Several companies have been dealing with inflation by passing higher costs on to their customers through price hikes. The consumer price index increased 5.4% in June, its biggest monthly gain since August 2008. The rising cost of labor, raw materials, and other inputs are primarily responsible for the consumer price increases.
While Federal Reserve Chairman Jerome Powell reiterated recently that inflation is transitory, the International Monetary Fund (IMF) warned yesterday that inflation could be persistent. And while investors are worried about rising inflation, companies that are increasing the prices of their products are not expected to be significantly affected by an inflationary environment.
PepsiCo, Inc. (PEP), Whirlpool Corporation (WHR), and Tempur Sealy International, Inc. (TPX) have been raising prices to offset increased costs. So, we think it could be wise to scoop up their shares to protect one’s portfolio from the impact of high inflation.
PepsiCo, Inc. (PEP)
In operation for more than a century, Harrison, N.Y.-based PEP is one of the top players in the food and beverage space. The company’s segments include Frito-Lay North America; Quaker Foods North America; and PepsiCo Beverages North America. Its product offerings include branded dips, cheese-flavored snacks, tortillas, and dairy products.
On July 27, PEP’s Lay’s introduced two new flavor combinations—Lay’s Doritos Cool Ranch and Lay’s Wavy Funyuns Onion—as part of its Lay's Flavor Swap lineup. These introductions could drive increased sales for the company.
PEP’s net revenue increased 20.5% year-over-year to $19.22 billion for its fiscal second quarter ended June 12, 2021. Its non-GAAP operating profit grew 25.9% year-over-year to $3.17 billion, while its non-GAAP net income increased 30.1% year-over-year to $2.39 billion. Its non-GAAP EPS came in at $1.72, up 30.3% year-over-year.
Analysts expect PEP’s EPS and revenue to increase 10.3% and 7.2%, respectively, year-over-year to $6.09 and $75.46 billion in its fiscal year 2021. It surpassed consensus EPS estimates in each of the trailing four quarters. The stock has rallied 14.4% over the past six months to close yesterday’s trading session at $157.94.
PEP’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. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Sentiment and Quality. Click here to access PEP’s ratings for Growth, Value, Momentum, and Stability also. PEP is ranked #5 of 37 stocks in the Beverages industry.
Whirlpool Corporation (WHR)
WHR manufactures and markets home appliances and related products, such as refrigerators, freezers, ice makers, and refrigerator water filters. The Benton Harbor, Mich.-company operates through four segments: North America, Europe, Middle East, and Africa, Latin America, and Asia.
The company expanded its strategic collaboration with Google Cloud in June 2021 to deliver critical business systems and applications on Google Cloud's secure, reliable, and sustainable infrastructure. WHR’s senior vice president and CIO, Dani Brown, said, “Whirlpool Corporation is committed to reaching zero emissions by 2030, and turning to Google Cloud's clean infrastructure for our global business systems and applications is a step forward toward that goal.”
WHR’s revenue increased 31.7% year-over-year to $5.32 billion for its fiscal second quarter, ended June 30, 2021. Its EBIT grew 197.5% from the same period last year to $607 million. The company’s EPS came in at $6.64, up 220.8% year-over-year.
For its fiscal year 2021, analysts expect WHR’s EPS and revenue to increase 27.9% and 12.3% year-over-year to $23.73 and $21.84 billion, respectively. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has soared 32.4% over the past year to close yesterday’s trading session at $219.43.
WHR’s POWR Ratings reflect this promising outlook. The stock has an A grade for Momentum, and a B grade for Value. Within the A-rated Home Improvement & Goods industry, WHR is ranked #29 of 63 stocks.
To see the additional POWR Ratings for WHR (Stability, Growth, Sentiment, and Quality), click here.
Tempur Sealy International, Inc. (TPX)
TPX in Lexington, Ky., develops, manufactures, markets, and distributes bedding products internationally. Its products include mattresses, foundations, and adjustable bases. In addition, the company is involved in licensing its Sealy, Tempur, and Stearns & Foster brands, technology, and trademarks to other manufacturers.
TPX announced on June 7, 2021, that it had selected Crawfordsville, Indiana, as the site for its third domestic foam-pouring plant. The company’s Chairman and CEO, Scott Thompson, said, "This facility underpins our commitment to expanding our global manufacturing footprint to fulfill the projected long-term demand trajectory for our industry-leading products and support our growth initiatives."
The company’s net sales increased 26.9% year-over-year to $1.04 billion for its fiscal first quarter, ended March 31, 2021. Its operating income grew 78.9% year-over-year to $188.4 million. Its adjusted net income came in at $134.6 million, which represents an 85.7% year-over-year increase. The company’s adjusted EPS was $0.64, up 88.2% year-over-year.
TPX’s EPS and revenue are expected to increase 44% and 26.1%, respectively, year-over-year to $2.75 and $4.64 billion. It surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 101.7% over the past year to close yesterday’s trading session at $38.25.
TPX’s POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system. It has an A grade for Growth, and a B grade for Momentum and Quality.
Click here to see the additional POWR Ratings for TPX (Sentiment, Stability, and Value). TPX is ranked #18 in the Home Improvement & Goods industry.
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PEP shares were trading at $157.26 per share on Wednesday morning, down $0.68 (-0.43%). Year-to-date, PEP has gained 7.67%, versus a 18.24% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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