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Top 5 Consumer Staples Stocks for a Stable Portfolio in 2024
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U.S. stock markets are facing fluctuations in early 2024 after a sharp rally in 2023. The euphoria surrounding technology stocks evaporated as the yield on the benchmark 10-Year U.S. Treasury Note returned northward, trading well above 4%.
This was primarily owing to the uncertainty regarding the time of the Fed’s first cut in the benchmark interest rate. Recently, several key Fed FOMC members said that although they believe that the rate hike regime is over, they are yet to be convinced that the economic condition is conducive enough for an immediate rate cut.
At present, the CME FedWatch tool shows a mere 8.5% probability that the central bank will initiate a 25-basis-point rate cut in its March FOMC meeting. The probability of the first rate cut was more than 90% at the beginning of 2024.
Moreover, 63.3% of market respondents currently expect the central bank to maintain the status quo of the benchmark lending rate at 5.25-5.5% even in the May FOMC meeting. However, an overwhelming 78% of respondents expect the first cut in the Fed fund rate in the June FOMC meeting.
At this stage, investment in defensive stocks like consumer staples to stabilize your portfolio in 2024 should become a prudent strategy.
Consumer Staples Immune to Vagaries of Economic Cycle
The consumer staples sector is mature and fundamentally strong as demand for such services is generally immune to 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.
Our Top Picks
We have narrowed our search to five consumer staples stocks with strong growth potential for 2024. 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
Molson Coors Beverage Co.’s (TAP - Free Report) bullish run on the bourses can be attributable to brand strength and strong performances across its portfolio and both geographical segments. Also, Tap’s revitalization plan and the premiumization of the global portfolio bode well.
For 2024, net sales of TAP are projected to grow in the low single digits year over year on a constant-currency basis while underlying earnings per share are likely to rise in the mid-single digits. Underlying EBT is likely to grow mid-single digits year over year.
Zacks Rank #1 Molson Coors Beverage has an expected revenue and earnings growth rate of 1.2% and 4.2%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 3.1% over the last 30 days.
Tyson Foods Inc. (TSN - Free Report) has been seeing market share leadership across most retail categories. Productivity initiatives based on procurement, logistics and digitization are yielding results. TSN is focused on efforts to expand into the international markets. Also, TSN is keen on returning shareholder wealth, which is evident from its 12th consecutive year of dividend hikes.
Zacks Rank #1 Tyson Foods has an expected revenue and earnings growth rate of 0.1% and 74.6%, respectively, for the current year (ending September 2024). The Zacks Consensus Estimate for current-year earnings has improved 23.2% over the last 30 days.
Lamb Weston Holdings Inc. (LW - Free Report) has been reaping benefits from an effective pricing scenario and a solid operating momentum. LW’s focus on improving supply-chain productivity, global expansion efforts, bettering manufacturing capabilities and strengthening product, customer and channel mix is the key growth driver. This droves LW’s second-quarter fiscal 2024 net sales to increase year over year.
Zacks Rank #2 Lamb Weston has an expected revenue and earnings growth rate of 28.3% and 26.9%, respectively, for the current year (ending May 2024). The Zacks Consensus Estimate for current-year earnings has improved 1.7% over the last 60 days.
Colgate-Palmolive Co. (CL - Free Report) has been gaining from strong pricing, and the benefits of funding growth and other productivity efforts. This, along with solid business momentum, led to a robust performance during fourth-quarter 2023.
In addition, accelerated revenue growth management plans aided CL’s organic sales in the fourth quarter. In fact, 2023 marked the fifth straight year of organic sales growth either in line or ahead of the 3-5% long-term goal. As a result, CL anticipates net sales growth of 1-4% for 2024.
Zacks Rank #2 Colgate-Palmolive has an expected revenue and earnings growth rate of 3.7% and 7.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 30 days.
Church & Dwight Co. Inc. (CHD - Free Report) has been benefiting from the favorable consumer demand for its brands. CHD’s regular innovation, product introductions and acquisitions have helped it curate a solid portfolio. Brand strength, efficient pricing and productivity gains have been working well.
