3 "Buy Rated" Stocks to Buy for a Cold Winter

La Niña could bring a colder-than-normal winter across the North. With a chilly winter around the corner, companies with seasonal businesses are likely to see robust demand. Public Service Enterprise Group (PEG), Domino's Pizza (DPZ), and Columbia Sportswear (COLM) should significantly benefit if the winter is colder than normal.

In October, the National Oceanic and Atmospheric Administration forecast that the 2020 winter would be wetter-than-average for the northern tier of the country (from the Pacific Northwest to the Great Lakes). The department also predicted that the temperature would be below average owing to the ongoing La Nina. Experts also foresee that the United States could experience a worsening drought in the winter months ahead.

As cold weather sets in, certain stocks will gather steam because of seasonality of demand. Companies dealing with home heating and winter wear, among others, fall into this category. Owing to the second round of COVID-19 and the peak of winter approaching, people would also prefer to stay home and order staple products online. Moreover, the holiday festivities also add to the appeal of online food delivery. Naturally, quick service restaurants with a robust delivery chain will witness huge demand.

As a result, some companies are expected to see a surge in demand for their products and services. Public Service Enterprise Group Incorporated (PEG), Domino's Pizza Inc. (DPZ), and Columbia Sportswear Company (COLM) are companies which belong to these varied sectors. While PEG would provide the energy required for home heating, COLM would help customers to stay warm with its unique collection of winter wear. On the other hand, DPZ will enable people to stay indoors and order food without having to venture out in the cold. Owing to the nature of their businesses, these stocks are poised to see an uptick in their prices as winter acts as a growth catalyst for them.

Public Service Enterprise Group Incorporated (PEG)

PEG is an energy company which has its operations primarily focused in the Northeastern and Mid-Atlantic United States. PSE&G and PSEG Power are the two main business segments of the company. PEG transmits electricity and gas to residential, commercial, and industrial consumers. The company also invests in solar generation projects, and energy efficiency programs. On an average, PEG has an electric transmission and distribution system of 25,000 circuit miles.

In September, the New Jersey Board of Public Utilities approved the settlement of PEG’s Clean Energy Future-Energy Efficiency program. The objective of this project is to lower electricity bills and reduce carbon footprint. The company is authorized to invest $1 billion over three years to offer energy efficiency access to customers in New Jersey.

PEG’s revenue for the third quarter that ended September 2020 climbed 2.9% year-over-year to $2.3 billion. The electric sales volumes for the quarter were 12,176 million kwh, whereas the sales volumes for gas were 504 million therms. The EPS for the third quarter rose 44.3% year-over-year to $1.14.

Analysts expect the revenue for the fourth quarter ending December 2020 to grow 16% year-over-year to $2.9 billion. Meanwhile, the EPS for the fourth quarter is expected to be $0.61, down 4.7% from the year-ago period.

PEG has dropped 0.4% on a year-to-date basis to close Friday’s session at $58.42. Over the past six months, the stock has climbed 17.9%

How does PEG stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

A for Peer Grade

B for Industry Rank

A for Overall POWR Rating

The stock is also ranked #4 out of 62 stocks in the Utilities - Domestic industry.

Domino's Pizza Inc. (DPZ)

DPZ is a global pizza delivery company, which operates across three segments namely U.S. Stores, International Franchise, and Supply Chain. The company sells pizzas under the Domino's brand through company-owned stores, as well as franchisees. As of August 2020, the company had nearly 17,100 stores across 90 markets.

Last month, DPZ launched a limited edition of the new chocolate orange cookies named Choc Orange Cookies as the perfect treat for chilly days. The pizza delivery chain also launched a special Halloween Roulette pizza to woo customers during the spooky festival. Halloween, Thanksgiving and the Holiday season are peak business periods for DPZ during which it adds new offerings to pull in more crowds.

During the third quarter that ended September 2020, DPZ’s revenue climbed 17.9% year-over-year to $968 million. Revenue also exceeded the consensus estimate by a narrow margin. The company’s U.S. same-store sales jumped 17.5%, led by a mix of order volume as well as ticket growth.  DPZ’s EPS for the quarter increased 21.4% year-over-year to $2.49. However, EPS trailed the consensus estimate of $2.79.

The street expects revenue for the fourth quarter to be $1.4 billion, indicating a 19.8% year-over-year increase. Meanwhile, the consensus estimate for EPS indicates a 24% year-over-year improvement to $3.88.

On a year-to-date basis, DPZ has gained 34.9% to close at $399.85 on Friday. The stock has gained 6.7% over the past six months.

DPZ’s strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with an “A” in Industry Rank and a “B” in Peer Grade and Buy and Hold Grade. Within the Restaurants industry, it’s ranked #6 out of 49 stocks.

Columbia Sportswear Company (COLM)

COLM is a sportswear company that designs, sources, and commercially distributes lifestyle apparel for outdoors, athletic outfits, footwear, accessories, and sporting equipment. The company has operations across the globe with the United States, Latin America, Europe, Asia Pacific, Africa, Middle East, and Canada as the major markets. COLM sells most of its products under the Columbia, Mountain HardWear, SOREL, and prAna brand names. At the end of 2019, the company had over 140 retail stores across the globe.

On October 14th, COLM launched its new Omni-Heat Black Dot technology, a first of its kind outdoor apparel to feature an external thermal shield to protect from the cold. Each multi-layered dot on this apparel is made of aluminum and covered with a black coating to increase the heat absorption from scattered or direct sunlight. This new offering coupled with COLM’s Omni-Heat 3D thermal-reflective line of clothes is one of the most advanced solutions for the winter chills.

COLM’s revenue for the third quarter that ended September dropped 22.7% year-over-year to $701.1 million. The company’s e-commerce channel performed better than its brick & mortar stores due to the pandemic. The EPS for the quarter dropped 46.3% year-over-year to $0.94.

Analysts expect COLM’s revenue for the fourth quarter to drop 8.5% year-over-year to $873.8 million. The company’s EPS for the quarter is likely to be $1.27, down 24% year-over-year.

During the past six months, COLM gained 22.5% to close Friday’s session at $78.66. However, the stock slumped 21.5% year-to-date due to subdued sportswear demand as people stayed indoors due to the pandemic.

COLM is rated “Buy” in our POWR Ratings system. It also has an “A” for Trade Grade, Peer Grade, and Industry Rank. In the 34-stock Athletics & Recreation industry, it is ranked #5.

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PEG shares were trading at $61.34 per share on Monday morning, up $2.92 (+5.00%). Year-to-date, PEG has gained 6.78%, versus a 13.41% rise in the benchmark S&P 500 index during the same period.

About the Author: Namrata Sen Chanda

Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education.


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