Inflation chat is once more this week’s hot topic. December’s consumer price index (CPI) will likely be released on Thursday with analysts hoping a repeat of last month’s positive declaration in inflation levels.
The forecast is for core CPI to have climbed 0.3% in December. While it is a touch higher than November, it will still be in step with the quarter’s average, and lower than the 0.5% average exhibited between January and September against a backdrop of the very best inflation in a long time.
The outcomes may even provide a sign on whether the Fed will ease the size of its rate hikes when it meets on Jan. 31-Feb. 1 to come to a decision on the matter. The hope is that there’ll only be a 25 basis-point increase within the Fed’s benchmark rate, but a half-point increase just isn’t out of the query either.
With all possibilities open, it’s best to take a prudent approach to stock picking straight away and lean into the blue chip stocks – the businesses with a superb fame and a history of success even in a difficult macro environment.
With this in mind, we delved into the TipRanks database and pulled out two such names – each stock market giants that outperformed the market last yr and that might protect the portfolio against any incoming volatility. Let’s check the small print.
Walmart Inc. (WMT)
Blue chip stocks, you say? Well, there’s no higher place to begin than with Walmart, officially the world’s largest company by revenue. As of October 2022, the retail giant topped the Fortune Global 500 list, generating around $570 billion in annual revenue. Walmart boasts 10,586 stores and clubs spread across 24 countries, operating under 46 banners, with ~2.3 million worldwide employees, of which 1.6 million are U.S.-based.
Walmart’s credentials as a stock to own in difficult times is reflected by its solid performance over the past yr. Despite all the key indexes seeing out 2022 firmly planted in negative territory, WMT shares have sidestepped the carnage and are up by 2%.
That’s because in the true world, Walmart has shown it’s resilient to the tough conditions. This was evident in the corporate’s most up-to-date quarterly statement – for the third quarter of fiscal yr 2023.
Revenue rose by 8.8% year-over-year to $152.8 billion, beating the Street’s call by $6 billion, while comparable sales grew by 8.2%, also above consensus expectations of 6.9%. On the bottom-line, the corporate delivered EPS of $1.50 – easily trumping the $1.32 forecast. Importantly, for Q4, Walmart expects consolidated net sales growth of around 5.5%, and said consolidated adjusted operating income is anticipated to drop by 6.5% to 7.5%, improving on its previous guidance of a 9% decline.
All of this caught the eye of Credit Suisse’s Karen Short who sees multiple reasons to have WMT shares in a portfolio. These include, “1) WMT has been gaining meaningful market share since early 2021; 2) Our view that WMT is a well-positioned defensive name in an uncertain macro backdrop; 3) Price gaps to standard grocers remain wide; 4) A potentially weak macro backdrop should speed up share gains;, 5) In light of a possible combination of two of the biggest conventional food retailers (Kroger and Albertsons merger), we consider WMT is well positioned to be much more offensive than usual to achieve share; and 6) Alternative profit streams should proceed to evolve and contribute to operating profits.”
Unsurprisingly, then, the 5-star analyst rates WMT shares an Outperform (i.e. Buy) while her $170 price goal makes room for gains of 17% within the yr ahead. (To look at Short’s track record, click here)
Most analysts are reading off the identical page; the stock claims a Strong Buy consensus rating, based on 20 Buys vs. 5 Holds. (See Walmart stock forecast)
Visa Inc. (V)
One of the priceless firms on the planet, Visa is a pacesetter in international payments. The corporate doesn’t actually issue cards, extend credit, or set rates and charges for consumers. What it does is provide financial institutions with access to payment instruments that carry the Visa name, which they will use to offer credit, debit, prepaid, and money access services to their customers. Over 200 countries and territories can accept digital payments due to its network, which may perform as much as 30,000 transactions concurrently and reach as much as 100 billion computations every second.
Visa’s most up-to-date earnings report – for the fiscal fourth quarter of 2022 (September quarter) – was a powerful one. Revenue climbed by 19% from the identical period a yr ago to $7.8 billion, beating Wall’s Street’s expectations by $250 million. The analysts were calling for adj. EPS of $1.86 but Visa delivered a significantly better $1.93. In further excellent news, the quarterly money dividend was increased by 20% to $0.45 a share and a brand new $12.0 billion share repurchase program was also authorized.
That is the type of stuff which has shielded Visa from the stock market wreckage; the shares climbed 4% over the past yr. 2023 needs to be one other good yr, in response to Evercore analyst David Togut, who lays out the bull case for V, bear market or not.
“V’s resilient business model and sizable moat around its network offers best-in-class risk/reward with downside protection in an uncertain macro environment and material upside opportunity in a rising economy,” the analyst explained. “With lower than 50% of V’s revenue generated outside of the US and an inflation-hedged, ad valorem revenue model, we see moderate risk to V’s revenue as many international economies may underperform the US.”
To this end, Togut rates V shares an Outperform (i.e., Buy) together with a $290 price goal. The implication for investors? Upside of ~32% from current levels. (To look at Togut’s track record, click here)
As for the remaining of the Street, most are on board, too. The rankings mix show 20 Buys, 1 Hold and a pair of Sells, all coalescing to a Strong Buy consensus rating. (See Visa stock forecast on TipRanks)
To seek out good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this text are solely those of the featured analyst. The content is meant for use for informational purposes only. It is rather necessary to do your personal evaluation before making any investment.