For immediate release
Chicago, IL – September 21, 2022 – Zacks.com announces the list of stocks featured in the analyst blog. Every day, Zacks Equity Research analysts discuss the latest news and events impacting stocks and financial markets. Stocks recently featured in the blog include: Walmart Inc. WMT, The Home Depot, Inc. HD and Costco Wholesale Corp. COST.
Here are the highlights from Tuesday’s analyst blog:
3 blue-chip retail stocks investors should watch
Volatility has gripped the stock market lately and you can easily blame it on inflationary headwinds, supply chain issues and geopolitical tensions. The consumer price index rose to 8.3% in August 2022 on an annual basis, higher than analysts’ expectations of 8.1% and well above the Federal Reserve’s 2% target . With the desperate need to get inflation under control, the Federal Reserve could announce another big hike in the benchmark interest rate.
So, as you adjust your portfolio to deal with current challenges and the continued tightening of monetary policy, market experts are betting on highly reputable companies with colossal market capitalizations. These industry stalwarts are commonly referred to as blue chip companies. These blue chip stocks are financially resilient with an impressive track record of strong shareholder returns.
We have identified here three actions of the Retail – Wholesale sector, namely Walmart Inc., Home Depot, Inc. and Costco Wholesale Corp. Through successful trading operations, these indicators have withstood multiple market fluctuations and generated returns for investors. These blue chip stocks have the momentum and balance sheet strength to weather any untoward market volatility.
Despite inflationary pressures, we believe the retail sector should take center stage as the holiday season approaches. Well, last year’s stimulus savings, steady wage gains and falling unemployment rate should help keep demand alive. According to Mastercard SpendingPulse, U.S. retail sales, excluding autos, are expected to grow 7.1% year over year during the traditional holiday period which runs from Nov. December 24. While in-store retail sales are expected to increase by 7.9%, e-commerce is expected to increase by 4.2%.
3 important choices
Walmart: The omnichannel retailer has done everything possible to consolidate its already strong position in the market. Walmart has taken several e-commerce initiatives, including buyouts, alliances, and improved delivery and payment systems, as well as efforts to improve merchandise assortments. The company innovates in the supply chain and adds capacity while growing businesses, such as Walmart GoLocal, Walmart Connect, Walmart Luminate, Walmart+, Spark Delivery, Marketplace and Walmart Fulfillment Services. The company recently revealed the addition of the Paramount+ streaming service for Walmart+ members at no additional cost.
With a market capitalization of over $360 billion, Walmart has a long-term earnings growth expectation of 5.5% and a Momentum Score of B. This Zacks No. 3 (Hold) ranking stock has a four-quarter earnings surprise of 1.5%, on average. Zacks’ consensus estimate for Walmart’s current fiscal year sales suggests growth of 4.8% over the prior year period. The company pays a quarterly dividend of 56 cents ($2.24 annualized) per share, yielding a yield of 1.7% at the current share price. WMT’s payout ratio is 37, with a five-year dividend growth rate of 1.9%. (See WMT’s dividend history here)
You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Home deposit: The world’s largest home improvement specialty retailer has seen continued demand for its products and assortments, despite widespread inflation. The company also enjoys continued strength in the Pro and DIY categories as well as digital prowess. Increased home renovation activity amid rising new home prices should benefit Home Depot. In the second quarter of fiscal 2022, Home Depot revenue increased 6.5% year over year to $43,792 million, with a 5.8% increase in comparable sales. Digital sales increased 12% in the quarter.
With a market capitalization of over $280 billion, Home Depot has a long-term earnings growth expectation of 11.2% and a Momentum Score of B. This Zacks Tier 3 stock has an earnings surprise on the last four quarters by 7.2%, on average. . Zacks’ consensus estimate for Home Depot’s current-year sales and EPS suggests growth of 3.5% and 6.6%, respectively, over the prior-year period. The company pays a quarterly dividend of $1.90 ($7.60 annualized) per share, yielding a yield of 2.7% at the current share price. HD’s payout ratio is 47, with a five-year dividend growth rate of 17%.
Costco: Costco’s growth strategies, better price management, decent membership trends and increasing e-commerce penetration contributed to its upbeat performance. The company’s strategy of selling products at discounted prices helped attract customers who were looking for both value and convenience in an inflationary environment. These factors have helped this member warehouse operator record an impressive number of sales. Costco’s net sales increased 15.3% to $70.8 billion during the 16-week fourth quarter ended August 28, 2022. Comparable sales increased 13.7% during the said period.
With a market capitalization of over $220 billion, Costco has a long-term earnings growth expectation of 9.2% and a Momentum Score of B. This Zacks Tier 3 stock has an earnings surprise on all four last quarters by 9.7%, on average. Zacks’ consensus estimate for Costco’s current-year sales and EPS suggests growth of 15.7% and 18.1%, respectively, over the prior-year period. The company pays a quarterly dividend of 90 cents ($3.60 annualized) per share, yielding a yield of 0.7% at the current share price. COST’s payout ratio is 28, with a five-year dividend growth rate of 11.9%.
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Past performance is not indicative of future results. The potential for loss is inherent in any investment. This document is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold any security. No recommendation or advice is given as to whether any investment is suitable for any particular investor. It should not be assumed that investments in the securities, companies, sectors or markets identified and described have been or will be profitable. All information is current as of the date hereof and is subject to change without notice. The views or opinions expressed may not reflect those of the company as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management of securities. These returns come from hypothetical portfolios composed of stocks with Zacks Rank = 1 that have been rebalanced monthly without transaction fees. These are not the returns of actual stock portfolios. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for more information on the performance figures displayed in this press release.
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