Sky-high inflation has recently shown signs of cooling after the Fed’s most aggressive monetary tightening campaign since the 1980s. Investors overwhelmingly expect the Fed to slow its pace of rate hikes over the upcoming months.

However, Christian Nolting, Chief Investment Officer of Deutsche Bank, told CNBC last week that the market’s pricing for central bank cuts in the second half of 2023 were premature. He said, “inflation is going to be lower next year, but also higher than previous years, so we will stay at higher levels, and from that perspective, I think central banks will stay put and not cut very fast.”

Moreover, the Conference Board’s Consumer Confidence Index fell to 100.2 for the month, down from 102.2 in October, hitting its lowest level since July. This indicates that inflation and uncertainty continue to loom over the economy.

Against this volatile backdrop, we think Lowe’s Companies, Inc. (LOW), Centene Corporation (CNC), and Kroger Co. (KR) might be ideal investments for this winter based on their strong fundamentals.

Lowe’s Companies, Inc. (LOW)

LOW operates as a home improvement retailer in the United States and internationally. The company offers a line of products for construction, maintenance, home improvement, repair, remodeling, and decorating.

On November 17, LOW announced its partnership with Miele, a German premium appliance manufacturer, to expand its assortment of premium appliances through a new exclusive home center. Lowe’s is expected to offer an assortment of Miele dishwashers and laundry appliances in 149 Lowe’s stores and online.

Bill Boltz, LOW’s executive vice president of merchandising, said, “Our partnership with Miele reaffirms Lowe’s commitment to ensuring that we have new, high-quality offerings across all price points.”

On November 11, LOW declared a quarterly dividend of $1.05 per share, payable to shareholders on February 8, 2023.

Its annual dividend of $4.20 yields 2.01% on prevailing prices. The company’s dividend payouts have increased at a 21.6% CAGR over the past three years and a 19.5% CAGR over the past five years. The company has a record of 59 years of consecutive dividend growth.

In the fiscal third quarter ended October 28, 2022, LOW’s net sales increased 2.4% year-over-year to $23.48 billion. Its operating income came in at $924 million, while its comprehensive income amounted to $157 million.

Street expects LOW’s EPS to improve 26.3% year-over-year to $2.25 in the fiscal fourth quarter ending January 2023. Its revenue is expected to come in at $22.75 billion, indicating a 6.6% year-over-year growth. The company has surpassed the consensus EPS estimates in each of the trailing four quarters.

The stock has gained 4.4% over the past month to close its last trading session at $207.47.

LOW’s POWR Ratings reflect this promising outlook. The stock’s overall B rating translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It is also rated a B for Sentiment and Quality. LOW is ranked #13 out of 60 stocks in the Home Improvement & Goods industry.

Click here to access additional POWR Ratings of LOW for Stability, Value, Growth, and Momentum.

Centene Corporation (CNC)

CNC is a multinational healthcare enterprise that offers programs and services to underinsured and uninsured individuals. The company operates through the Managed Care and Specialty Services segments.

On November 17, CNC announced that it had signed a definitive agreement to sell Magellan Specialty Health to Evolent Health, Inc. (EVH). CNC expects to receive over $750 million in aggregate from the transaction and intends to use the majority of the net proceeds from the sale to repurchase stock and the balance to reduce debt.

Sarah London, Chief Executive Officer of CNC, said, “This transaction is another significant milestone in our ongoing portfolio review and value creation plan.”

On October 25, CNC and Express Scripts, the pharmacy benefits management business of Cigna Corporation’s (CI) Evernorth, announced a new strategic collaboration to make prescription medications more accessible and affordable for customers. The collaboration is expected to expand the customer base of both companies.

CNC’s total revenues came in at $35.87 billion for the fiscal third quarter ended September 30, 2022, representing an 11% year-over-year growth. Its adjusted net earnings rose 1.3% from the same period last year to $755 million, while its adjusted EPS increased 3.2% from the prior-year quarter to $1.30.

Analysts expect CNC’s revenue for the current fiscal year (ending December 2022) to improve 14.8% year-over-year to $144.59 billion. The company’s EPS for the current year is expected to increase by 11.2% from the prior year to $5.73. Additionally, CNC has topped consensus EPS estimates in each of the trailing four quarters.

CNC has gained 10.3% over the past month to close its last trading session at $84.42.

It is no surprise that CNC has an overall A rating, which translates to Strong Buy in our POWR Ratings system.

The stock has a B grade for Value and Quality. In the A-rated Medical – Health Insurance industry, it is ranked #6 out of 11 stocks.

Beyond what we’ve stated above, we have also given CNC grades for Growth, Momentum, Stability, and Sentiment. Get all CNC ratings here.

Kroger Co. (KR)

KR operates as a retailer in the United States. The company operates combination food and drug stores, multi-department stores, marketplace stores, and price-impact warehouses.

On October 14, KR and Albertsons Companies (ACI) announced that they have entered into a definitive agreement under which the companies will merge, aiming to expand the customer reach and improve proximity to deliver fresh and affordable food to approximately 85 million households with a premier omnichannel experience. The company expects this collaboration to drive profitable growth and sustainable value.

On September 15, KR declared a quarterly dividend of 26 cents per share to be paid to shareholders on December 1, 2022. Its annual dividend of $1.04 yields 2.11% on prevailing prices. The company’s dividend payouts have increased at a 16.1% CAGR over the past three years and a 13.9% CAGR over the past five years. The company has a record of 16 years of consecutive dividend growth.

KR’s sales increased 9.3% year-over-year to $34.64 billion in the fiscal second quarter ending August 13. Its operating profit increased 13.7% year-over-year to $954 million. The company’s adjusted EBITDA grew 10.9% from the year-ago value to $7.63 billion, while its adjusted EPS improved 12.5% year-over-year to $0.90.

KR’s revenue for the fiscal year ending January 2023 is expected to come in at $148.18 billion, indicating an increase of 7.5% year-over-year. The company’s EPS is likely to grow 11.3% year-over-year to $4.10 in the same year. Additionally, the company has surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.

KR has gained 16.5% over the past year to close the last trading session at $49.35. The stock has gained 5.5% over the past month.

KR’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, translating to Strong Buy in our proprietary rating system.

KR has a B grade in Value and Quality. It is ranked #10 out of the 39 stocks in the A-rated Grocery/Big Box Retailers industry.

Click here to access additional POWR Ratings for KR for Growth, Momentum, Stability, and Sentiment.

LOW shares were trading at $204.66 per share on Wednesday morning, down $2.81 (-1.35%). Year-to-date, LOW has declined -19.35%, versus a -15.82% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...

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