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5 Consumer Staples Stocks to Buy as Volatility Grips Markets
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On Mar 9, Wall Street tumbled on concerns of an impending recession in 2023. The sharp fall in equities was triggered by SVB Financial Group (SIVB) — a bank that primarily lends to technology companies. The bank announced that it was compelled to sell $1.75 billion in shares at a loss in order to cover rapidly declining customer deposits.
Following the news, the share price of SVB Financial plunged 60.4% creating a domino effect on the entire banking and financial services sector. Market participants remained highly concerned that a rigorous hike in interest rates is quickly eroding banks and other financial institutions’ capital-raising capacity.
Moreover, strong private payrolls released by the ADP and resilient JOLTS data suggested that the labor market stayed rock solid, forcing the central bank to hike rate rigorously for a longer period.
Consequently, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have plummeted 1.7%, 1.9% and 2.1%, respectively. The Financials Select Sector SPDR (XLF) — one of the 11 broad sectors of the S&P 500 Index — tanked 4.1%, marking its biggest daily decline since March 2020.
Consumer Staples Immune to the Vagaries of Economic Cycle
At this juncture, it should be prudent to invest in stocks from defensive sectors like consumer staples, utilities and health care. The consumer staples sector is mature and fundamentally strong as demand for such services is generally immune to the changes in the economic cycle. The consumer staples sector includes companies that provide necessities and products for daily use. This makes the sector defensive in nature.
Therefore, this has always been a go-to place for investors, who want to play it safe during extreme market fluctuations irrespective of internal or external disturbances. Moreover, the sector is known for the stability and visibility of its earnings and cash flows. Consequently, adding stocks from the consumer staples basket lends more stability to portfolios in an uncertain market.
Our Top Picks
We have narrowed our search to five consumer staples stocks with strong growth potential for 2023. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
The Clorox Co. (CLX - Free Report) manufactures and markets consumer and professional products worldwide. CLX benefited from solid demand, cost-saving efforts, strong execution, and pricing actions.
CLX has been on track with its IGNITE strategy and digital investments to transition to a cloud-based platform. Also, continued strength in the international segment bodes well. Fiscal 2023 organic sales are anticipated to be flat to up 3%, in sync with our estimate of 1.6% growth.
Zacks Rank #2 Clorox has an expected revenue and earnings growth rate of 0.5% and 3.2%, respectively, for the current year (June 2023). The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 30 days.
General Mills Inc. (GIS - Free Report) has been gaining from its Accelerate strategy, which is highlighted by its key priorities. These include competing efficiently, investing in Holistic Margin Management and Strategic Revenue Management initiatives and reshaping the portfolio.
GIS’ recent portfolio reshaping actions are likely to drive long-term growth. In fiscal 2023, management expects a rise in the cost of goods sold. That said, saving and pricing actions should aid. GIS is also gaining per unit, as seen in the second quarter of fiscal 2023 when the top and bottom lines grew year over year. We expect organic sales to grow 8.2% in fiscal 2023, which is within management’s view of 8-9%.
Zacks Rank #2 General Mills has an expected revenue and earnings growth rate of 5% and 6.1%, respectively, for the current year (May 2023). The Zacks Consensus Estimate for current-year earnings has improved 4.5% over the last 30 days.
The Hershey Co. (HSY - Free Report) has undertaken buyouts to augment portfolio strength and boost revenues. This was seen in fourth-quarter 2022, wherein buyouts of Pretzels and Dot's boosted net sales by 3.6 point. Results gained from improved net price realization and higher consumer demand.
HSY’s performance remained strong even amid elevated inflation, supply-chain hurdles and macroeconomic volatility. Management remains optimistic about generating earnings and sales growth in 2023. Favorable net price realization and greater levels of productivity are likely to keep offsetting the persistent rise in costs during 2023. HSY remains committed to investing in its brand portfolio and capacity expansion.
Zacks Rank #1 Hershey has an expected revenue and earnings growth rate of 7.8% and 10.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.7% over the last 60 days.
The Coca-Cola Co. (KO - Free Report) has benefited from its strategic transformation and ongoing recovery around the world. Strength across the majority of markets, investments in marketplace, recovery in certain markets as well as the cycling of last year’s pandemic-led impacts aided volumes. KO is poised to gain from innovations and accelerating digital investments.
Zacks Rank #2 Coca-Cola has an expected revenue and earnings growth rate of 4.2% and 4.8%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.6% over the last 30 days.
Chewy Inc. (CHWY - Free Report) is engaged in the pure-play e-commerce business in the United States. CHWY provides pet food and treats, pet supplies and pet medications, and other pet-health products, as well as pet services for dogs, cats, fish, birds, small pets, horses, and reptiles through its www.chewy.com retail Website, as well as its mobile applications.
Zacks Rank #1 CHWY has expected revenue and earnings growth rates of 11.2% and more than 100%, respectively, for the current year (ending January 2024). The Zacks Consensus Estimate for current-year earnings has improved 20% over the last 60 days.
