The Fed’s hawkish monetary policy stance to tame the hot inflation is increasing recession fears. However, many analysts believe a soft landing is possible. Given the uncertain market conditions, fundamentally sound stocks Coca-Cola (KO) and Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) might be best for a starter stock portfolio. Read more.
The S&P 500 witnessed its steepest September decline in two decades on investors’ concerns over historically high inflation, rising interest rates, and a looming recession.
However, in a recent speech in Vienna, US Federal Reserve Governor Christopher Waller dismissed recession fears and said, “The robust US labor market is giving us the flexibility to be aggressive in our fight against inflation.”
Moreover, Deputy U.S. Treasury Secretary Wally Adeyemo said that the Biden administration feels confident about the U.S. economy going forward and that bringing down inflation while maintaining growth is possible.
The Coca-Cola Company (KO)
KO is a popular beverage company that manufactures, markets, and sells various nonalcoholic beverages worldwide. The company offers sparkling soft drinks, flavored and enhanced water, sports drinks, juice, dairy, plant-based beverages, and energy drinks.
On September 29, KO and Molson Coors Beverage Company (TAP) entered an exclusive agreement to develop and commercialize Topo Chico Spirited, a line of spirit-based, ready-to-drink cocktails inspired by the bright and refreshing taste of tequila and vodka-based beverages. Expanding to more than 20 markets across the country in 2023 might bolster the company’s revenue stream.
On July 21, KO declared a quarterly dividend of 44 cents per common share, payable to shareholders on October 3. Its annual dividend of $1.76 yields 2.90% on prevailing prices. The company’s dividend payouts have increased at a 3.1% CAGR over the past three years and a 3.6% CAGR over the past five years. The company has a record of 59 years of consecutive dividend growth.
KO’s net operating revenue increased 11.8% year-over-year to $11.33 billion in the second quarter that ended July 1. Its non-GAAP gross profit grew 7.2% from the year-ago value to $6.67 billion, while its non-GAAP net income improved 4.4% year-over-year to $3.06 billion. The company’s non-GAAP net earnings per common share increased 2.9% from its year-ago value to $0.70.
The consensus EPS estimate of $2.46 for the fiscal year ending December 2022 indicates a 6.2% improvement year-over-year. The consensus revenue estimate of $42.13 billion represents an 8.9% growth from the prior year. Additionally, KO has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 7.2% over the past year.
It’s no surprise that KO has an overall rating of B, which translates to Buy in our POWR Ratings system.
KO is rated a B in Stability, Sentiment, and Quality. Within the A-rated Beverages industry, it is ranked #17 out of 34 stocks.
To see additional POWR Ratings for Growth, Value, and Momentum for KO, click here.
Banco Bilbao Vizcaya Argentaria, S.A. (BBVA)
BBVA provides retail banking, wholesale banking, and asset management services. It offers current accounts; and demand, savings, overnight, time, term, and subordinated deposits. The company also provides loan products, deals in securities, and manages pension and investment funds. The company is headquartered in Bilbao, Spain.
On September 29, BBVA declared an interim cash dividend of €0.12 per share, which is 50% higher than last year’s. The dividend is payable on October 11, 2022. This reflects the cash-generating ability of the company. The company’s trailing-12-month dividend translates to a 5.1% yield.
In the second quarter ended June 30, 2022, BBVA’s net interest income increased 31.3% year-over-year to €4.60 billion ($4.51 billion). Its gross income came in at €6.09 billion ($5.97 billion), up 19.4% from its prior-year quarter, while its operating income grew 23.3% from its year-ago value to €3.46 billion ($3.39 billion). The company’s adjusted EPS rose 55.6% year-over-year to €0.28.
Analysts expect revenue to amount to $23.01 billion for the fiscal ending December 2023, representing 3.7% year-over-year growth.
BBVA’s shares have gained 11.1% over the past month and 7.7% over the past three months.
It is no surprise that BBVA has an overall B rating, which equates to Buy in our POWR Ratings system.
BBVA also has a B grade for Momentum, Stability, and Sentiment. Within the B-rated Foreign Banks industry, it is ranked #1 of 98 stocks.
Click here to see additional POWR Ratings for Growth, Value, and Quality for BBVA.
KO shares were trading at $55.80 per share on Wednesday morning, down $0.98 (-1.73%). Year-to-date, KO has declined -3.65%, versus a -20.82% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor’s degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.