The U.S. Consumer Price Index (CPI) rose 9.1% year-over-year in June, driven by high costs of fuel, food, and other necessities. Last month, to bring the prices down, the Federal Reserve announced the most aggressive hike since 1994. And the market expects a similar interest rate hike this month as well.
Price levels have been soaring at a pace not seen in decades and have fostered recession fears among investors. Therefore, shares of companies dealing with essential commodities are no-brainer buys due to the inelastic demand for their products irrespective of economic conditions.
The Procter & Gamble Company (PG), The Coca-Cola Company (KO), and Philip Morris International Inc. (PM) are well-positioned to survive the high inflation and market volatility due to the defensive nature of these businesses. So, these stocks could be no-brainer picks.
The Procter & Gamble Company (PG)
PG offers branded consumer packaged goods to consumers across the world. It operates through Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care segments.
On June 8, 2022, PG and Microsoft Corp. (MSFT) announced a multi-year collaboration whereby MSFT will help enhance digital manufacturing at PG. This is expected to accelerate and expand PG's digital manufacturing platform and improve productivity to reduce costs.
For the third quarter ended March 31, 2022, PG’s net sales increased 7% year-over-year to $19.38 billion. Its net earnings attributable to PG came in at $3.36 billion, up 3% year-over-year, while its operating income rose 6% year-over-year to $4.02 billion. Also, its EPS came in at $1.33, up 6% year-over-year.
PG’s EPS and revenue are expected to increase 10% and 2.6% year-over-year to $ 1.24 and $19.43 billion, respectively, in the fourth quarter (ended June 30, 2022). It surpassed EPS estimates in each of the trailing four quarters. The stock has gained 9.5% over the past month to close the last trading session at $145.07.
PG’s POWR Ratings reflect solid prospects. The company has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Stability and Quality. It is ranked #4 out of 60 stocks in the Consumer Goods industry. Click here to see the other ratings of PG for Growth, Value, Momentum, and Sentiment.
The Coca-Cola Company (KO)
KO is a beverage company that manufactures, markets, and sells various non-alcoholic beverages globally. It sells its products under brands: Coca-Cola, Sprite, Fanta, Diet Coke, Coca-Cola Zero Sugar, Thumbs Up, Aquarius, fairlife, Minute Maid Pulpy, and Simply, among others.
During its fiscal 2022 first quarter (ended April 1, 2022), KO’s net revenues increased 16.3% year-over-year to $10.49 billion. Its gross profit rose 16% from its year-ago value to $6.40 billion. Its net income attributable grew 23.8% from the same period last year to $2.78 billion, while its EPS came in at $0.64, representing a 23% increase year-over-year.
Analysts expect KO’s EPS and revenue to increase 2% and 6.9% year-over-year to $0.66 and $10.74 billion, respectively, in its fiscal third quarter (ending September 2022). It surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 10.7% over the past year and 14.7% over the past nine months to close Friday’s trading session at $62.50.
KO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. KO also has a B grade for Stability and Quality.
The stock is ranked #16 of 35 stocks in the A-rated Beverages industry. Click here to see the other KO ratings for Growth, Value, Momentum, and Sentiment.
Philip Morris International Inc. (PM)
PM is a tobacco company focusing on delivering a smoke-free future and evolving its portfolio for the long term to include products outside of the tobacco and nicotine sector. The company's product portfolio comprises cigarettes and smoke-free products, such as heat-not-burn, vapor, and oral nicotine products.
PM’s net revenue increased 2.1% year-over-year to $7.75 billion for the first quarter ended March 31, 2022. The company’s adjusted EPS increased 14% year-over-year to $1.56. Also, the company’s cash and cash equivalents came in at $4.62 billion, indicating an increase of 2.8% from $4.50 billion as of December 31, 2021.
Analysts expect PM’s EPS and revenue for fiscal 2023 (ending December 2023) to increase 9.9% and 5% year-over-year to $5.98 and $30.63 billion, respectively. It has surpassed EPS estimates in each of the trailing four quarters. The stock has lost 5% year-to-date to close the last trading session at $90.18.
PM’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has an A grade for Quality and a B grade for Stability. It is ranked #6 out of 10 stocks in the A-rated Tobacco industry. Click here to see the other ratings of PM for Growth, Value, Momentum, and Sentiment.
PG shares were trading at $144.04 per share on Monday afternoon, down $1.03 (-0.71%). Year-to-date, PG has declined -10.97%, versus a -18.74% 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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