Investing

5 US Companies Consumers Need Are Virtually Unaffected by Coronavirus Concerns

Lee Jackson

Published: February 27, 2020 6:50 am

Last Updated: February 27, 2020 7:00 am

After a skid in which stocks experienced their worst two-trading days in four years with close to a 1,900-point drop in the Dow Jones industrials, investors tried to mount a Wednesday rebound. At one point, the venerable index was up 461 points, but that failed and the Dow ending closing down 123 points. While those gains faded, at least investors may have seen a light at the end of the tunnel that was not a selling momentum train trying to run them over.

The coronavirus continues to spread, and we did find out late Wednesday that cases have been reported in the United States. Wall Street is handicapping slowing global growth, so we decided to search for companies in our 24/7 Wall St. research database that basically do all their business in the United States. These companies provide products or services that will be needed almost regardless of the severity or length of the outbreak.

The five companies we found are all rated Buy or Outperform across Wall Street, and while buying big positions of anything with the current volatility is unwise, scaling some money into these stocks now could prove to be a solid short-term and long-term investment.

AT&T

This is a top telecom and entertainment play. AT&T Inc. (NYSE: T) is the largest U.S. telecom company and provides wireless and wireline service to retail, enterprise and wholesale customers. The company’s wireless network serves approximately 124 million mobile connections, with 77 million postpaid subscribers.

While AT&T’s traditional wireline voice business has undergone a period of secular decline due to wireless substitution and cable competition, the company through WarnerMedia has become a diversified media and entertainment business.

Merrill Lynch noted this when discussing the 2020 potential for the communications giant:

Our price objective is based on a P/E multiple of 12 times our fiscal year 2020 EPS estimate, which is in the middle of AT&T’s historical relative multiple range vs the S&P 500. We think this is warranted based on challenging operating trends within AT&T’s television business, higher leverage, and integration risk, but offset by higher earnings estimates and faster growth after baking in the impact of the company’s stock buyback and cost savings initiative.

Investors receive a 5.56% dividend. Merrill Lynch has a $43 price target for the shares, which compares to the $39.43 consensus target across Wall Street. AT&T stock closed Wednesday at $39.10 per share.

American Electric Power

Merrill Lynch recently added this one to its US 1 list of top stocks. American Electric Power Co. Inc. (NYSE: AEP) is one of the largest electric utilities in the United States, delivering electricity to more than 5.4 million customers in 11 states.

The company ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the United States. It also owns the nation’s largest electricity transmission system, a more than 40,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined.

Shareholders receive a solid 2.80% dividend. Wells Fargo recently raised its price target to $115 from $104, and the consensus target was last seen at $105. American Electric Power stock closed trading at $97.43 on Wednesday.

This top grocer does virtually all its business in the United States. Kroger Co. (NYSE: KR) is the second-largest U.S. food supermarket retailer and generates $120 billion in annual sales. Kroger operates roughly 2,800 supermarkets throughout 35 states and under two dozen banners. Kroger also sells fuel at 1,450 supermarket fuel centers and operates 2,268 pharmacies and 274 jewelry stores.

Analysts note that the company’s price leadership, strong management team, store execution and impressive leveraging of technology partnerships and investments (including a recently announced partnership with Ocado) should support Kroger’s revenue outlook and help drive efficiency.

Shareholders receive a 2.16% dividend. The $31 Merrill Lynch price target is above the posted $27.95 consensus target. Kroger stock closed most recently at $28.75.

Eli Lilly

This is another stock with solid upside potential and a degree of safety.

Eli Lilly and Co. (NYSE: LLY) is a global health care company with numerous core products in a number of primary-care pharmaceutical markets. The company generates revenues from its pharmaceutical product and animal health segments.

The product portfolio includes Zyprexa (for schizophrenia and bipolar disorder), Gemzar (pancreatic cancer), Evista (osteoporosis), Cymbalta (depression), Cialis (erectile dysfunction), Strattera (attention deficit hyperactivity disorder), Erbitux (cancer) and Alimta (chemotherapy). Eli Lilly also has a strong presence in the diabetes market.

Eli Lilly results came in strong for the fourth quarter, and Merrill Lynch analysts said this when it reported:

With a strong close to 2019, Lilly’s industry-leading top- and bottom-line growth appears on track to continue in 2020. 2020 is shaping up to be a big year of clinical and regulatory catalysts across all of Lilly’s core franchises. Discontinuation of pegilodecakin, while a disappointment for Lilly’s oncology franchise, was already removed from our model.

The dividend yield here is 2.19%. Merrill Lynch has a $155 price objective. The consensus target is $145.08, and Eli Lilly stock was last seen trading at $133.53 per share.

24/7 Wall St.
The 5 Most Shorted Dow Stocks

Waste Management

This Houston-based company is the clear solid waste industry leader. Waste Management Inc. (NYSE: WM) is the largest non-hazardous waste operator, servicing 21 million residential, commercial, industrial and municipal customers across 48 states and Canada.

Waste Management is vertically integrated, owning nearly 400 collection operations, 249 active solid waste landfills, 297 transfer stations and 104 recycling centers. The company has significant economies of scale, with 66% of the waste it collects disposed of at its own landfill. It also is a leading developer, operator and owner of landfill gas-to-energy facilities in the United States.

Shareholders receive a 1.79% dividend. RBC recently raised its $125 price target to $138, which is above the consensus estimate of $130.27. Waste Management stock ended Wednesday’s trading at $120.93 a share.

Even in a worst-case scenario, people across the country will still need phone service, entertainment, electricity, groceries and gasoline, medicine and garbage removal. While none of that sounds super exciting, with the potential for continued elevated volatility, it’s a smart bet now.