With concerns of an impending recession, it may be wise for investors to invest in large-cap companies as they are least affected by economic cycles. Therefore, fundamentally strong large-cap stocks Walmart (WMT) and Procter & Gamble (PG) could stabilize investors’ portfolios. Read more….
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Inflation slowed once again in December as the Consumer Price Index (CPI) increased by 6.5% over last year and decreased by 0.1% sequentially. Although progress has been made in bringing inflation down from its high of 9.1% year-over-year rise in June, the central bank remains committed to bringing inflation down to its 2% target.
Policymakers have signaled a slowdown in rate hikes but did not promise an easing. With a pause in interest rates improbable this year, the economy and the stock market are expected to remain under pressure.
With the expected macroeconomic uncertainty, investing in large-cap stocks can be considered secure investments since they are well-established companies and generally exhibit lower volatility. Moreover, these companies are considered to be least affected by economic cycles.
Hence, it could be wise for investors to buy fundamentally strong large-cap stocks Walmart Inc. (WMT) and The Procter & Gamble Company (PG).
Walmart Inc. (WMT)
WMT 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. It has a market capitalization of $379.82 billion.
Over the last three years, WMT’s dividend payouts have grown at a 1.9% CAGR. Its four-year average dividend yield is 1.69%, and its forward annual dividend of $2.24 per share translates to a 1.59% yield on prevailing prices. It paid a quarterly dividend of $0.56 per share on January 3, 2023.
On January 12, subsidiaries of WMT – Walmart Commerce Technologies, and Walmart GoLocal, announced a partnership with Salesforce to provide retailers access to technologies and solutions that power frictionless local pickup and delivery for shoppers everywhere.
Senior VP of technology strategy and commercialization at Walmart Global Technology, Anshu Bhardwaj, believes that together with Salesforce, retailers would be able to scale their business and deliver the personalized, convenient experiences shoppers expect.
For the fiscal third quarter that ended October 31, 2022, WMT’s total revenues increased 8.7% year-over-year to $152.81 billion. Its adjusted operating income increased 3.9% year-over-year to $6.02 billion. In addition, its adjusted EPS came in at $1.50, representing a 3.4% increase from the year-ago quarter.
WMT’s EPS for the quarter ending April 30, 2023, is expected to increase 7.1% year-over-year to $1.39. Its revenue for the quarter ending January 31, 2023, is expected to rise 4.3% year-over-year to $158.09 billion.
The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. The stock has gained 9.4% over the past six months to close the last trading session at $140.84.
WMT’s POWR Ratings reflect its solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the A-rated Grocery/Big Box Retailers industry, it is ranked #8 of 39 stocks. It has a B grade for Stability, Sentiment, and Quality.
Click here to see the additional POWR Ratings of WMT for Growth, Value, and Momentum.
The Procter & Gamble Company (PG)
PG provides branded consumer packaged goods worldwide. It operates through five segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. It has a market capitalization of $346.95 billion.
Over the last three years, PG’s dividend payouts have grown at a 7% CAGR. Its four-year average dividend yield is 2.45%, and its forward annual dividend of $3.65 per share translates to a 2.50% yield on the current price level. It is expected to pay a quarterly dividend of $0.91 per share on February 15, 2023.
PG’s total assets for the second quarter (ended December 31, 2022) came in at $117.72 billion, compared to $117.21 billion for the fiscal year that ended June 30, 2022. Net earnings attributable to PG came in at $3.93 billion, while its EPS came in at $1.59.
Analysts expect PG’s EPS for the quarter ending March 31, 2023, to increase 2.1% year-over-year to $1.36. Its revenue for the quarter ending June 30, 2023, is expected to increase marginally year-over-year to $19.68 billion.
It has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. Over the past three months, the stock has gained 14.1% to close the last trading session at $145.50.
PG’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. Within the Consumer Goods industry, it is ranked #8 of 57 stocks. It has an A grade for Stability and a B for Sentiment and Quality.
Click here to see the additional PG ratings for Growth, Value, and Momentum.
WMT shares were trading at $139.66 per share on Thursday afternoon, down $1.18 (-0.84%). Year-to-date, WMT has declined -1.50%, versus a 2.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika’s passion for writing and interest in financial markets led her to pursue a career in investment research.
With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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