These Stalwart Stocks Stayed Strong in a Sagging Market

The stock market downdraft largely continued on Wednesday, as investors are now starting to think that an economic recession might hit corporate earnings. Even as bond yields fell, most market benchmarks were lower, with only the Dow Jones Industrial Average (^DJI 0.06%) managing to escape declines. The Nasdaq Composite (^IXIC -0.52%) again underperformed, while the S&P 500 (^GSPC -0.22%) had a modest loss.

Data source: Yahoo! Finance.

Many little-known stocks have taken outsized hits during 2022, but industry leaders have tended to hold up better. Campbell Soup (CPB 0.92%) is actually up substantially for the year thus far, and homebuilder Toll Brothers (TOL -0.23%) is down but hasn't seen the extent of share-price declines that some other sectors of the market have experienced.

Both Campbell Soup and Toll Brothers gained ground on Wednesday after posting strong financial results, and many investors are growing increasingly optimistic about both companies and their future prospects.

Soup's on

Campbell Soup shares rose 6% on Wednesday. The company released financial results from its fiscal first quarter that ended Oct. 30, and investors were pleased with resilient performance and solid growth.

Campbell Soup's numbers looked excellent in a tough macroeconomic environment. Revenue jumped 15% year over year to $2.58 billion, with all of that growth coming organically. Adjusted earnings weighed in at $1.02 per share, also up 15% from year-ago levels.

Essentially, Campbell Soup was able to reap all the rewards of having a strong brand presence in the consumer staples industry. Even though inflation boosted the prices of the ingredients that Campbell needs for its soups and other food products, the company was able to increase the prices it charges consumers by enough to compensate and still leave room for expanding sales and profits. Efforts to control costs also helped contribute to the bottom-line strength.

Based on its strong performance, Campbell Soup increased its guidance for the full 2023 fiscal year. The company now expects sales growth of 7% to 9%, up from 4% to 6% previously, and it added $0.05 per share to its earnings projections and called for adjusted earnings of $2.90 to $3 per share. With good results from its meals and snacks segments, Campbell Soup is doing a good job of playing the role of a defensive stalwart stock.

Toll Brothers keeps building

Shares of Toll Brothers did even better, rising 8%. The homebuilder stock's fiscal fourth-quarter financial results for the period ending Oct. 31 showed considerable strength even in an area that has seen some challenges lately, and investors seemed to shrug off signs of possible future weakness.

Toll Brothers reported a 21% rise in revenue from home sales year over year, which came in at $3.58 billion. The homebuilder delivered 3,765 homes for the quarter, up 13% from year-ago levels. Net income jumped 71% to $641 million, and even though that included $138 million from a favorable settlement of one-time legal claims, investors were still pleased with Toll Brothers' earnings of $5.63 per share.

However, there were some indications that the housing market is weakening. The number of contracted homes during the period fell 60% to just 1,186, with contract value of $1.3 billion falling 56% from year-ago levels. Total home backlog dropped 21% to 8,098 units, although the value of those homes was down just 7% to $8.9 billion.

Even so, Toll Brothers believes that fiscal 2023 remains promising. The company anticipates delivering between 8,000 and 9,000 homes at an average price of $965,000 to $985,000. Despite short-term weakness, the housing market's longer-term prospects are still positive, and Toll Brothers expects the ongoing home shortage to support its business far into the future.