Almost a week removed from Brexit, the markets are rallying after the historic downturn late last week into early this week. We saw high beta stocks from financials to airlines plunge on the increased volatility surrounding the vote.
However, it wasn’t bad for everyone with gold and volatility indexes making significant gains. As for single equities we saw Walmart (NYSE:WMT), Verizon Communications Inc (NYSE:VZ), Altria Group (NYSE:MO), Clorox Company (NYSE:CLX) and Unilever PLC (NYSE:UL) unscathed and in fact make marginal gains. With earnings season on the horizon these companies should stay resilient with future earnings largely unaffected from the Brexit vote.
Verizon Communications (VZ) Telecommunication Services – Diversified Telecommunications
Verizon was one of the few companies to persevere amid the global market sell off of the last 2 days. The U.S. telecommunication industry has very little exposure to Europe so any future currency headwinds and macro volatility won’t impact forward earnings. However, Verizon’s biggest concern this quarter was how earnings will be impacted from the labor strikes. The strike lasted almost 3 months with nearly 40,000 landline workers walking off the job.
Instead of hiring temporary replacements, Verizon used corporate employees, at their current salaries, to do the work. This in itself should take its toll on earnings and margins for Q2 but shouldn’t have a long lasting effect. Verizon was also in the news after many believed it was the frontrunner to acquire the beleaguered Yahoo (NASDAQ:YHOO). Verizon’s efforts to buy outdated media companies appears to be a bad idea, but only time will tell.
Competition has also started to ramp up. Verizon remains the industry leading service in the U.S., but Sprint, Tmobile and AT&T (NYSE:T) aren’t too far behind. The Estimize community is calling for earnings per share of 99 cents on $31.45 billion this quarter, marking negative growth for the first time in nearly 2 years. Fortunately, investors won’t need to speculate about Brexit aftermath when buying or selling this company.
Walmart (WMT) Consumer Staples – Food and Staples Retailing
For all the flack Walmart gets, this was another company that managed to surprise investors and make gains in the past 2 days. The discount retailer has been adamant that it would continue to lower prices and expand its omnichannel capabilities to keep up with Amazon (NASDAQ:AMZN). This hasn’t come at the cost of its employees either. After heavy scrutiny for unfair wages, Walmart has raised compensation for its employees across the board.
Other initiatives include opening new stores in strategic locations, domestic and globally, while closing or relocating stores in struggling locations. Considering its size, Walmart has made significant strides in the past few years. The Estimize community is confident that Walmart will continue its gains with estimates seeing moderate upward revisions. The consensus data is looking for earnings per share of $1.03 on $120 billion in revenue. Shares are now up 5% over the past 3 months.
Altria Group (MO) Consumer Staples – Tobacco
Just as gun stocks soar on mass shooting, drug and alcohol manufacturer’s rise during bear markets. Shares of the tobacco maker soared these past two days as investors sought safe haven investments. Consumers often turn to cigarettes and liquor during market volatility so these stocks typically do well.
Altria Group was one of the big winners in this space. Between Friday and Monday shares of the tobacco maker were up nearly 3% and have just tailed off as the rest of the market begins to rally. If Brexit does lead to devastation like mainstream news would like us to believe, then Altria could see shares rise even further from here.
Clorox Corporation (CLX) Consumer Staples – Household and Personal Products
Consumer goods were one of the standouts in the aftermath of the Brexit Vote. We saw names like Unilever and Clorox make significant gains in the past 2 days while many of its peers stumbled. Untimely events and market volatility aren’t the only things driving these stocks, particularly Clorox.
Clorox has exceeded earnings expectations in each of the past 4 quarters with shares now up 30%. In that same time earnings have grown by double digits while revenue increases by low single digits. The 103 year old company has seen strength across all its brands such as Burt’s Bees, Glad Trash Bags and Brita. Clorox also regained distribution of its products at Costco (NASDAQ:COST) after conceding the business to Reckitt Benckiser nearly two years ago.
Clorox also recently acquired organic supplements company, Renew Life, for $295 million in cash. Renew Life’s products can be found at stores such as Whole Foods, Sprouts and Vitamin Shoppe. Investor’s probably don’t mind that Clorox isn’t the most glamorous company given the way has performed.
How do you think these names will report this week?