August 5, 2022, The TJX Companies, Inc. (NYSE:TJX) and Anheuser-Busch InBev SA/NV (NYSE:BUD)
These two recession-proof names look like the best stocks to buy now.
Markets were little changed on Thursday (August 4, 2022) as investors continued to digest corporate earnings and oil’s dip below the $90-level for the first time since February. With recession risks still prevalent, The TJX Companies, Inc. (NYSE:TJX) and Anheuser-Busch InBev SA/NV (NYSE:BUD) look recession-proof and like the best stocks to buy now.
The TJX Companies, Inc. is one of the best stocks to buy now because it’s a premier discount retailer in a time when consumers are desperately looking for bargains. It’s almost like discount and luxury retailers are best bets during inflation, despite serving two opposite segments of society. Retailers like Nordstrom are primarily unaffected by inflation because their customers have the capital to withstand it. Retailers like TJX, responsible for names like TJ Maxx, Marshalls, and HomeGoods, benefit from inflation for a different reason. Inflation helps it expand beyond its core consumer base to a broader one. People right now want to cut their spending. Period. With impressive fundamentals, growth potential, and a strong dividend, TJX is a no-brainer.
Anheuser-Busch, the world’s largest beer company, is a “sin stock” in the highest regard. “People still drink and smoke, even in a recession,” according to Dan Weil of TheStreet.com. That phrase sums up why Anheuser-Busch is largely recession-proof and one of the best stocks to buy now. Following a recent earnings beat and top ranking on Morningstar’s 10 most undervalued recession-resistant stocks list, it’s staring at a 20+% upside in prime positioning.
While we may or may not be in a recession, these two names offer outstanding upside in this environment as the best stocks to buy now.
The TJX Companies, Inc. (NYSE:TJX)
Consider this STRONG BUY discount retailer with a 19.24% upside before it announces earnings in two weeks.
We’ve featured companies in a similar realm as TJX as the best stocks to buy now before. Discount retailers are in high demand right now because they offer some of the hardest-hit consumers much-needed affordable products thanks to inflation. While TJX isn’t the most undervalued name in the sector, it’s arguably the best-established. After all, it describes itself as “the leading off-price apparel and home fashions retailer in the U.S. and worldwide.”
Since the 1960s, it’s arguably been the face of this retail sector. As of February 23, 2022, it operated 1,284 T.J. Maxx, 1,148 Marshalls, 850 HomeGoods, 59 Sierra, and 39 Homesense stores and tjmaxx.com, marshalls.com, and sierra.com in the United States, along with other locations in Canada, Europe, and Australia.
Yet, besides the bird’s eye view of why TJX is one of the best stocks to buy now, it has strong earnings, a growing dividend, and analyst upside.
With Consumers Having to Slash Costs, TJX’s Bottom and Top Line Growth Could be Substantial
TJX will report Q2 earnings in about two weeks (August 17, 2022) but had an impressive Q1. It reported $0.68 EPS for the quarter, beating the consensus estimate of $0.60 by $0.08 and marking a 54.55% year-over-year gain. Revenue also came in at $11.4 billion for the quarter, beat analysts’ expectations of $11.58 billion, and represented a 13.1% year-over-year increase.
With consumers potentially forced to do more bargain shopping in this inflationary environment, earnings could continue with positive surprises. Especially with TJX earnings expected to grow by 12.78% in the coming year, net income projected to grow 14.4%, and revenue expected to see a 7.9% 5-year CAGR.
This should all help define why TJX is one of the best stocks to buy now, primarily before it reports earnings.
Strong Margins and Dividends at a Decent Value
TJX isn’t the cheapest stock of the bunch based on its high price-to-book ratio and 20x+ forward and trailing P/Es. However, its PEG is 0.18, and the stock is roughly -17.44% below all-time highs.
TJX also has strong underlying fundamentals. Its 7 out of 9 Piotroski Score is solid and indicates healthy Liquid Balance Sheets, Profitability, and Operating Efficiency. Cash flows can also sufficiently cover interest payments, and the Company ended its latest quarter with $940 million in net cash.
The following margins may also add more context to how well-run this Company is on a fundamental level.
However, you can’t talk about TJX being one of the best stocks to buy now without discussing its outstanding dividend. It’s not only the fact that TJX’s current 1.87% dividend yield has grown at a 13.5% 5-year CAGR or 17.8% 10-year CAGR. It’s the fact that it was just hiked by 13.5% in May while outstanding shares have been reduced by aggressive stock buybacks.
With a decent payout ratio and a dividend projected to grow another 13.5% at a 14.9% 5-year CAGR, TJX has all the makings of eventually becoming a dividend aristocrat over the long term.
