The global economy is expected to face headwinds in 2023. The international monetary fund (IMF) expects one-third of the world economy to fall into a recession this year. The IMF projected a 2.7% economic growth this year, lower than the 3.2% in 2022.

Although the United States is expected to avoid recession narrowly, Moody’s Analytics expects growth to slow down to a near halt, termed a “slowcession.” Moreover, as per December’s forecast, the Federal Reserve is expected to raise interest rates to a peak of 5%-5.25%.

On the bright side, FactSet industry analysts, in aggregate, predict the S&P 500 to gain and have a closing price of 4,493.50 in 12 months, which is 17.5% higher than the last closing price of 3,824.14.

Given this backdrop, shares of fundamentally strong and renowned companies Microsoft Corporation (MSFT), Centene Corporation (CNC), and The Kroger Co. (KR) could be ideal investments for the long term.

Microsoft Corporation (MSFT)

Tech behemoth MSFT develops and licenses software, services, devices, and solutions globally.  The company operates in three segments Productivity and Business Processes; Intelligent Cloud; and More Personal Computing. 

On December 14, MSFT announced a partnership with Viasat, Inc. (VSAT) to increase internet availability worldwide, including five million people across Africa. This should help strengthen the company’s global presence.

MSFT declared a quarterly dividend of $0.68 per share on November 29, payable to shareholders on March 9, 2023. Its annual dividend of $2.72 yields 1.14% at the current price level.

The company’s dividend payouts have increased at a 10.4% CAGR over the past three years and a 9.8% CAGR over the past five years. MSFT has a record of 18 years of consecutive dividend growth.

For the fiscal first quarter that ended September 30, 2022, MSFT’s total revenue increased 10.6% year-over-year to $50.12 billion. Gross margin rose 9.5% from the prior-year quarter to $34.67 billion. Operating income improved 6.3% year-over-year to $21.52 billion. Net income and EPS came in at $17.56 billion and $2.35, respectively.

The consensus EPS estimate of $2.33 for the quarter ending March 2023 indicates a 5% year-over-year improvement. Likewise, the consensus revenue estimate for the same quarter of $52.44 billion reflects an increase of 6.2% from the prior-year period.

Moreover, MSFT has an impressive surprise earnings history, as it topped consensus EPS estimates in three of the trailing four quarters.

The stock has gained 2.1% over the past five days to close its last trading session at $239.58.

MSFT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

MSFT has a Stability, Sentiment, and Quality grade of B. In the 53-stock Software – Business industry, it is ranked #9.

Click here to see the additional POWR Ratings for MSFT (Growth, Value, and Momentum).

Centene Corporation (CNC)

CNC is a multinational healthcare enterprise that provides programs and services to underinsured and uninsured individuals in the United States. The company operates through its broad segments of Managed Care and Specialty Services.

On January 3, CNC announced that the California Department of Health Care Services (DHCS) had selected Health Net of California (Health Net), its California subsidiary, for direct contracts in Los Angeles and Sacramento counties. This has increased the number of direct county contracts by DHCS to ten.

CNC’s total revenues increased 10.7% year-over-year to $35.87 billion in the fiscal third quarter that ended September 30. Adjusted net earnings and adjusted EPS came in at $755 million and $1.30, up 1.3% and 3.2% from the prior-year period, respectively.

For the fiscal year 2022, analysts expect CNC’s EPS and revenue to increase 11.5% and 14.8% year-over-year to $5.74 and $144.58 billion, respectively. In addition, CNC surpassed consensus EPS estimates in all four trailing quarters, which is impressive.

For fiscal 2023, the company expects total revenues between $137.40 billion and $139.40 billion. CNC also expects adjusted EPS in the range of $6.25 to $6.40.

The stock has declined marginally over the past three months to close its last trading session at $79.74.

It’s no surprise that CNC has an overall B rating, which translates to Buy in our POWR Ratings system.

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

To see the additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for CNC, click here.

The Kroger Co. (KR)

KR operates combination food and drug stores, multi-department stores, marketplace stores, and price impact warehouses.

On October 14, KR and Albertsons Companies, Inc. (ACI) announced entering into a definitive merger agreement to form a behemoth. The combined company will likely generate more than $200 billion in annual revenue and serve 85 million households.

On September 15, KR declared a quarterly dividend of 26 cents per share, which was payable to shareholders on December 1, 2022. Its annual dividend of $1.04 yields 2.34% on prevailing prices.

The company’s dividend payouts have increased at 16.1% and 13.9% CAGRs over the past three and five years, respectively. The company has 16 years of consecutive dividend growth records.

For the fiscal third quarter of 2022, KR’s sales increased 7.3% year-over-year to $34.20 billion. Adjusted net earnings attributable to KR rose 9.2% from the prior-year quarter to $643 million. Its adjusted EPS came in at $0.88, up 12.8% from the same period the prior year.

Street EPS estimate for the fiscal year 2023 of $4.13 reflects a 12.2% year-over-year rise. Likewise, Street revenue estimate for the same year of $148.31 billion indicates a rise of 7.6% from the prior year. Moreover, KR surpassed consensus EPS estimates in each of the trailing four quarters.

KR’s shares have gained 1.6% over the past three months to close its last trading session at $44.47.

This promising prospect is reflected in KR’s POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.

KR has a Value and Quality grade of B. In the 39-stock Grocery/Big Box Retailers industry, it is ranked #8. The industry is rated A.

In addition to the POWR Rating grades stated above, one can see KR’s ratings for Growth, Momentum, Stability, and Sentiment here.

MSFT shares were trading at $228.61 per share on Wednesday afternoon, down $10.97 (-4.58%). Year-to-date, MSFT has declined -4.67%, versus a 0.62% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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