The stock market has been severely affected due to surging inflation and the Fed’s continued efforts to bring prices down by raising the interest rates. The consumer price index rose…
8.6% in May from a year ago, the highest increase since December 1981.
According to Dow Jones, consumer prices remained higher in June, with the headline consumer price index expected to have increased 8.8% year-over-year.
Consumers usually feel the pinch of inflation most acutely on the price they pay at the grocery store. However, even though consumers might reduce their grocery budgets or shift their brand loyalties, they would still require groceries. That is why investors consider grocery companies among the greatest defensive stocks to invest in during a bear market.
According to a report by Mastercard SpendingPulse, U.S. grocery retail sales climbed 14% year over year in June, the third straight month of double-digit gains.
Despite suffering higher input costs, fundamentally sound grocery stocks Costco Wholesale Corporation (COST), The Kroger Co. (KR), and Casey’s General Stores, Inc. (CASY) have exhibited solid profitability and delivered robust returns to shareholders. So, we think investing in these resilient stocks could be wise.
Costco Wholesale Corporation (COST)
COST is involved in the operation of membership warehouses in the United States, Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Korea, Australia, Spain, France, Iceland, China, and Taiwan. It offers branded and private-label products in a range of merchandise categories.
Last month, COST completed a purchase for $1.05 billion by a wholly-owned subsidiary of the 45% minority interest in Costco-Taiwan, a joint venture, from their long-time joint venture partners. The company now indirectly owns all of Costco Taiwan. The company has estimated that the purchase will be approximately 1-1.5% accretive to earnings per share.
For the third quarter ending May 8, 2022, COST’s total revenue increased 16.2% year-over-year to $52.60 billion. Its operating income improved 7.7% from its year-ago value to $1.79 billion, while its net income grew 10.9% year-over-year to $1.35 billion. The company’s EPS increased 10.5% from its prior-year quarter to $3.04.
Analysts expect COST’s revenue to increase 13.8% year-over-year to $71.34 billion for the fourth quarter ending August 2022. The consensus EPS estimate of $4.12 represents a 5.7% improvement year-over-year for the fourth quarter ending August 2022.
Moreover, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters. The stock has gained 20.3% over the past year.
COST’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
To see additional POWR Ratings for Value, Quality, Stability, and Momentum for COST, Click here.
The Kroger Co. (KR)
KR functions as a retailer in the United States. The company operates combination food and drug stores which offer natural food and organic sections, pharmacies, general merchandise, pet centers, fresh seafood, and organic produce, and multi-department stores which provides apparel, home fashion and furnishings, outdoor living, electronics, automotive products, and toys, marketplace stores, and price impact warehouses.
Last month, KR announced a 35,000-square-foot expansion at Tamarack Farms Dairy to aid the implementation of a state-of-the-art aseptic milk line capable of…
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