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Following recent bank failures, the Fed is at a crossroads in policy, weighing strong economic data against volatile capital markets. Grocery stocks tend to fare better than others given the inelastic demand for commodities in an inflationary environment. Therefore, quality grocery stocks Walmart (WMT) and Costco Wholesale (COST) could be ideal investments for solid returns. read….
The recent banking crisis has complicated the Fed’s fight against stubborn inflation. In an inflationary environment, grocery inventories can help hedge a portfolio as demand for products is inelastic. I can’t.WMT) and Costco Wholesale Corporation (price) now.
Rate hikes remain high, well above the 2% target, despite aggressive Fed hikes to combat high inflation. The Consumer Price Index (CPI) rose 0.4% in February, 6% YoYThe recent release of upbeat economic data job growth And stubbornly high inflation increases the likelihood of further rate hikes.
The recent turmoil in the financial system Bankruptcy of two major regional banks It may deter the Fed from fighting stubborn inflation. Even as prices rise, consumers typically do not hold back on spending on essentials such as groceries. As such, food companies can pass on rising raw material costs to consumers, making demand for food stocks inelastic and helping them weather economic turmoil with ease.
The e-grocery market could thrive following a rapid surge during the pandemic. Grocery retailers continue to fine-tune their e-commerce business models by offering faster pickup and delivery, which should catalyze further growth.
According to forecasts released by Brick Meets Click and Mercatus, online grocery sales 11.7% CAGR E-commerce’s share of total grocery spending will grow over the next five years, rising from 11.2% in 2022 to 13.6% in 2027.
Given the inelasticity of demand for groceries, the WMT and COST of fundamentally sound groceries stocks may be worth looking at for risk-adjusted returns.
Walmart (WMT)
WMT offers a variety of goods and services through retail and e-commerce. The company offers a range of products and amenities at economical prices under its Everyday Low Price (EDLP) strategy. It operates through his three segments. Walmart International; and Sam’s Club.
On 28 February 2023, WMT and Citigroup (C.) announced a collaboration to provide A bridge built by the Citi platform To WMT’s 10,000 small and medium-sized businesses (SMBs) within its US-based supplier network. The platform is expected to enable WMT’s suppliers to expand their operations, improve access to the capital they need to achieve their objectives, and contribute to the company’s growth.
Additionally, on February 21, the company approved its annual report. dividend $2.28 per share in 2024, up 2% from $2.24 per share last year. WMT has a long history of 49 consecutive years of dividend increases.
The current annual dividend of $2.28 is 1.64% at current price levels, with an average yield of 1.67% over the past four years and dividend payouts growing at a CAGR of 1.8% over the past three years.
WMT’s total revenue increased 7.3% year-over-year to $164.05 billion in the fourth quarter of fiscal 2023, which ended January 31. Pre-tax income increased 86.2% from the prior year period to $8.90 billion. Additionally, the company’s consolidated net income increased 59.9% year-over-year to $5.81 billion, with adjusted EPS of $1.71, an increase of 11.8% year-over-year.
Analysts expect WMT’s revenue to grow 3.5% year-over-year to $649.63 billion in the next fiscal year (ending January 2025). The company’s EPS for the year is expected to be $6.79, up 11.3% year over year. Additionally, WMT has outperformed consensus EPS forecasts in three of four quarters. This is impressive.
The stock has gained 17.9% over the past nine months, closing its last trading session at $139.40.
WMT’s strong fundamentals are POWR ratingThe stock has an overall rating of A, which equates to a strong buy in our proprietary rating system. The POWR Rating is calculated taking into account 118 different factors, each weighted to an optimal degree.
WMT has an A grade for stability and a B grade for value and quality. Ranked 3rd out of 37 A rated shares Grocery/Big Retail industry.
In addition to the POWR rating I just highlighted, you can see WMT’s growth, sentiment, and momentum ratings. here.
Costco Wholesale Corporation (price)
Global retailer COST operates warehouse clubs in eight different countries. The company offers goods in various categories such as groceries, candy, electronics, TV and media, auto supplies, etc. It has approximately 838 warehouses worldwide and also maintains self-service gas stations. .
On January 19, 2023, COST authorized a new share buyback program of up to $4 billion. The new program replaces the previous program, which had already bought back $1.4 billion.
Such buybacks Improving return on assets With less assets on the balance sheet and less outstanding capital, the return on equity improves. Ultimately, the move could increase the value of the company in the eyes of investors.
COST total revenue was $55.27 billion for the second quarter of fiscal year 2023, which ended February 12, up 6.5% year-over-year. Operating income was $1.9 billion, up 5% from the prior year period. $1.98 billion in the year-ago quarter.
Additionally, net income attributable to COST and net income per common share were $1.46 billion and $3.30, respectively, an increase of 12.9% and 13%, respectively, from the prior year.
The consensus revenue estimate of $243.4 billion for the fiscal year ending August 2023 reflects a year-over-year improvement of 7.3%. Similarly, this year’s consensus EPS forecast is $14.47, up 9.1% year-over-year. Additionally, COST beat the consensus EPS estimate in three of his four subsequent quarters.
COST’s share price is up 9% over the past nine months and closed its last trading session at $487.05.
COST’s POWR rating reflects its promising outlook. The stock has an overall rating of B, which is equivalent to a buy in our proprietary rating system.
The stock has a B grade for stability and sentiment. It ranks 24th out of 37 stocks in the same industry.
In addition to the above, there are also COST ratings for value, growth, momentum, and quality.Get all COST ratings here.
Consider this before making your next trade…
We are still in the middle of a bear market.
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Watch this timely presentation before making your next trade.
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WMT shares traded at $140.66 per share on Monday afternoon, up $1.26 (+0.90%). WMT is down -0.39% year-to-date, compared to his 2.77% rise in the S&P 500 index over the same period.
About the Author: Aanchal Sugandh
Aanchal’s passion for the financial markets drives her work as an investment analyst and journalist. She has a bachelor’s degree in finance and is working on the CFA program. Her fundamental analysis skills make her adept at assessing the long-term outlook of stocks. Her goal is to help investors build portfolios that deliver sustainable returns.
post Get Your Shopping Done With These 2 Grocery Stocks first appeared StockNews.com