The field at hand is our Real America Index, our group of stocks taking the pulse of the American economy. And it’s a little early to pick on some of the laggards in the RAI — after all, it has only been about six weeks since the gang got together — but a number of stocks have been on the ropes, whether through their own issues or just being dragged down thanks to the drumbeat of mixed messages from Europe and choppy economic waters here at home.
But that’s no reason to fret. In fact, these four names — while struggling a bit — still have the fundamental strengths they need to get up off the floor for the remainder of the year:
It’s a little hard to imagine how health insurance giant Humana (NYSE:HUM) can make it to this list given the industry’s relative stability and long-term moxie. But, here we are, with the RAI representative from Kentucky down 30% on the year.
What went wrong? Well, the upholding of the Affordable Health Care Act was seen as generally negative for providers in the short term. Earnings and revenues are just not cutting it at this point, either. Humana just reported weaker second-quarter earnings due primarily to a recent legal settlement, and HUM also cut its full-year forecast because of high costs for both new and existing customers on Medicare plans.
Humana generates three-quarters of sales from Medicare, so missing the boat on expenses in the system is a bit of a mistake, particularly since competitor UnitedHealth Group (NYSE:UNH) recently raised its profit outlook for the remainder of the year.
I wouldn’t panic. “Obamacare” will be phased in over time, and as new patients are moved into the system, Humana will start adjusting its prices and benefits beginning in 2013, looking to get back to its 5% profit margins and grow earnings by about 7% by the end of next year. Once the pricing system is in place and running at a normal clip, Humana should benefit nicely from the new law.
Nebraska-based ConAgra (NYSE:CAG) is down about 7% this year, vs. broader-market gains of 10%. In June, ConAgra declared a loss from continuing operations of 21 cents per share for the fourth quarter of fiscal 2012. But an accounting change had an impact on results, and sales growth actually was at 6.3%, beating analyst estimates.
For now, times are a bit tough as weak jobs data, an unhappy and slightly confused market and weak consumer confidence are putting pressure not just on ConAgra but the entire packaged goods industry, including Kraft (NASDAQ:KFT) and General Mills (NYSE:GIS).
However, ConAgra predicts it will grow earnings for fiscal 2013 as it continues to buy into more private-label brands and expand its offerings. In the past year alone, CAG has added well-known names like Del Monte Canada, Odom’s Tennessee Pride, National Pretzel and Kangaroo Brands pita chips, as well as its most recent acquisition — the Bertolli and P.F. Chang’s brands, which it bought from Unilever (NYSE:UL) for $265 million.
Analysts seem to agree, clocking expected earnings growth at roughly 7% for the next couple years.
In the meantime, investors currently get 24 cents a quarter in dividends, currently good for a nearly 4% yield — and CAG has reliably upped its payout at the end of each of the past three years, meaning income-hunters could be in for a holiday treat.