Inflation Remains Sticky in February: 5 Safe Picks
On Mar 12, the Department of Labor reported that the consumer price index (CPI) for February increased 0.4% month over month, in line with the consensus estimate. However, the metric was higher than January’s reading of a 0.3% rise. This marked the most significant monthly increase since September 2023. Year over year, CPI increased 3.2% in February, higher than January’s reading of a 3.1% rise.
Core CPI (excluding volatile items like food and energy) increased 0.4% month over month in February, in line with January’s data. The consensus estimate was pegged at a rise of 0.3%. Year over year, core CPI increased 3.8% in February, higher than January’s reading of a 3.7% rise.
Although inflation has declined significantly from its peak of 9% in June 2022, it remains elevated compared with the Fed’s target rate of 2%. Personal spending remains rock solid despite the Fed maintaining a highly restrictive monetary policy, including a higher interest rate regime. The U.S. economy grew a healthy 2.5% in 2023.
At this stage, investment in low-beta stocks with a high dividend yield and a favorable Zacks Rank may be the best option. If markets regain momentum, the favorable Zacks Rank of these stocks will capture the upside potential. However, if the downtrend continues, low-beta stocks will minimize portfolio losses and dividend payments and will act as a regular income stream.
Our Top Picks
We have narrowed our search to five low-beta (beta >0 <1) stocks with a solid dividend yield. These companies have strong growth potential for 2024 and have seen positive earnings estimate revisions in the past 60 days. Each of our picks carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Booz Allen Hamilton Holding Corp. BAH is benefiting from its Vision 2020 strategy, which has accelerated organic revenue growth, strengthened its profitability and fetched significant headcount and backlog growth.
BAH’s VoLT strategy focuses on integrating velocity, leadership and technology in the process of transformation. BAH is focusing on areas such as Artificial Intelligence, advanced engineering, directed energy and modern digital platforms. We expect revenue growth of 12.4% in fiscal 2024.
Booz Allen Hamilton has an expected revenue and earnings growth rate of 6.5% and 7.3%, respectively, for the next year (ending March 2025). The Zacks Consensus Estimate for next-year earnings has improved 0.7% over the past 60 days. BAH has a beta of 0.53 and a current dividend yield of 1.41%.
Molson Coors Beverage Co. TAP has been benefiting from brand strength and strong performances across its portfolio and geographical segments. Also, TAP’s revitalization plan and the premiumization of the global portfolio bode well.
For 2024, net sales of TAP are projected to grow in the low single digits year over year on a constant-currency basis, while underlying earnings per share are likely to rise in the mid-single digits. The underlying EBT of TAP is likely to grow in mid-single digits year over year.
Molson Coors Beverage has an expected revenue and earnings growth rate of 1.3% and 4.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.1% over the past 60 days. TAP has a beta of 0.83 and a current dividend yield of 2.67%.
Tyson Foods Inc. TSN has been showcasing resilience amid industry hurdles with its iconic brand portfolio for sustained market share growth and consumer resonance. Strategic investments in brand building and innovation reinforce TSN’s leadership position, driving long-term loyalty. In the second quarter of fiscal 2024, TSN continued to see strength in its foodservice operations, wherein volumes surged due to diversification efforts and prudent acquisitions like Williams.
Operational excellence remains another upside, with initiatives like plant closures and digitalization. These upsides are likely to continue working well for Tyson Foods and help it battle the expected challenges in the Beef segment due to limited cattle supply. Additionally, TSN expects to bear elevated start-up costs associated with the Prepared Foods segment.
Tyson Foods has an expected revenue and earnings growth rate of 0.1% and 74.6%, respectively, for the current year (ending September 2024). The Zacks Consensus Estimate for current-year earnings has improved 23.2% over the past 30 days. TSN has a beta of 0.76 and a current dividend yield of 3.52%.
GlaxoSmithKline plc.’s GSK specialty products like Dovato, Nucala, Shingrix and Juluca are driving sales. GSK enjoys a strong position in HIV and Vaccines therapeutic areas. It has some promising new products in Specialty Medicines and Vaccines areas like RSV. GSK’s RSV vaccine, Arexvy, had an exceptional launch and generated £1.2 billion in sales in 2023. The spin-off of the Consumer unit in 2022 allowed GSK to focus on its drug development.
GlaxoSmithKline has an expected revenue and earnings growth rate of 5.5% and 4.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1% over the past 30 days. GSK has a beta of 0.64 and a current dividend yield of 3.71%.
Toyota Motor Corp. TM put up a stellar show in the fiscal third quarter of 2024. A robust lineup of trucks and sport utility vehicles are set to fuel TM’s sales volumes. Its electric vehicle (EV) push is a major tailwind. TM aims to generate 40% of its global sales from EVs by 2025 and 70% by 2030. It aims to expand global sales of BEVs to 1.5 million units in 2026.
Upbeat projections for profit and revenues for fiscal 2024 spark optimism. Revenues and operating income for the current fiscal are projected to be ¥43.5 trillion and ¥4.9 trillion, indicating a year-over-year surge of 18% and 79.8%, respectively. TM’s commitment to maximizing shareholders value via dividends and buybacks is also praiseworthy.
Toyota Motor has an expected revenue and earnings growth rate of 3% and 0.5%, respectively, for next year (ending March 2025). The Zacks Consensus Estimate for next-year earnings has improved 3.9% over the past seven days. TM has a beta of 0.69 and a current dividend yield of 1.51%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
GSK PLC Sponsored ADR (GSK) : Free Stock Analysis Report
Toyota Motor Corporation (TM) : Free Stock Analysis Report
Molson Coors Beverage Company (TAP) : Free Stock Analysis Report
Tyson Foods, Inc. (TSN) : Free Stock Analysis Report
Booz Allen Hamilton Holding Corporation (BAH) : Free Stock Analysis Report
