Higher-than-expected US inflation has pushed benchmarks in the last week in the red. In addition, the World Bank has warned of stagnation and lowered its overall growth forecast. In the midst of this volatile situation, the fundamentally strong stocks of the consumer protection sector Kellogg (K), Kroger (KR), PriceSmart (PSMT), British American Tobacco (BTI) and Ambev (ABEV) could be solid purchases.
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Last week, benchmark indexes recorded their worst weekly declines since late January. The losses were big after the US inflation report went ahead of schedule. He consumer price index rose 8.6% of its value a year ago. On the last trading day, the Dow fell 4.6%, the S&P 500 fell 5.1% and the Nasdaq Composite, with a lot of technology, lost 5.6%.
Recently, the World Bank warned that the The global economy faces a risk of stagnation, with very high prices, along with low growth that is causing countries to reach recession due to the post-war war in Ukraine, China blockades, and supply chain disruptions. The entity has reduced its overall growth projections from 4.1% to 2.9% for this year.
In the midst of a challenging economic environment, consumers in general shift your spending from non-essentials to daily needs. Therefore, consumer defensive actions they usually hold up well in these situations. Therefore, the strong actions of the sector, Kellogg Company (K), The Kroger Co. (KR), PriceSmart, Inc. (PSMT), British American Tobacco plc (BTI), and Ambev SA (ABEV), which have surpassed the 18.2% drop in the S&P 500 this year, could be solid buys now.
Kellogg Company (K)
K is a convenience food and snack vendor operating in the four broad segments of North America; Europe; Latin America; and Asia Middle East Africa. The company mainly offers French fries, cookies, ready-to-eat cereals, savory snacks and cereal bars.
On May 18, K announced three new flavors for their Kellogg’s Frosted Flakes. In early May, Snap Crackle and Pop unveiled their Rice Krispies Treats HOMESTYLE Cinnamon Sugar. New product offerings can increase your company’s revenue stream.
On April 29, K declared a dividend of $ 0.58 per share on its common shares, payable to shareholders on June 15. This reflects the company’s ability to generate cash and shareholder performance.
For the first fiscal quarter ended April 2, K’s net sales rose 2.5% year-over-year to $ 3.67 billion. Net income attributable to K increased 14.7% year-over-year to $ 422 million. The EPA improved 15% over the same period last year to $ 1.23.
The EPA consensus estimate of $ 4.30 for fiscal year 2023 indicates a 4.6% year-over-year increase. Also, the agreed revenue estimate for the same year of $ 14.86 billion reflects a 2% improvement over the previous year. In addition, K has an astonishingly impressive earnings history as it has exceeded the consensus EPS estimates in each of the next four quarters.
Shares have gained 8% to date and 16.3% over the past three months to close Friday’s trading session at $ 69.58.
The solid foundations of K are reflected in his POWR ratings. The shares have an overall rating of B, which is equivalent to Buy in our own rating system. POWR scores are calculated taking into account 118 different factors, with each factor weighted to an optimal degree.
K has a degree of stability and quality of B. In stock 86 Food manufacturers industry, ranks number 22. The sector is ranked B.
Click here to see additional POWR ratings for K (growth, value, momentum, and sentiment).
The Kroger Company (KR)
KR is a retailer that operates a combination of food and drug stores, multi-department stores, market stores and department stores with an impact on prices. The company’s offering also includes manufactured and processed food products and fuel.
On June 8, KR announced that its Kroger delivery service has begun serving customers in South Florida by opening a new radio facility in Miami. On May 25, the company added a radio facility in downtown Ohio to meet customer orders in the area. These facilities should add to the operating capacity of the company.
KR sales increased 7.5% year-on-year to $ 33.05 billion in the fourth fiscal quarter of 2021. Adjusted net income attributable to KR was $ 686 million, 8.9% more than the quarter from the previous year. Adjusted net income attributable to KR per common share improved 12.3% over the same period last year to $ 0.91.
Analysts expect KR’s EPA to rise 4.1% year-on-year to $ 3.83 in fiscal year 2023. Similarly, Street expects revenue to increase 4.3% year-over-year to $ 143.84 billion during the same period. In addition, KR has exceeded the EPS estimates agreed in each of the following four quarters, which is impressive.
KR shares have gained 32% over the past year and 12.9% to date to close Friday’s trading session at $ 51.09.
No wonder KR has an overall rating of A, which translates to Strong Buy in our POWR rating system.
KR has an A grade for Growth and a B for Value, Feeling and Quality. It occupies the number 4 of the 37 actions of the Grocery / Big Box industry. The industry is rated A.
