Stocks, cryptocurrencies, and other risky assets have witnessed massive sell-offs lately as investors fear that surging inflation and rising interest rates may push the economy into a recession.
The S&P 500 ended last week recording its worst weekly performance since March 2020, shedding 5.8%. This was the benchmark index's tenth drop over the previous 11 weeks.
While the Fed's unprecedented rate hike last week reaffirmed its commitment to resetting pricing levels, investors and analysts are concerned that its inflation-fighting policies would push the economy into a recession.
Amid the current market downturn, Wells Fargo has named a few stocks that can withstand a recession and outperform based on their solid fundamentals and impressive growth attributes.
Verizon Communications Inc. (VZ) and The Coca–Cola Company (KO) are the two names among Wells Fargo’s portfolio of stocks that could potentially stay afloat during a recession and offer stable returns. Therefore, these stocks could be ideal investments now.
Verizon Communications Inc. (VZ)
VZ provides communications, technology, information, and entertainment goods and services to people, companies, and governments worldwide. It had roughly 27 million wireless retail postpaid connections and 477 thousand wireline internet connections as of December 31, 2021.
This month, VZ announced a collaboration with Mastercard and First National Bank of Omaha (FNBO) to offer a credit card aimed at small business owners.
Existing VZ cellular customers with fewer than 100 lines with an online account can apply for the Verizon Business Mastercard in the coming weeks, which rewards spending on ordinary business expenses such as qualified office supplies, technology, gasoline, and more.
Also, this month, VZ and its strategic partner Ericsson completed a 5G data session utilizing CBRS General Authorized Access frequency. This experiment shows that Verizon and its vendors are ready to provide 5G on both shared and Priority Access License CBRS spectrum, which will enhance Verizon’s existing rollout of 5G service across C-band and mmWave spectrum.
VZ’s total operating revenue increased 2.1% year-over-year to $33.55 billion in the first quarter ended March 31, 2022. Its operating income grew marginally from the year-ago value to $7.79 billion. The company’s net income came in at $4.71 billion, while its EPS amounted to $1.09 over this period.
The company’s EPS is expected to grow 2.8% year-over-year to $5.56 in fiscal 2023. Analysts expect VZ’s revenue to increase 2.3% year-over-year to $136.74 billion in fiscal 2022. Moreover, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters.
VZ’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
VZ has also rated a B grade for Stability. Within the D-rated Telecom – Domestic industry, it is ranked #4 of 21 stocks. Click here to see VZ’s additional POWR Ratings for Quality, Growth, Sentiment, Value, and Momentum.
The Coca–Cola Company (KO)
KO manufactures, promotes, and distributes a variety of nonalcoholic beverages worldwide. The firm sells sparkling soft drinks, flavored and improved water, sports drinks, juice, dairy, plant-based beverages, tea, coffee, and energy drinks. It works through an independent bottling partner network, distributors, wholesalers, and retailers.
This month, Brown-Forman Corporation and KO announced a global partnership to bring the classic Jack & Coke cocktail to market as a branded, ready-to-drink pre-mixed cocktail alternative.
"We keep consumers at the center of everything we do as we continue to develop our portfolio as a total beverage company, and that includes new products with our iconic Coca-Cola brand," said James Quincey, Chairman, and CEO of The Coca-Cola Company.
During the first quarter ended April 01, 2022, KO's net operating revenue increased 16.3% year-over-year to $10.49 billion. Its operating income grew 25.1% from the year-ago value to $3.41 billion. The company’s net income surged 23.9% from the prior-year quarter to $2.78 billion. Its EPS increased 23.1% year-over-year to $0.64.
The consensus EPS estimate of $2.47 for fiscal 2022 represents a 6.5% improvement year-over-year. Analysts expect KO's revenue to increase 8.3% year-over-year to $41.86 billion in fiscal 2022. Furthermore, 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 8.2% over the past year.
KO's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. It also has a B grade for Stability, Sentiment, and Quality. In the A-rated Beverages industry, it is ranked #14 of 35 stocks.
In total, we rate KO on eight different levels. Beyond what we've stated above, we have also given KO grades for Value, Momentum, and Growth. Get all the KO ratings here.
VZ shares were trading at $49.03 per share on Monday morning, up $0.19 (+0.39%). Year-to-date, VZ has declined -3.34%, versus a -22.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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