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3 Stocks Tailored for a Defensive Approach

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Negative sentiment has flowed into the market following the crumbling of Silicon Valley Bank (SVB), with many financial stocks feeling the drag.

With uncertainty and volatility temporarily gripping the market, revisiting defensive areas of the market, such as the Consumer Staples sector, may be worthwhile.

Three top-ranked stocks from the Zacks Consumer Staples sector – The Hershey Company (HSY - Free Report) , Lamb Weston (LW - Free Report) , and Inter Parfums (IPAR - Free Report) – could all be considerations for investors looking to shore up defensive capabilities.

Below is a chart illustrating the performance of all three stocks year-to-date, with the S&P 500 blended in as a benchmark.

Zacks Investment Research
Image Source: Zacks Investment Research

On top of improved earnings outlooks, all three pay dividends, providing another beneficial advantage. Let’s take a closer look at each one.

Lamb Weston

Lamb Weston Holdings is a leading global manufacturer, marketer, and distributor of value-added frozen potato products. Over the last several months, the company’s bottom line outlook has improved across all timeframes, landing it into a Zacks Rank #2 (Buy).

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Image Source: Zacks Investment Research

Lamb Weston delivered a big-time beat in its latest quarterly release, exceeding the Zacks Consensus EPS Estimate by more than 70%.  Quarterly revenue totaled $1.3 billion, 10% ahead of expectations and growing 30% year-over-year.

The market cheered on the quarterly results, continuing a trend already well in place. The green arrows illustrate this in the chart below.

Zacks Investment Research
Image Source: Zacks Investment Research

And to top it off, LW’s annual dividend presently stands at 1.1%, with the company’s payout growing by more than 6% over the last five years.

Zacks Investment Research
Image Source: Zacks Investment Research

The Hershey Company

The Hershey Company is the largest chocolate manufacturer in North America and a global leader in chocolate and non-chocolate confectionery. The stock presently sports a Zacks Rank #2 (Buy).

Zacks Investment Research
Image Source: Zacks Investment Research

In addition, the company’s bottom line is expected to expand nicely, with the $9.39 Zacks Consensus EPS Estimate for its current fiscal year (FY23) suggesting a double-digit 10% year-over-year uptick. And in FY24, earnings are forecasted to grow a further 8%.

Zacks Investment Research
Image Source: Zacks Investment Research

While Hershey’s 1.7% annual dividend yield remains below the Zacks Consumer Staples sector average, its 9% five-year annualized dividend growth rate helps bridge the gap.

Zacks Investment Research
Image Source: Zacks Investment Research

Inter Parfums

Inter Parfums is engaged in the manufacturing, distribution, and marketing of an extensive range of fragrances and related products.

Inter Parfums impressed in its latest quarterly release, beating bottom-line expectations by more than 100% and delivering an 11% revenue surprise. Below is a chart illustrating the company’s strong revenue trend on a quarterly basis.

Zacks Investment Research
Image Source: Zacks Investment Research

Like LW, market participants took the better-than-expected results in stride, sending Inter Parfums shares soaring post-earnings for the second consecutive instance.

Zacks Investment Research
Image Source: Zacks Investment Research

The company has been committed to increasingly rewarding its shareholders, growing its dividend payout by more than 15% just over the last five years. Presently, IPAR’s dividend yields 1.5% annually.

Bottom Line

Following the fallout from Silicon Valley Bank, some investors could find interest in visiting sectors that provide a higher level of defense, including Consumer Staples.

These companies’ products can generate demand in the face of many economic situations, helping explain why they’re generally seen as defensive.

And all three stocks from the Zacks Consumer Staples sector above – The Hershey Company (HSY - Free Report) , Lamb Weston (LW - Free Report) , and Inter Parfums (IPAR - Free Report) – could be considerations for those looking to enhance defensive capabilities.


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