U.S. equities plunged into a bear market yesterday as recession fears mounted ahead of this week’s Federal Reserve meeting. The S&P 500 declined 3.9%, registering its lowest level since March 2021. The Dow Jones and the Nasdaq Composite dropped 2.8% and 4.7%, respectively. After the disappointing May Consumer Price Index report released on Friday, Wall Street expects stricter action from the Fed to control the inflationary pressure. And overly aggressive interest rate hikes could push the U.S. economy into a recession.
Amid an increasing possibility of a recession, investing in companies with high resilience to market fluctuations could be wise. The companies involved in businesses, including groceries; health care; beer, wine, and liquor; cybersecurity and IT; children’s goods; and financial products and services, thrive during a recession as they witness relatively inelastic and steady demand.
Amid the recessionary environment, it could be wise to add quality recession-proof stocks UnitedHealth Group Incorporated (UNH), Assurant, Inc. (AIZ), Pilgrim’s Pride Corporation (PPC), Kellogg Company (K), and Constellation Brands, Inc. (STZ) to your portfolio.
UnitedHealth Group Incorporated (UNH)
UNH operates as a diversified health care company in the U.S. The company operates through four segments: UnitedHealthcare; OptumHealth; OptumInsight; and OptumRx. It provides consumer-oriented health benefit plans and services, Medicaid plans, children’s health insurance and health care programs, and hospital and clinical services. Also, it offers software and information products, advisory consulting arrangements, and pharmacy care services and programs.
On May 12, UNH’s UnitedHealthcare Community Plan of Missouri got selected by the state of Missouri as one of the three managed care organizations to manage its MO HealthNet Managed Care Program for Medicaid members in Temporary Assistance for Needy Families (TANF) and the Children’s Health Insurance Program (CHIP). The company is committed to providing access to high-quality care for members and the communities it serves.
In the fiscal 2022 first quarter ended March 31, 2022, UNH's revenues increased 14.2% year-over-year to $80.15 billion. Its earnings from operations grew 3.1% year-over-year to $6.95 billion. The company's adjusted net earnings attributable to UNH common shareholders and adjusted earnings per share came in at $5.24 billion and $5.49, registering an increase of 3% and 3.4% from the prior-year period, respectively.
The $79.71 billion consensus revenue estimate for the fiscal 2022 second quarter, ending June 2022, represents an 11.8% improvement from the same period last year. Analysts expect UNH’s EPS for the current quarter to increase 10.9% year-over-year to $5.21. The company has topped the consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has increased 19.6% over the past year to close yesterday’s trading session at $469.70.
UNH's POWR Ratings reflect this promising outlook. The stock has an overall grade of A, equating to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its weighting.
UNH has a grade of B for Stability, Quality, and Growth. Within the A-rated Medical - Health Insurance industry, it is ranked #4 of 11 stocks. Click here to see additional POWR Ratings (Sentiment, Momentum, and Value) for UNH.
Assurant, Inc. (AIZ)
AIZ offers lifestyle and housing solutions in North America, Latin America, Europe, and the Asia Pacific. The company operates through two segments: Global Lifestyle; and Global Housing. Its Global Lifestyle segment provides mobile device solutions, vehicle protection, related services, credit protection, and insurance products. AIZ’s Global Housing segment offers lender-placed homeowners insurance and manufactured housing and flood insurance.
In March, AIZ entered a strategic partnership with Polly, the leading insurance marketplace for automotive retail. Through this partnership, Polly’s cost-saving personal insurance platform will assist AIZ in providing digital tools to its automotive dealers. The Polly platform is the latest addition to AIZ’s suite of digital retailing tools designed for car buying journeys and automotive insurance products.
AIZ's revenues increased 2.1% year-over-year to $2.48 billion in the fiscal 2022 first quarter ended March 31, 2022. Its adjusted EBITDA rose 15.6% year-over-year to $299 million. In addition, the company’s adjusted earnings and adjusted earnings per share came in at $210.90 million and $3.75, registering a rise of 30.8% and 39.4% year-over-year, respectively.
The consensus revenue estimate of $10.50 billion for the fiscal year 2022, ending December 2022, represents an increase of 3% from the previous year. The $12.94 consensus EPS estimate for the ongoing year indicates a 38.3% year-over-year rise. Furthermore, it has surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 11.7% in price year-to-date and closed yesterday's trading session at $172.69.
AIZ's POWR Ratings reflect this strong outlook. It has an overall grade of B, equating to Buy in our proprietary rating system.
AIZ has a grade of B for Momentum and Sentiment. Within the Insurance - Accident & Supplemental industry, it is ranked #2 of 9 stocks. To see additional POWR Ratings (Quality, Growth, Value, and Stability) for AIZ, click here.
Pilgrim’s Pride Corporation (PPC)
PPC produces, markets, and distributes fresh products, including frozen and value-added chicken and pork products, to retailers, distributors, and foodservice operators in the U.S., the United Kingdom, Mexico, the Middle East, Asia, and Continental Europe. The company provides its products under the Pilgrim’s, Gold Kist, Just BARE, Pierce Chicken, Richmond, Del Dia, County Post, and Denny brands.
