The stock market has witnessed significant volatility of late on concerns over the Fed’s hawkish comments to tame the stubbornly high inflation and other macroeconomic uncertainties. Therefore, it could enhance the need to add stocks of financially resilient companies, Walmart Inc. (WMT) and Oracle Corporation (ORCL), to one’s portfolio. Let’s dig deeper to understand why these stocks could be big winners this year.
A string of hot economic data in recent weeks has increased the likelihood that the Federal Reserve would have to continue raising interest rates to bring prices down, stalling the early-year stock rally. Moreover, hotter-than-expected inflation and the minutes of the Fed meeting indicate that inflation is “well above” the central bank’s 2% target.
As the bears dust themselves off, market participants expect the Fed to go with a 50-basis-point increase in March. At the last FOMC meeting, Fed Governors James Bullard and Loretta Mester favored such moves to curtail inflation sufficiently. This could induce significant pressure on the stock market in the upcoming months.
Meanwhile, investors have now ditched expectations for rate cuts later this year for some time now as the markets move from a soft landing to a ‘no landing’ scenario.
Given such a wobbly market scenario, fundamentally strong stocks, WMT and ORCL, might be wise investments for long-term investors. Despite the highly uncertain market conditions, these stocks have delivered solid returns due to their strong fundamentals.
Walmart Inc. (WMT)
The retail giant WMT operates supercentres, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, discount stores, membership-only warehouse clubs, and e-commerce websites, including walmart.com and Walmart.com.mx flipkart.com, and others. The company operates through three segments: Walmart U.S.; Walmart International; and Sam’s Club.
On January 12, 2023, Walmart Commerce Technologies and Walmart GoLocal announced a partnership with Salesforce Inc. (CRM) to give retailers access to the tools and services that enable frictionless local pickup and delivery for customers globally.
Last year in December, WMT Canada announced its plans to open a first-of-its-kind distribution center in Quebec in addition to two distribution centers that opened earlier that year. Another distribution center in Mexico is strengthening its logistics and supply chain networks across the entire Southeast region.
Such investments in infrastructure, logistics, and supply chains should enable the company to bolster its distribution networks and offer a brisker shopping experience to its customers.
On February 21, 2023, the company raised its annual dividend by 2% to $2.28 per share, marking the 50th consecutive year of dividend increase. WMT’s four-year average dividend yield is 1.67%, and its forward annual dividend of $2.28 translates to a 1.60% yield on prevailing prices. Its dividend has grown at a 1.8% CAGR over the past three years and a 1.9% CAGR over the past five years.
The stock’s trailing-12-month ROCE of 14.60% is 48.2% higher than the 9.85% industry average. Likewise, its trailing-12-month ROTC of 8.71% is 41.2% higher than the industry average of 6.17%.
For the fiscal fourth quarter that ended January 31, 2023, WMT’s total revenues increased 7.3% year-over-year to $164.05 billion. Its adjusted operating income grew 6.3% from the year-ago value to $6.37 billion, while its adjusted EPS came in at $1.71, representing an increase of 11.8% year-over-year. Also, the company’s attributable net income stood at $6.28 billion, up 76.2% year-over-year.
Street expects WMT’s revenue for the first quarter (ending April 30, 2023) to increase 4.9% year-over-year to $147.24 billion. Its EPS is expected to increase by 10% per annum over the next five years. Moreover, the company surpassed the revenue estimates in each of the trailing four quarters, which is promising.
Shares of WMT have gained 14.8% over the past nine months and 5.9% over the past year to close the last trading session at $142.47.
WMT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It also has an A grade for Stability and a B for Growth, Value, and Quality. Among 39 stocks in the A-rated Grocery/Big Box Retailers industry, it is ranked #3. Click here to see the other ratings of WMT for Momentum and Sentiment.
Oracle Corporation (ORCL)
ORCL provides products and services that address all aspects of corporate IT environments, including applications, platforms, and infrastructure worldwide. The company operates through cloud services and license support; cloud license; and on-premises license; hardware; and services segments.
Recently, ORCL announced the launch of Oracle Banking Cloud Services, a new suite of componentized, composable cloud-native services to help banks accelerate their movement amid increasing transaction volumes, customer expectations, and growing competitive threats.
The cloud native SaaS suite provides corporate and retail banks with the agility to modernize their banking applications rapidly to meet customer demands and capitalize on new opportunities.
On February 2, 2023, ORCL announced that Mizuho Bank, Ltd., one of Japan’s largest financial services organizations and the integrated retail and corporate banking unit of Mizuho Financial Group, Inc. (MFG), is modernizing its legacy banking system for international operations by integrating ORCL’s banking solutions to support critical functions.
With the ORCL foundation, the bank should be able to continue to evolve its services and products to best meet the needs of its clients and stakeholders worldwide, thereby boosting ORCL’s growth.
ORCL’s four-year average dividend yield is 1.59%, and its current dividend of $1.28 translates to a 1.44% yield on the current price level. Its dividends have grown at a 10.1% CAGR over the past three years and an 11% CAGR over the past five years. The company has a record of eight years of consecutive dividend growth.
The stock’s trailing-12-month net income margin of 19.09% is 561.2% higher than the 2.89% industry average. Likewise, its trailing-12-month EBIT margin of 31.42% is 409% higher than the industry average of 6.17%.
In the fiscal second quarter that ended November 30, 2022, ORCL’s total revenue increased 18.5% year-over-year to $12.28 billion. Its non-GAAP operating income grew 4.8% year-over-year to $5.09 billion. The company’s net income came in at $1.74 billion compared to a net loss of $1.25 billion in the previous-year quarter. Its non-GAAP EPS came in at $1.21.
Analysts expect ORCL’s revenue for the quarter ending February 2023 to increase 18.1% year-over-year to $12.42 billion. Its EPS for the current quarter is expected to increase 6.5% from the year-ago period to $1.20. Over the past nine months, the stock has gained 28.4% to close the last trading session at $88.66.
ORCL POWR Ratings reflect its solid prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Stability and Sentiment. In the Software - Application industry, it is ranked #33 of 137 stocks. Click here to see the additional ratings of ORCL (Growth, Value, Momentum, and Quality).
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WMT shares were trading at $141.53 per share on Monday afternoon, down $0.94 (-0.66%). Year-to-date, WMT has declined -0.18%, versus a 4.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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