A STRONG BUY With 19.24% of Analyst Upside
TipRanks rates TJX a STRONG BUY because 13 out of 16 analysts who offered 12-month price targets in the last 3 months rated it a BUY. The stock currently has a high forecast of $90.00, a low forecast of $60.00, and an average price target of $75.47. The average price target represents a 19.24% upside from August 4, 2022’s $63.29 closing price.
TJX’s year-to-date low and high are $53.69 and $77.35, respectively.
Anheuser-Busch InBev SA/NV (NYSE:BUD)
This prominent “sin stock” looks recession-proof with a 23.19% upside.
Who doesn’t love a cold beer after a hard day at work or when watching your favorite sports team get clobbered?
Calling Anheuser-Busch a prominent player in the beverages industry doesn’t fully capture the magnitude of how big of a deal this Company really is. It is the world’s largest beer brewer by volume and revenue and operates over 600 beer brands in 150 countries.
You’ve probably heard of several of them.
- Budweiser
- Bud Light
- Corona
- Stella Artois
- Beck’s
- Hoegaarden
- Leffe
- Michelob Ultra
- Modelo Especial
Still not sold on Anheuser-Busch’s size and scale? Maybe you’re more of a numbers person. In 2021, BUD had gross annual sales of $53 billion in a global $768.17 billion beer industry. Do the math. That’s almost 7% of the entire market.
As we said earlier, people will still drink and smoke during a recession, and the numbers don’t lie. Americans consume over 6.3 billion gallons of beer each year.
Too big to fail? Perhaps. Especially with football season on the horizon.
A deeper dive into this Company, though, brings up countless other reasons why it’s clearly one of the best stocks to buy now.
Strong Growth Trends in its Latest Earnings Report
Anheuser-Busch, on July 28, 2022, reported its Q2 earnings. While EPS came in at $0.73, in line with analyst estimates, revenue came in at $14.79 billion, beat the consensus estimate of $14.63 billion, and marked a 9.3% year-over-year increase. Organic revenue also increased 11.3%, primarily driven by growth in volume and revenue per hectoliter (hl) and the performance of Budweiser, Corona, and Stella Artois. EBITDA also grew 7.2% vs. a consensus of 5.6%, while Latin America saw BUD’s fastest regional growth at an 8% increase.
With continued business momentum, investments in its brands, and more emphasis on technology and digitization, BUD retained its 2022 guidance with 4%-8% EBITDA growth.
But we’re not calling Anheuser-Busch one of the best stocks to buy now based on a good quarter. We’re calling it one of the best stocks to buy now because of its future earnings potential.]
Earnings for BUD are expected to grow by 9.00% in the coming year, while
net income is projected to grow 34.2% at an average of 18.4% over the next five fiscal years.
Based on Strong Fundamentals and Morningstar Criteria, BUD Looks Deeply Undervalued and Recession-Proof
BUD currently trades near its 2022 lows and -20.04% below its highs.
Although the stock has moved primarily sideways, and its multiples aren’t that cheap, Morningstar sees it differently. Based on a four-tiered Morningstar criterion, BUD ranks number 1 on the investment researcher’s 10 most undervalued recession-resistant stocks list.
Morningstar bases its valuation and recession-resistant definition on stocks that are:
- Trading below Morningstar analysts’ fair value estimates
- In a Morningstar defensive super sector such as healthcare, consumer defensive, and utilities
- Trading with wide Morningstar moats, aka financially healthy and highly profitable
- Ranked with a low or medium Morningstar uncertainty rating based on the predictability of future cash flows
Based on price-to-fair valuation ratios as of August 1, Anheuser-Busch’s is a mouth-watering 0.59.
Helping its case as not only a top Morningstar pick but one of the best stocks to buy now is BUD’s 7 out of 9 Piotroski Score. This demonstrates healthy Liquid Balance Sheets, Profitability, and Operating Efficiency.
Its latest twelve months gross profit margin of 55.9% and 25.5% operating margin are also outstanding and compare very favorably to many top competitors.
Source: Finbox
Source: Finbox
A 20+% Upside Makes the BUD Story Even Stronger
Although analyst activity on BUD has been relatively light over the past three months, TipRanks still notes that 3 Wall Street analysts offered 12-month price targets in this timeframe. The stock currently has a high price target of $80.00, a low of $52.50, and an average of $66.25. The average price target represents a 23.19% upside from August 4, 2022’s closing price of $53.78.
BUD’s year-to-date low and high are $50.59 and $67.26, respectively.
