As investors have been feeling pinched between elevated prices and the Fed’s enduring battle to slow the economy over the past year, the central bank’s aggressive rate hikes have managed to slow price rises in recent months.

The Consumer Price Index (CPI) rose 6.4% in January, down slightly from an annual rate of 6.5% in December and a 40-year high of 9.1% in June. Further encouraged by the recent developments, the central bank raised the interest rates by a quarter of a percentage point this month.

However, price levels remain stubbornly high and well above the Fed's long-term price stability target of 2%. Prices for everyday purchases are still climbing at a pace that risks chipping away at economic security for many households.

Market participants had been hopeful that signs of economic softness could translate to a dovish pivot from the Federal Reserve, but those hopes were dashed when Fed Chair Jerome Powell warned that interest rates could climb higher if the U.S. job market strengthens further in the coming months. This, in turn, increases the odds of a recession this year.

Given the strong fundamentals, Walmart Inc. (WMT) and The Coca-Cola Company (KO) seem well-positioned to survive the market uncertainties. So, these stocks might be no-brainer picks now.

Walmart Inc. (WMT)

The retail giant WMT operates supercentres, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, discount stores, membership-only warehouse clubs, and e-commerce websites, including walmart.com and Walmart.com.mx flipkart.com, and others. The company operates through three segments: Walmart U.S.; Walmart International; and Sam’s Club.

On January 12, 2023, Walmart Commerce Technologies and Walmart GoLocal announced a partnership with Salesforce Inc. (CRM) to give retailers access to the tools and services that enable frictionless local pickup and delivery for customers globally.

On December 15, 2022, WMT Canada announced its plans to open a first-of-its-kind distribution center in Quebec in addition to two distribution centers that opened earlier that year. Another distribution center in Mexico is strengthening its logistics and supply chain networks across the entire Southeast region.

Such investments in infrastructure, logistics, and supply chains should enable the company to bolster its distribution networks and offer a brisker shopping experience to its customers.

WMT’s four-year average dividend yield is 1.68%, and its forward annual dividend of $2.24 translates to a 1.54% yield on prevailing prices. Its dividend has grown at a 1.8% CAGR over the past three years and a 1.9% CAGR over the past five years. The company has a record of 49 consecutive years of dividend growth.

The stock’s trailing-12-month ROTC of 10.10% is 63.9% higher than the 6.17% industry average. Likewise, its trailing-12-month ROCE of 11.61% is 11.6% higher than the industry average of 10.40%.

For the fiscal third quarter that ended October 28, 2022, WMT’s total revenues increased 8.7% year-over-year to $152.81 billion. Its adjusted operating income grew 4.6% from the year-ago value to $6.06 billion, while its adjusted EPS came in at $1.50, representing an increase of 3.4% year-over-year. Also, the company’s total assets increased by 1.1% from the prior-year value to $247.66 billion.

Analysts expect WMT’s EPS and revenue for the first quarter (ending April 30, 2023) to increase 6.1% and 3.9% year-over-year to $1.38 and 145.72 billion, respectively. It surpassed Street EPS estimates in three of the trailing four quarters. Over the past six months, the stock has gained 10% to close the last trading session at $145.49.

WMT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has a B grade for Stability and Sentiment. Among 39 stocks in the A-rated Grocery/Big Box Retailers industry, it is ranked #8. Click here to see the other ratings of WMT for Growth, Value, Momentum, and Quality.

The Coca-Cola Company (KO)

KO is a famous beverage company that manufactures, markets, and sells various non-alcoholic beverages globally. It sells its products under the brands: Coca-Cola, Sprite, Fanta, Diet Coke, Coca-Cola Zero Sugar, Thumbs Up, Aquarius, fairlife, Minute Maid Pulpy, and Simply, among others.

The company paid a quarterly dividend of 44 cents per share to its shareholders on December 15, 2022. KO’s four-year average dividend yield is 3.06%, and its forward annual dividend of $1.76 translates to a 2.95% yield at the current price level. Its dividend has grown at a 3.2% CAGR over the past three years and a 3.5% CAGR over the past five years. Also, it has a record of 60 consecutive years of dividend growth.

KO’s trailing-12-month levered FCF margin of 16.18% is 530.7% higher than the 2.57% industry average. Likewise, its trailing-12-month net income margin of 22.19% is 455.9% higher than the industry average of 3.99%.

KO’s net operating revenue increased 7% year-over-year to $10.13 billion in the fourth quarter that ended December 31, 2022. Its gross profit grew 4.4% from the year-ago value to $5.61 billion, while its adjusted operating income increased 10.9% from the prior-year quarter to $2.32 billion. The company’s non-GAAP net income and non-GAAP EPS came in at $1.94 billion and $0.45, respectively.

The consensus EPS estimate of $0.65 for the first quarter ending on March 31, 2023, represents a marginal improvement year-over-year. The consensus revenue estimate of $10.89 billion for the current quarter indicates a 3.7% increase from the prior-year period. The company has an excellent earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.

Over the past three months, the stock has lost 1.9% to close the last trading session at $59.59.

KO’s solid prospects 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 Sentiment and a B for Stability and Quality. The stock is ranked #16 of 37 stocks in the B-rated Beverages industry.

To see additional POWR Ratings of KO for Growth, Value, and Momentum, click here.

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WMT shares were trading at $145.11 per share on Wednesday morning, down $0.38 (-0.26%). Year-to-date, WMT has gained 2.34%, versus a 7.43% rise in the benchmark S&P 500 index during the same period.

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.

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