Despite the Federal Reserve’s interest rate hikes, the U.S. economy seems resilient enough, with solid job growth and stable consumer spending. Goldman Sachs sees improved odds of the U.S. economy avoiding a deep recession this year.
Moreover, Chris Williamson, a chief business economist at S&P Global Market Intelligence. Believes, "Despite headwinds from higher interest rates and the cost-of-living squeeze, the business mood has brightened amid signs that inflation has peaked and recession risks have faded."
In addition, the Dow Jones Industrial Average gained nearly 3% in January 2023 and is expected to maintain momentum this year. Also, according to the Economy Forecast Agency, the Dow Jones Industrial Average Index could trade at 33,634 points by March 2023.
Therefore, we think quality Dow stocks The Coca-Cola Company (KO) and McDonald's Corporation (MCD) could make solid buys this week.
The Coca-Cola Company (KO)
KO manufactures, markets, and sells various non-alcoholic beverages worldwide. The company provides sparkling soft drinks, flavored and enhanced water, sports drinks, juice, dairy, plant-based beverages, tea and coffee, and energy drinks.
KO's trailing-12-month gross profit and EBITDA margins of 58.14% and 31.03% are 84.4% and 194% higher than the industry averages of 31.53% and 10.55%.
KO has paid dividends for 60 consecutive years. Its dividend payouts have increased at 3.5% CAGR for the past five years. Its current dividend yield is 3.08%, and its four-year average yield is 3.06%.
KO's net operating revenues came in at $43 billion for the year ended December 31, 2022, up 11.3% year-over-year. Its gross profit increased 7.3% year-over-year to $25 billion. Moreover, its operating income came in at $10.91 billion, representing a 5.8% year-over-year rise.
Analysts expect KO's revenue to increase 4.5% year-over-year to $44.98 billion in the current fiscal year, 2023. Its EPS is expected to increase by 6.1% per annum for the next five years. It surpassed EPS estimates in all four trailing quarters. The stock has lost marginally over the past month to close the last trading session at $59.80.
KO's POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
KO has a B grade for Stability, Sentiment, and Quality. KO is ranked #15 out of 37 stocks in the B-rated Beverages industry. Click here for additional KO ratings (Growth, Value, and Momentum).
McDonald's Corporation (MCD)
MCD operates and franchises McDonald's restaurants in the United States and internationally.
MCD's trailing-12-month gross profit and EBITDA margins of 56.97% and 52.69% are 61.3% and 375.1% higher than the industry averages of 35.33% and 11.09%.
MCD has paid dividends for 21 consecutive years. Its dividend payouts have increased at 8.1% CAGR for the past five years. Its current dividend yield is 2.26%, while its four-year average yield is also 2.26%.
MCD's revenues from franchised restaurants came in at $3.65 billion for the quarter that ended December 31, 2022, up 7.5% year-over-year. Its net income increased 16% year-over-year to $1.90 billion, while its EPS increased 18.8% year-over-year to $2.59.
Street expects MCD's revenue to increase 5% year-over-year to $24.35 billion in the current fiscal year 2023. Its EPS is expected to rise 7.3% per annum for the next five years. It surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 7.2% to close the last trading session at $268.68.
MCD's overall B rating equates to a Buy in our proprietary rating system. It has an A grade for Quality and a B for Stability and Sentiment. MCD is ranked #7 out of 45 stocks in the B-rated Restaurants industry. Get additional MCD ratings for Growth, Value, and Momentum here.
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KO shares were trading at $60.12 per share on Wednesday afternoon, up $0.32 (+0.54%). Year-to-date, KO has declined -5.49%, versus a 4.39% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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