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The markets faced a big shock due to the black swan event of the pandemic. As economies returned to normal, the Russian-Ukrainian war sparked new concerns in several sectors of the economy. The war has catalyzed an increase in the list of beaten stocks in 2022.
With the Russian-Ukrainian war, oil prices soared, which translated into widespread inflation for the global economy. While commodity producers have benefited, commodity consumers have been affected. The war also caused headwinds in the supply chain, contributing to higher inflation.
Among the battered stocks, some companies had significant exposure to Russia. This includes companies with retail operations or companies with commodity assets. I think most concerns related to the Russian-Ukrainian war have been ignored in these actions. I remain cautiously optimistic.
Let’s talk about three stocks beaten since the start of the Russian-Ukrainian war.
Carnival Corporation (CCL)
carnival society (NYSE:CCA) the stock was struggling due to the pandemic. The company had overleveraged and diluted equity to stay afloat. Even as the recovery began, Carnival was facing the headwind of the Russian-Ukrainian war. Since the beginning of 2022, CCL shares have fallen by 62%. It seems likely that the difficult environment will continue for the company in 2023.
An immediate impact of Russia-Ukraine was a spike in fuel prices. It should be noted that Carnival recorded revenues of $8.3 billion for the first nine months of 2022. However, EBITDA losses were incurred.
Another impact of the war relates to the global supply chain and trade. There are several reasons to expect a recession in 2023; war is one of the catalysts. A possible recession will impact cruise travel and cash burn may continue for years to come. While credit indicators remain under pressure, CCL stock will remain subdued.
Kinross Gold (KGC)
The war also forced several companies to leave Russia. Losses were significant as the exit can be likened to sales of distressed assets.
Kinross Gold (NYSE:KGC) is one of the victims of the war. In April, it was announced that Kinross would sell its gold mining assets in Russia for a consideration of $680 million. However, the Russian subcommittee on control of foreign investments approved the transaction for only $340 million.
First, KGC shares were hurt due to weaker than expected cash inflows from asset sales. In addition, the company’s production forecasts for the coming years have been impacted.
Either way, these factors have already been discounted in the stock price. KGC stock looks attractive, with a solid cash reserve and stable production visibility for the next few years. Notably, the company has guided free cash flow even though gold is trading around $1,700 to $1,800 an ounce.
PepsiCo’s (NASDAQ:DYNAMISM) stock is not among the names that have plunged. However, Pepsi is worth talking about for two reasons. The company was one of the oldest American companies in Russia. Moreover, Russia was the second largest international market for the company, after Mexico.
I also wanted to talk about Pepsi because the company is expected to eliminate hundreds of jobs in North America. With rising costs affecting consumers and a potential recession in 2023, the outlook is difficult.
For the third quarter of 2022, the company’s revenue exceeded estimates. However, this was following a price increase even if the volumes have decreased in some business units. It’s also worth noting that PEP shares are trading at a forward price-to-earnings ratio of 26.3. If there is a downward revision to earnings forecasts in 2023, the stock will likely see a significant correction.
As of the date of publication, Faisal Humayun does not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.