022, KO’s non-GAAP net operating revenue came in at $11.05 billion, up 10% year-over-year. Its non-GAAP gross profit increased 6.5% year-over-year to $6.54 billion. Furthermore, its non-GAAP net income per share increased 6.2% year-over-year to $0.69.
KO’s revenue has grown at 5.6% and 2.6% CAGRs over the past three and five years, respectively. Moreover, its EBIT has grown at a 6.5% CAGR over the past three years.
For the fiscal first quarter ending March 2023, analysts expect KO’s EPS to come in at $0.63. Street expects its revenue to increase marginally year-over-year to $10.60 billion for the same quarter. Moreover, KO topped consensus EPS and revenue estimates in all four trailing quarters.
The stock has declined marginally over the past five days to close its last trading session at $59.62.
KO’s POWR Ratings reflect its solid prospects. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
KO is also rated an A for Sentiment and a B for Stability and Quality. Within the A-rated Beverages industry, it is ranked #15 of 37 stocks.
To see additional POWR Ratings for Value, Growth, and Momentum for KO, click here.
Centene Corporation (CNC)
With a market capitalization of $40.06 billion, CNC is a multinational healthcare company that provides government-sponsored and commercial healthcare programs, focusing on underinsured and uninsured individuals. It operates through the Managed Care and Specialty Services segments.
On January 3, 2023, the company’s Health Net of California subsidiary received new Medi-Cal direct contracts from the California Department of Health Care Services (DHCS). This should enable CNC to reach more people, provide member-focused care, and enhance health outcomes.
CNC’s trailing-12-month asset turnover ratio of 1.76x is 422.8% higher than the 0.34x industry average. Its trailing-12-month ROCE is 4.73%, compared to the negative 39.80% industry average.
CNC’s total revenues came in at $35.56 billion for the fourth quarter that ended December 31, 2022, up 9.2% year-over-year. Its adjusted net earnings and EPS stood at $485 million and $0.86, respectively.
In addition, its total current assets came in at $30.13 billion for the period that ended December 31, 2022, compared to $28.50 million for the period that ended December 31, 2021.
CNC’s EPS is expected to grow 9.4% year-over-year to $2 in the fiscal first quarter ending March 2023. Street expects its revenue to come at $36.14 billion for the same quarter. It surpassed EPS and revenue estimates in each of the four trailing quarters.
CNC’s shares have gained 2.4% over the past five days and 1.7% intraday to close the last trading session at $72.74.
CNC’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall A rating indicates a Strong Buy in our proprietary rating system.
CNC has a B grade for Value, Sentiment, and Quality. In the A-rated 11 stock Medical – Health Insurance industry, it is ranked #4.
Click here for the additional POWR Ratings for CNC (Stability, Momentum, and Growth).
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WMT shares were unchanged in premarket trading Monday. Year-to-date, WMT has gained 1.36%, versus a 6.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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