Slightly cooled-off inflation, strong job growth, and improved consumer sentiment have renewed investors’ optimism lately, helping the benchmark indexes rally. However, since the Federal Reserve is expected to continue its aggressive policy tightening to fight the elevated inflation, the market might remain volatile in the near term.

Since the market’s near-term prospects look uncertain, it could be wise to focus on fundamentally-sound defensive companies that enjoy an inelastic demand for their products and stay resilient in any business cycle.

Belonging to the healthcare and consumer staples sectors, fundamentally sound stocks UnitedHealth Group Incorporated (UNH), Weis Markets, Inc. (WMK), and Constellation Brands, Inc. (STZ) could be solid choices for investors to dodge the market fluctuations.

UnitedHealth Group Incorporated (UNH)

UNH is a diversified health care and insurance company that offers a broad spectrum of products and services through UnitedHealthcare and Optum platforms. It provides employers with products and resources to plan and administer employee benefit programs.

The stock paid a $1.65 quarterly cash dividend on June 28, 2022. The stock pays a $6.60 per share dividend annually, translating to a 1.21% yield. The company’s dividend has grown at an 18% rate over the past five years. UNH has increased its dividends for 12 consecutive years.

On August 11, 2022, Surest, UNH’s employer-sponsored health plan, announced a new approach to health benefits that removes deductibles and provides clear upfront pricing information to people before treatment.

The Surest app offers clear and transparent health care quality and cost data that help remove financial barriers to care and make it easier for members to understand their coverage and cost before receiving care or making an appointment. This should help UNH witness higher demand in the coming months.

For its fiscal 2022 second quarter ended June 30, 2022, UNH’s revenues grew 12.6% year-over-year to $80.33 billion. The company’s earnings from operations came in at $7.13 billion, indicating a 19.3% rise from the year-ago period.

Its adjusted net earnings came in at $5.29 billion, up 17.7% from the prior-year period. UNH’s adjusted EPS increased 18.5% year-over-year to $5.57. As of June 30, 2022, the company had $24.61 billion in cash and cash equivalents. 

Analysts expect the company’s EPS to be $21.85 for fiscal 2022 ending December 31, 2022, indicating a 14.9% increase from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.

The consensus revenue estimate of $322.19 billion for the same fiscal year represents a 12% year-over-year improvement. Its EPS is expected to grow at a rate of 14.4% per annum over the next five years.

The stock’s 1.69x forward EV/Sales is 61.3% lower than the 4.37x industry average. In terms of forward Price/Sales, UNH is currently trading at 1.58x, which is 69.3% lower than the 5.14x industry average. Over the past month, the stock has gained 3.1% to close the last trading session at $546.12.

UNH’s POWR Ratings reflect this promising outlook. It has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a B grade for Growth, Stability, Quality, and Sentiment. Click here to see the additional ratings for UNH’s Value and Momentum.

UNH is ranked #2 of 11 stocks in the A-rated Medical – Health Insurance industry.

Weis Markets, Inc. (WMK)

WMK operates a chain of supermarkets that engages in the retail sale of groceries, dairy, meat, and bakery products, frozen foods, fresh produce, floral, pharmacy services, beer and wine, fuel; and general merchandise items, such as health and beauty care, and household products.

The store product selection includes national, local, and private brands, including natural, gluten-free, and organic varieties.

The stock paid a $0.32 quarterly cash dividend on August 8, 2022. The stock pays a $1.28 per share dividend annually, translating to a 1.58% yield. The company’s dividend has grown at a 1.3% rate over the past five years.

WMK’s net sales for its fiscal 2022 second quarter ended June 25, 2022, increased 8.4% year-over-year to $1.14 billion. The company’s gross profit came in at $292.21 million, up 3.9% from the prior-year period. Its income from operations came in at $48.41 million for the quarter, indicating a 6.2% rise from the year-ago period.

WMK’s net income came in at $36.27 million, representing an 8.3% year-over-year improvement. Its EPS grew 8.9% from the year-ago period to $1.35. The company had $70.68 million in cash and equivalents as of June 25, 2022.

The stock’s 0.47x trailing-12-month EV/Sales is 75.5% lower than the 1.92x industry average. In terms of trailing-12-month Price/Sales, UNH is currently trading at 0.49x, which is 61.7% lower than the 1.29x industry average. Over the past month, the stock has gained 5.5% to close the last trading session at $82.89.

WMK’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system.

It has an A grade for Stability and a B for Quality. In addition to the POWR Ratings grades we have just highlighted, one can see WMK’s Value, Growth, Sentiment, and Momentum rating here.

WMK is ranked #9 of 38 stocks in the A-rated Grocery/Big Box Retailers industry.

Constellation Brands, Inc. (STZ)

STZ produces, imports, markets, and sells beer, wine, and spirits in the U.S., Canada, Mexico, New Zealand, and Italy. It provides its products to wholesale distributors, retailers, on-premise locations, and state alcohol beverage control agencies.

STZ will pay a $0.80 quarterly cash dividend on August 24, 2022. The stock pays a $3.20 per share dividend annually, translating to a 1.33% yield. The company’s dividend has grown at a 12.4% rate over the past five years. STZ has increased its dividends for six consecutive years.

On August 4, 2022, STZ acquired a minority stake in Archer Roose — an accessible luxury wine brand focused on offering consciously-crafted, worldly wines to legal drinking age (LDA) wine drinkers. This planet-friendly premium wine is expected to witness great demand among the new generation of LDA drinkers.

This investment was also made as part of STZ’s Focus on Female Founders initiative, which aims to increase female representation and access to funding in the industry by investing $100 million in female-led or female-founded companies by 2028.

For its fiscal 2023 first quarter ended May 31, 2022, STZ’s net sales and revenues increased 16.6% year-over-year to $2.36 billion. The company’s non-GAAP gross profit came in at $1.23 billion, representing an 11.8% year-over-year improvement. Its non-GAAP operating income came in at $792.50 million for the quarter, up 9.6% from the prior-year period.

While its non-GAAP net income increased 10.2% year-over-year to $503.80 million, its non-GAAP EPS grew 14.2% to $2.66. It had $101.80 million in cash and cash equivalents as of May 31, 2022.

Analysts expect the company’s EPS to come in at $11.01 for its fiscal 2023 ending February 28, 2023, indicating a 30.9% increase from the prior-year period. It surpassed Street EPS estimates in three of the trailing four quarters.

The consensus revenue estimate of $9.46 billion for the same fiscal year represents a 7.3% year-over-year improvement. Its EPS is expected to grow at a rate of 10.8% per annum over the next five years.

The stock’s 2.46x non-GAAP forward PEG is 9.1% lower than the 2.71x industry average. Over the past month, the stock has gained 1.5% to close the last trading session at $248.17.

STZ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.

It has an A grade for Growth and a B for Quality and Sentiment. Click here to see the additional ratings for STZ (Stability, Value, and Momentum).

STZ is ranked #10 of 35 stocks in the A-rated Beverages industry.

UNH shares were trading at $547.01 per share on Wednesday afternoon, up $0.89 (+0.16%). Year-to-date, UNH has gained 9.65%, versus a -9.17% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...

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