Volatility has gripped the stock market lately and you can easily blame this on inflationary headwinds, supply chain issues and geopolitical tensions. The consumer price index rose to 8.3% in August 2022 on a year-over-year basis, more than analysts’ expectations of 8.1%, and way above the Federal Reserve’s target of 2%. With the desperate need to tame inflation, the Federal Reserve may announce another steep hike in the benchmark interest rate.
So, as you modify your portfolio to cope with the ongoing challenges and continued monetary policy tightening, market pundits are placing their bets on highly-reputed companies with humongous market capitalization. These industry stalwarts are widely referred as blue-chip companies. These blue-chip stocks are financially resilient with an impressive track record of solid returns to shareholders.
Here we have identified three stocks from the Retail - Wholesale sector, namely Walmart Inc. WMT, The Home Depot, Inc. HD and Costco Wholesale Corporation COST. Thanks to successful business operations, these bellwethers have withstood multiple market gyrations and delivered returns to investors. These blue-chip stocks have momentum and balance sheet strength to tackle any untoward market volatility.
Notwithstanding the inflationary pressure, we believe that the retail sector is likely to take a front seat as the holiday season nears. Well, stimulus savings from last year, steady wage gains and a lower unemployment rate should help keep demand alive. Per Mastercard SpendingPulse, U.S. retail sales, excluding automotive, are anticipated to increase 7.1% from a year earlier during the traditional holiday period that runs from Nov 1-Dec 24. While in-store retail sales are projected to increase 7.9%, e-commerce is expected to rise 4.2%.
Past Year Price Performance
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3 Prominent Picks
Walmart: The omnichannel retailer has been doing every bit to solidify its already robust market position. Walmart has been taking several e-commerce initiatives, including buyouts, alliances, and improved delivery and payment systems as well as undertaking efforts to enhance merchandise assortments. The company is innovating in the supply chain and adding capacity as well as building businesses, such as Walmart GoLocal, Walmart Connect, Walmart Luminate, Walmart+, Spark Delivery, Marketplace, and Walmart Fulfillment Services. The company recently revealed the addition of Paramount+ streaming service for the members of Walmart+ at no extra cost.
With a market cap of more than $360 billion Walmart has a long-term earnings growth expectation of 5.5% and a Momentum Score of B. This Zacks Rank #3 (Hold) stock has a trailing four-quarter earnings surprise of 1.5%, on average. The Zacks Consensus Estimate for Walmart’s current financial year sales suggests growth of 4.8% from the year-ago period. The company pays out a quarterly dividend of 56 cents ($2.24 annualized) per share, giving a 1.7% yield at the current stock price. WMT’s payout ratio is 37, with a five-year dividend growth rate of 1.9%. (Check WMT’s dividend history here)
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Home Depot: The world’s largest home improvement specialty retailer has been witnessing continued demand for its products and assortments, despite broad-based inflation. The company is also benefiting from continued strength in both the Pro and DIY categories as well as digital prowess. Higher remodeling home activity amid rising new home prices should benefit Home Depot. In second-quarter fiscal 2022, Home Depot’s revenues grew 6.5% year over year to $43,792 million with 5.8% increase in comparable sales. Digital sales were up 12% during the quarter.
With a market cap of more than $280 billion, Home Depot has a long-term earnings growth expectation of 11.2% and a Momentum Score of B. This Zacks Rank #3 stock has a trailing four-quarter earnings surprise of 7.2%, on average. The Zacks Consensus Estimate for Home Depot’s current financial year sales and EPS suggests growth of 3.5% and 6.6%, respectively, from the year-ago period. The company pays out a quarterly dividend of $1.90 ($7.60 annualized) per share, giving a 2.7% yield at the current stock price. HD’s payout ratio is 47, with a five-year dividend growth rate of 17%.
Costco: Costco’s growth strategies, better price management, decent membership trends and the increasing penetration of the e-commerce business have been contributing to its upbeat performance. The company’s strategy to sell products at discounted prices has helped attract customers who have been seeking both value and convenience amid the inflationary environment. These factors have been aiding this operator of membership warehouses in registering an impressive sales run. Costco’s net sales grew 15.3% to $70.8 billion during the 16-week fourth quarter ended Aug 28, 2022. Comparable sales increased 13.7% during the said period.
With a market cap of more than $220 billion, Costco has a long-term earnings growth expectation of 9.2% and a Momentum Score of B. This Zacks Rank #3 stock has a trailing four-quarter earnings surprise of 9.7%, on average. The Zacks Consensus Estimate for Costco’s current financial year sales and EPS suggests growth of 15.7% and 18.1%, respectively, from the year-ago period. The company pays out a quarterly dividend of 90 cents ($3.60 annualized) per share, giving a 0.7% yield at the current stock price. COST’s payout ratio is 28, with a five-year dividend growth rate of 11.9%.
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Walmart Inc. (WMT) : Free Stock Analysis Report
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Costco Wholesale Corporation (COST) : Free Stock Analysis Report
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