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5 Consumer Staples Stocks to Buy as Volatility Grips Markets
On Mar 9, Wall Street tumbled on concerns of an impending recession in 2023. The sharp fall in equities was triggered by SVB Financial Group (SIVB) — a bank that primarily lends to technology companies. The bank announced that it was compelled to sell $1.75 billion in shares at a loss in order to cover rapidly declining customer deposits.
Following the news, the share price of SVB Financial plunged 60.4% creating a domino effect on the entire banking and financial services sector. Market participants remained highly concerned that a rigorous hike in interest rates is quickly eroding banks and other financial institutions’ capital-raising capacity.
Moreover, strong private payrolls released by the ADP and resilient JOLTS data suggested that the labor market stayed rock solid, forcing the central bank to hike rate rigorously for a longer period.
Consequently, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have plummeted 1.7%, 1.9% and 2.1%, respectively. The Financials Select Sector SPDR (XLF) — one of the 11 broad sectors of the S&P 500 Index — tanked 4.1%, marking its biggest daily decline since March 2020.
Consumer Staples Immune to the Vagaries of Economic Cycle
At this juncture, it should be prudent to invest in stocks from defensive sectors like consumer staples, utilities and health care. The consumer staples sector is mature and fundamentally strong as demand for such services is generally immune to the changes in the economic cycle. The consumer staples sector includes companies that provide necessities and products for daily use. This makes the sector defensive in nature.
Therefore, this has always been a go-to place for investors, who want to play it safe during extreme market fluctuations irrespective of internal or external disturbances. Moreover, the sector is known for the stability and visibility of its earnings and cash flows. Consequently, adding stocks from the consumer staples basket lends more stability to portfolios in an uncertain market.
Our Top Picks
We have narrowed our search to five consumer staples stocks with strong growth potential for 2023. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
The Clorox Co. (CLX - Free Report) manufactures and markets consumer and professional products worldwide. CLX benefited from solid demand, cost-saving efforts, strong execution, and pricing actions.
CLX has been on track with its IGNITE strategy and digital investments to transition to a cloud-based platform. Also, continued strength in the international segment bodes well. Fiscal 2023 organic sales are anticipated to be flat to up 3%, in sync with our estimate of 1.6% growth.
Zacks Rank #2 Clorox has an expected revenue and earnings growth rate of 0.5% and 3.2%, respectively, for the current year (June 2023). The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 30 days.
General Mills Inc. (GIS - Free Report) has been gaining from its Accelerate strategy, which is highlighted by its key priorities. These include competing efficiently, investing in Holistic Margin Management and Strategic Revenue Management initiatives and reshaping the portfolio.
GIS’ recent portfolio reshaping actions are likely to drive long-term growth. In fiscal 2023, management expects a rise in the cost of goods sold. That said, saving and pricing actions should aid. GIS is also gaining per unit, as seen in the second quarter of fiscal 2023 when the top and bottom lines grew year over year. We expect organic sales to grow 8.2% in fiscal 2023, which is within management’s view of 8-9%.
Zacks Rank #2 General Mills has an expected revenue and earnings growth rate of 5% and 6.1%, respectively, for the current year (May 2023). The Zacks Consensus Estimate for current-year earnings has improved 4.5% over the last 30 days.
The Hershey Co. (HSY - Free Report) has undertaken buyouts to augment portfolio strength and boost revenues. This was seen in fourth-quarter 2022, wherein buyouts of Pretzels and Dot's boosted net sales by 3.6 point. Results gained from improved net price realization and higher consumer demand.
HSY’s performance remained strong even amid elevated inflation, supply-chain hurdles and macroeconomic volatility. Management remains optimistic about generating earnings and sales growth in 2023. Favorable net price realization and greater levels of productivity are likely to keep offsetting the persistent rise in costs during 2023. HSY remains committed to investing in its brand portfolio and capacity expansion.
Zacks Rank #1 Hershey has an expected revenue and earnings growth rate of 7.8% and 10.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.7% over the last 60 days.
The Coca-Cola Co. (KO - Free Report) has benefited from its strategic transformation and ongoing recovery around the world. Strength across the majority of markets, investments in marketplace, recovery in certain markets as well as the cycling of last year’s pandemic-led impacts aided volumes. KO is poised to gain from innovations and accelerating digital investments.
Zacks Rank #2 Coca-Cola has an expected revenue and earnings growth rate of 4.2% and 4.8%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.6% over the last 30 days.
Chewy Inc. (CHWY - Free Report) is engaged in the pure-play e-commerce business in the United States. CHWY provides pet food and treats, pet supplies and pet medications, and other pet-health products, as well as pet services for dogs, cats, fish, birds, small pets, horses, and reptiles through its www.chewy.com retail Website, as well as its mobile applications.
Zacks Rank #1 CHWY has expected revenue and earnings growth rates of 11.2% and more than 100%, respectively, for the current year (ending January 2024). The Zacks Consensus Estimate for current-year earnings has improved 20% over the last 60 days.