The BlackRock Investment Institute's midyear outlook warned of increased market volatility as the Federal Reserve, and other central banks are trying to rein in inflation and avoid a steep economic downturn. The CBOE Volatility Index (VIX) increased more than 4% after Tuesday’s market close.
The Bureau of Labor Statistics' Consumer Price Index (CPI) showed a year-over-year increase of 9.1% last month, up from the prior 40-year high of 8.6% in May. As analysts fear that the Federal Reserve could choke growth with its aggressive policy tightening, the market volatility is not expected to ease anytime soon.
“We have seen the consumer getting squeezed by the higher cost of living and by monetary policy, which could lead to a consumer-led recession,” said Erin Browne, portfolio manager at Pimco.
Despite the prevailing market turbulence, fundamentally sound stocks Johnson & Johnson (JNJ), Coca-Cola FEMSA, S.A.B. de C.V. (KOF), KT Corporation (KT), and Weis Markets, Inc. (WMK) have outperformed the broader market. These stocks are also rated Strong Buy in our POWR Ratings system.
Johnson & Johnson (JNJ)
JNJ researches, develops, manufactures, and sells various products in the healthcare field worldwide. The company's Consumer Health segment offers baby care products under the JOHNSON'S and AVEENO Baby brands; oral care products under the LISTERINE brand; skin health/beauty products under the AVEENO, CLEAN & CLEAR, DR. CI:LABO, NEUTROGENA, and OGX brands; TYLENOL acetaminophen products; SUDAFED cold, flu, and allergy products.
In April, JNJ announced the launch of the J&J Satellite Center for Global Health Discovery at the Holistic Drug Discovery and Development (H3D) Centre, University of Cape Town, in Cape Town, South Africa. This marks the latest expansion of the J&J Centers for Global Health Discovery (J&J Centers), a global network of research collaborations between the company and leading research institutions to increase translational and discovery research to address some of the world's most pressing global health challenges.
For the first quarter of 2022, JNJ’s reported sales increased 5% year-over-year to $23.43 billion. Its gross profit improved 3.7% year-over-year to $15.83 billion, while its Non-GAAP net earnings grew 3% from its year-ago value to $7.13 billion. The company’s Non-GAAP EPS increased 3.1% from its prior-year quarter to $2.67.
Analysts expect JNJ's revenue to increase 2.3% year-over-year to $23.86 billion for the second quarter ending June 2022. The company's EPS is expected to grow 3.3% year-over-year to $2.56 for the second quarter ending June 2022.
Moreover, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters. The company's shares have soared 2.6% year-to-date and 10.2% over the past nine months.
JNJ’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
JNJ is also rated an A grade for Stability and a B for Quality. Within the F-rated Medical - Pharmaceuticals industry, it is ranked #8 of 169 stocks.
To see additional POWR Ratings for Momentum, Value, Growth, and Sentiment for JNJ, click here.
Coca-Cola FEMSA, S.A.B. de C.V. (KOF)
Headquartered in Mexico City, Mexico. KOF is a subsidiary of Fomento Economico Mexicano, S.A.B. de C.V., and a franchise bottler that produces, markets, sells, and distributes Coca-Cola trademark beverages. The company offers sparkling beverages, including colas, flavored sparkling beverages, water, and other beverages.
During the first quarter ending March 2022, KOF’s total revenues increased 14.6% year-over-year to MXN$51.20 billion ($2.46 billion). The operating income grew 16% from its prior-year quarter to MXN$6.844 billion ($328.96 million), while its net income came in at MXN$2.89 billion ($138.90 million).
For the three months ended March 2022, the cash and cash equivalents and marketable securities came in at MXN$49.44 billion ($2.38 billion), up 5% from its previous period.
The consensus EPS estimate of $0.86 for the second quarter ending June 2022 represents an 8.8% year-over-year growth. Analysts expect revenue to increase 4.2% year-over-year to $2.49 billion for the second quarter ending June 2022.
In addition, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 3.6% over the past year.
KOF's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Stability and a B for Quality and Value. Within the A-rated Beverages industry, it is ranked #2 of 36 stocks.
In total, we rate KOF on eight different levels. Beyond what we've stated above, we have also given KOF grades for Sentiment, Growth, and Momentum. Get all the KOF ratings here.
KT Corporation (KT)
Headquartered in Seongnam, South Korea, KT provides integrated telecommunications and platform services in Korea and internationally. The company provides fixed-line telephone services, including local, domestic long-distance, international long-distance, and voice-over-Internet protocol telephone services, as well as interconnection services, broadband Internet access services, and other Internet-related services.
Last month, KT and Hanmi Pharmaceutical, a pharmaceutical company specializing in R&D-focused new drug development, co-invested in Digital Pharm, a company specializing in DTx and electroceuticals. The companies announced on June 19, 2022, that KT and Hanmi completed their investments in Digital Pharm and held a launch ceremony.
During the first quarter of fiscal 2022, KT’s operating revenue increased 4.1% year-over-year to KRW6029.40 billion ($4.62 billion). Its operating income grew 41.1% from its year-ago value to KRW5585.20 billion ($4.28 billion), while its net income improved 39.5% from its prior-year quarter to KRW326.50 billion ($250.02 million). The company’s cash and cash equivalent amounted to KRW2753.10 billion ($2.11 billion).
The $2.30 consensus EPS estimate represents a 3.4% improvement year-over-year for fiscal 2023. Analysts expect KT’s revenue to increase 2.9% year-over-year to $14.77 billion for fiscal 2023. The stock has gained 13.9% year-to-date.
KT's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Value and Stability and a B for Sentiment. Within the A-rated Telecom - Foreign Chip industry, it is ranked #2 of 47 stocks.
In total, we rate KT on eight different levels. Beyond what we've stated above, we have also given KT grades for Quality, Momentum, and Growth. Get all the KT ratings here.
Weis Markets, Inc. (WMK)
Headquartered in Sunbury, Pennsylvania, WMK is involved in the retail sale of food through a chain of supermarkets in Pennsylvania and surrounding states. The company's retail food stores sell groceries, dairy products, frozen foods, meats, seafood, fresh produce, floral, pharmacy services, deli products, prepared foods, bakery products, beer and wine, fuel, and general merchandise items.
For the first quarter ending March 26, 2022, WMK’s net sales increased 9.7% year-over-year to $1.10 billion. Its income from operations improved 30.1% from its year-ago value to $41.41 million, while its net income came in at $31.39 million, up 29.4% from its year-ago value.
The company’s EPS rose 0.3% year-over-year to $1.17. The stock has gained 16.9% year-to-date.
WMK's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Stability and a B grade for Growth and Quality. In the A-rated Grocery/Big Box Retailers industry, it is ranked #4 of 38 stocks.
In total, we rate WMK on eight different levels. Beyond what we've stated above, we have also given WMK grades for Sentiment, Value, and Momentum. Get all the WMK ratings here.
JNJ shares were trading at $175.21 per share on Thursday afternoon, down $0.23 (-0.13%). Year-to-date, JNJ has gained 3.74%, versus a -19.82% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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