To see additional POWR ratings for boost and stability for KR, click here.
PriceSmart, Inc. (PSMT)
PSMT is the owner and operator of American-style member shopping mall clubs. The company’s clubs offer branded and private label consumer products, essential goods, fresh produce and prepared food, as well as other ancillary services.
On March 29, PSMT announced that it had purchased land in the El Poblado area of Medellin, Colombia, and had begun construction of its second warehouse club in the area. This could improve the company’s operational capability.
For the second fiscal quarter ended Feb. 28, PSMT’s total revenue rose 10.8% year-over-year to $ 1.04 billion. Net income attributable to PSMT and net earnings per share attributable to PSMT were up 11.4% and 12%, respectively, from $ 31.46 million and $ 1.03 million, respectively.
The street EPS estimate for the August 2022 quarter ended at $ 0.76 indicates a 20.6% year-over-year increase. Similarly, the street revenue estimate for the same quarter of $ 997.40 million reflects a 9.7% increase over the previous quarter. In addition, PSMT has exceeded the EPS estimates agreed in three of the following four quarters.
Shares have gained marginally over the past six months to close Friday’s trading session at $ 72.45. It has decreased by about 1% since the year.
POWR ratings reflect the promising prospects of PSMT. The shares have an overall rating of B, equivalent to Buy in our proprietary rating system.
The PSMT has a degree of growth, stability and sentiment of B. It ranks 16th in the grocery and large box industry.
Click here to see additional POWR ratings for value, momentum, and quality for PSMT.
British American Tobacco plc (BTI)
BTI operates as a global supplier of tobacco and nicotine products. The company’s offerings include steam, tobacco warming, modern nicotine products and traditional oral products. Based in London, UK, BTI sells its products under various brands.
On May 12, BTI announced that its US indirect subsidiary RJ Reynolds Vapor Company had received marketing authorization from the U.S. Food and Drug Administration (FDA) for certain Vuse Ciro and Vuse Vibe products. The authorization should allow the products to remain on the U.S. market, which could benefit the company.
BTI’s profit from operations rose 2.7% year-on-year to £ 10.23 billion ($ 12.6 billion) in the fiscal year ended December 31. Profits for the year and the EPA stood at 6.69 billion pounds ($ 8.58 billion) and 295.60 pence, up 6.2%. and 6% over the previous year.
Analysts expect BTI’s EPA for next year (fiscal year 2023) to be $ 5.06, indicating year-on-year growth of 8.5%. Similarly, the same year’s street revenue estimate of $ 34.53 billion reflects an increase of 4.3% over the previous year.
Over the past year, shares have gained 8.2% and 15.9% to date as of the close of Friday’s trading session at $ 43.37.
BTI has an overall B rating, which translates to Buy in our POWR rating system. The stock has a B grade of stability and feeling. In 10 stocks Tobacco industry, ranks number 4. The industry is rated A.
To see additional POWR ratings for BTI’s growth, value, momentum, and quality, click here.
Ambev SA (ABEV)
ABEV, based in Sao Paulo, Brazil, is engaged in producing, distributing and selling beer, draft beer, soft drinks, malt and food products in the Americas. The company offers its products with different brands, such as Skol, Brahma, Antarctica, Brahva, Extra, Bud Light, Beck, Leffe and Hoegaarden.
For the first fiscal quarter of 2022, ABEV’s net income increased 10.8% year-on-year to R $ 18,440 million ($ 3.7 billion). Normalized profit improved 28.6% year-over-year to $ 3.55 billion ($ 711.95 million), while normalized EPA reached $ 0.22 million, a 29.4% more than the same period last year.
The EPA consensus estimate of $ 0.16 for fiscal year 2022 indicates a year-on-year increase of 6.7%. Also, the consensus revenue for the same year of $ 16.31 billion reflects an improvement of 20.8% over the previous year.
ABEV shares have gained 2.7% over the past three months to close Friday’s trading session at $ 2.67. It has decreased by 4.6% since the year.
ABEV has an overall rating of B, which is equivalent to Buy in our proprietary rating system. The share has a quality rating of B. It ranks number 10 out of the 36 shares of the Drinks industry. The sector is classified B.
In addition to the POWR rating we indicated above, ABEV scores of growth, value, momentum, stability, and sentiment can be seen. here.
K shares were trading at $ 69.29 per share on Monday morning, down $ 0.29 (-0.42%). So far this year, K has gained 9.43%, compared to a -20.19% increase in the S&P 500 benchmark index over the same period.
About the author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on the financial markets motivated her to pursue a career in investment research.
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