In the fiscal 2022 first quarter ended March 27, 2022, PPC's net sales grew 29.5% year-over-year to $4.24 billion, and its gross profit improved 107.5% from the year-ago value to $541.98 million. The company's adjusted EBITDA rose 97.7% year-over-year to $501.76 million. Its adjusted net income attributable to PPC and adjusted net income attributable to PPC per common share came in at $287.15 million and $1.18, up 178.7% and 181% year-over-year, respectively.
Analysts expect PPC’s EPS to grow 72.8% year-over-year to $1.09 for its fiscal 2022 second quarter, ending June 2022. The $4.53 billion consensus revenue estimate for the ongoing quarter represents a 19.6% rise from the same period in 2021. The company has topped the consensus revenue estimates in each of the trailing four quarters, and the consensus EPS estimates in three of the trailing four quarters.
PPC’s shares have increased 29.2% over the past year and closed yesterday’s trading session at $29.82.
PPC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of A, equating to a Strong Buy in our proprietary rating system.
PPC has a grade of A for Growth. It has a B for Value, Quality, and Sentiment. Within the B-rated Food Makers industry, it is ranked #5 of 86 stocks. To see additional POWR Ratings (Stability and Momentum) for PPC, click here.
Kellogg Company (K)
K manufactures, markets, and sells snacks and convenience foods. The company operates through four segments: North America; Europe; Latin America; Asia Middle East Africa (AMEA). Its primary products include savory snacks, crackers, toaster pastries, cereal bars, ready-to-eat cereals, veggie foods, and noodles. K distributes and sells its products to retailers through direct sales, brokers, and distributors.
On April 29, K’s Board of Directors declared a dividend of $0.58 per share, payable on June 15. It marks the 390th dividend the company has paid to shareowners since 1925. Also, the Board of Directors announced plans to raise the regular quarterly dividend to $0.59 beginning with the third quarter of 2022. The regular dividend payments reflect the company’s strong financial position.
In the fiscal 2022 first quarter ended April 2, 2022, K's net sales grew 2.5% year-over-year to $3.67 billion. Its operating profit improved 9.5% from the year-ago value to $517 million. The company's net income and earnings per share amounted to $424 million and $1.23, registering a rise of 14.3% and 15% year-over-year, respectively. In addition, its comprehensive income came in at $538 million, up 25.7% year-over-year.
The $3.55 billion consensus revenue estimate for the fiscal 2022 fourth quarter, ending December 2022, represents a 3.8% improvement from last year's period. Analysts expect the company's EPS for the same quarter to come in at $0.93, representing a 12.6% increase year-over-year. It has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
K’s shares have improved 9.4% over the past six months and 8.6% over the past year to close yesterday's trading session at $68.86.
K's strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, which translates to Buy in our proprietary rating system.
K has a grade of B for Stability and Quality. Within the B-rated Food Makers industry, it is ranked #23 of 86 stocks. To see additional POWR Ratings (Growth, Momentum, Value, and Sentiment) for K, click here.
Constellation Brands, Inc. (STZ)
STZ produces, imports, markets, and sells beer, wine, and spirits in the U.S., Canada, Mexico, New Zealand, and Italy. The company provides beer under the Corona Extra, Corona Premier, Corona Light, Modelo Especial, Modelo Chelada, and Victoria brands. It offers wines primarily under the 7 Moons, Cooper & Thief, Kin Crawford, Ruffino, and Schrader, and spirits under the Casa Noble, High West, Mi CAMPO, and SVEDKA brands.
On May 4, STZ priced the public offering of $1.85 billion of Senior Notes consisting of $550 million of 3.60% Senior Notes due 2024, $600 million of 4.35% Senior Notes due 2027, and $700 million of 4.75% Senior Notes due 2032. The company intends to use the net proceeds from the offering for corporate purposes, including working capital, funding capital expenditures, the retirement of debt, and other business opportunities.
STZ's revenues increased 7.7% year-over-year to $2.10 billion in the fiscal 2022 fourth quarter, which ended February 28, 2022. Its non-GAAP operating income rose 16.9% year-over-year to $658.90 million. Its non-GAAP EBIT grew 17.3% from the year-ago value to $622.70 million. Furthermore, non-GAAP net income attributable to STZ and non-GAAP EPS came in at $451.70 million and $2.37, registering an increase of 27% and 30.2% year-over-year, respectively.
Analysts expect STZ's revenue for fiscal 2022 first quarter, ended May 2022, to come in at $2.15 billion, representing a 6.2% rise year-over-year. The street expects the company's EPS for the to-be-reported quarter to come in at $2.57, representing a growth of 10.3% year-over-year. The company has surpassed the consensus revenue estimates in each of the trailing four quarters.
STZ’s shares have gained 8.7% over the past three months and closed yesterday's trading session at $230.03.
STZ has a grade of A for Growth and B for Quality. It is ranked #18 of 35 stocks in the A-rated Beverages industry. Click here to see STZ's POWR Ratings for Stability, Value, Sentiment, and Momentum.
UNH shares were trading at $458.98 per share on Tuesday afternoon, down $10.72 (-2.28%). Year-to-date, UNH has declined -8.32%, versus a -20.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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