Another federal rate hike of 75 bps is expected to be announced in November as inflation shows no signs of slowing down. Moreover, the likelihood of an economic recession in the coming 12 months has increased from 49% to 63%, with the possibility of a soft landing for the economy increasingly being ruled out.

Aneta Markowska, the chief economist at Jefferies LLC, expressed her concern by saying, “The coming drag from higher rates and stronger dollar is enormous and will knock off about 2.5 percentage points from next year’s GDP growth.”

On the other hand, the Federal Reserve Bank of Atlanta’s GDP model predicts third-quarter growth to be 2.9%, up from 2.4% a month ago. Sevin Yeltekin, dean of the Simon Business School at the University of Rochester, believes, “There’s a lot of resilience in a lot of places.”

Furthermore, according to the University of Michigan’s latest survey, the consumer sentiment index increased to 59.5 in September (its highest level since April) from 58.2 in August.

Given the backdrop, investors could consider buying and holding fundamentally strong stocks, The Coca-Cola Company (KO) and Energy Transfer LP (ET), this fall.

The Coca-Cola Company (KO)

KO, a beverage company, manufactures, markets, and sells various non-alcoholic beverages worldwide. The company provides sparkling soft drinks, flavored and enhanced water, sports drinks, juice, dairy, plant-based beverages, tea and coffee, and energy drinks.

On September 29, KO and Molson Coors Beverage Company (TAP) entered an exclusive agreement to develop and commercialize Topo Chico Spirited, spirit-based, ready-to-drink cocktails. It will be launched in more than 20 countries in 2023 and might bolster the company’s revenue stream.

KO has paid dividends for 59 consecutive years. Its dividend payouts have grown at 3.6% CAGR over the past five years. Its current dividend yield is 3.06%, while its four-year average yield is 3.09%.

KO’s net operating revenue came in at $11.06 billion for the third quarter that ended September 30, 2022, up 10.2% year-over-year. Its gross profit increased 7.1% year-over-year to $6.50 billion. Also, its EPS increased 14% year-over-year to $0.65.

KO’s revenue is estimated to increase 8.9% year-over-year to $42.1 billion in 2022. Its EPS is estimated to grow 6% year-over-year to $2.46 in 2022. It has surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 5.7% to close the last trading session at $57.57. 

KO’s overall B rating equates to a Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. 

It has a B grade for Sentiment, Stability, and Quality. Within the A-rated Beverages industry, it is ranked #21 out of 33 stocks. Click here to see the additional POWR Ratings for Momentum, Growth, and Value for KO.

Energy Transfer LP (ET)

ET provides energy-related services. The company owns and operates approximately 11,600 miles of natural gas transportation pipeline, three natural gas storage facilities in Texas, two natural gas storage facilities in Texas and Oklahoma, and 19,830 miles of interstate natural gas pipeline.

On August 24, 2022, ET announced that its subsidiary, Energy Transfer LNG Export, LLC, entered into a 20-year LNG Sale and Purchase Agreement with Shell NA LNG LLC related to its Lake Charles LNG project.

Under the agreement, Energy Transfer LNG will supply Shell with 2.10 million tonnes of LNG per annum. This partnership is expected to be mutually beneficial to the companies.

ET has paid dividends for 15 consecutive years. Its current dividend yield is 7.62%, while its four-year average yield is 10.44%.

ET’s revenues came in at $25.95 billion for the second quarter that ended June 30, 2022, up 71.8% year-over-year. Its net income increased 111.8% year-over-year to $1.33 billion. In addition, its EPS increased 95% year-over-year to $0.39.

ET’s revenue is expected to increase 35.4% year-over-year to $91.25 billion in 2022. It has surpassed EPS estimates in three of four trailing quarters. Over the past nine months, the stock has gained 31.5% to close the last trading session at $12.07.

ET’s overall B rating equates to a Buy in our POWR Ratings system. It has an A grade for Momentum and a B for Value. It is ranked #26 out of 94 stocks in the B-rated Energy – Oil & Gas industry.

We’ve also rated ET for Sentiment, Growth, Stability, and Quality. Get all ET ratings here.

KO shares were trading at $58.91 per share on Tuesday afternoon, up $1.34 (+2.33%). Year-to-date, KO has gained 1.72%, versus a -18.17% rise in the benchmark S&P 500 index during the same period.

About the Author: Rashmi Kumari

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...

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