CHD develops, manufactures and markets a broad range of household, personal care and specialty products. CHD boasts power brands, such as ARM & HAMMER, Trojan, OxiClean, Spinbrush, Nair, Orajel, WATERPIK, FLAWLESS, Batiste and TheraBreath, which represent the majority of its consumer sales.
Zacks Rank #2 Church & Dwight has an expected revenue and earnings growth rate of 4.5% and 8.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 30 days.
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Top 5 Consumer Staples Stocks for a Stable Portfolio in 2024
U.S. stock markets are facing fluctuations in early 2024 after a sharp rally in 2023. The euphoria surrounding technology stocks evaporated as the yield on the benchmark 10-Year U.S. Treasury Note returned northward, trading well above 4%.
This was primarily owing to the uncertainty regarding the time of the Fed’s first cut in the benchmark interest rate. Recently, several key Fed FOMC members said that although they believe that the rate hike regime is over, they are yet to be convinced that the economic condition is conducive enough for an immediate rate cut.
At present, the CME FedWatch tool shows a mere 8.5% probability that the central bank will initiate a 25-basis-point rate cut in its March FOMC meeting. The probability of the first rate cut was more than 90% at the beginning of 2024.
Moreover, 63.3% of market respondents currently expect the central bank to maintain the status quo of the benchmark lending rate at 5.25-5.5% even in the May FOMC meeting. However, an overwhelming 78% of respondents expect the first cut in the Fed fund rate in the June FOMC meeting.
At this stage, investment in defensive stocks like consumer staples to stabilize your portfolio in 2024 should become a prudent strategy.
Consumer Staples Immune to Vagaries of Economic Cycle
The consumer staples sector is mature and fundamentally strong as demand for such services is generally immune to 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.
Our Top Picks
We have narrowed our search to five consumer staples stocks with strong growth potential for 2024. 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
Molson Coors Beverage Co.’s (TAP - Free Report) bullish run on the bourses can be attributable to brand strength and strong performances across its portfolio and both geographical segments. Also, Tap’s revitalization plan and the premiumization of the global portfolio bode well.
For 2024, net sales of TAP are projected to grow in the low single digits year over year on a constant-currency basis while underlying earnings per share are likely to rise in the mid-single digits. Underlying EBT is likely to grow mid-single digits year over year.
Zacks Rank #1 Molson Coors Beverage has an expected revenue and earnings growth rate of 1.2% and 4.2%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 3.1% over the last 30 days.
Tyson Foods Inc. (TSN - Free Report) has been seeing market share leadership across most retail categories. Productivity initiatives based on procurement, logistics and digitization are yielding results. TSN is focused on efforts to expand into the international markets. Also, TSN is keen on returning shareholder wealth, which is evident from its 12th consecutive year of dividend hikes.
Zacks Rank #1 Tyson Foods has an expected revenue and earnings growth rate of 0.1% and 74.6%, respectively, for the current year (ending September 2024). The Zacks Consensus Estimate for current-year earnings has improved 23.2% over the last 30 days.
Lamb Weston Holdings Inc. (LW - Free Report) has been reaping benefits from an effective pricing scenario and a solid operating momentum. LW’s focus on improving supply-chain productivity, global expansion efforts, bettering manufacturing capabilities and strengthening product, customer and channel mix is the key growth driver. This droves LW’s second-quarter fiscal 2024 net sales to increase year over year.
Zacks Rank #2 Lamb Weston has an expected revenue and earnings growth rate of 28.3% and 26.9%, respectively, for the current year (ending May 2024). The Zacks Consensus Estimate for current-year earnings has improved 1.7% over the last 60 days.
Colgate-Palmolive Co. (CL - Free Report) has been gaining from strong pricing, and the benefits of funding growth and other productivity efforts. This, along with solid business momentum, led to a robust performance during fourth-quarter 2023.
In addition, accelerated revenue growth management plans aided CL’s organic sales in the fourth quarter. In fact, 2023 marked the fifth straight year of organic sales growth either in line or ahead of the 3-5% long-term goal. As a result, CL anticipates net sales growth of 1-4% for 2024.
Zacks Rank #2 Colgate-Palmolive has an expected revenue and earnings growth rate of 3.7% and 7.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 30 days.
Church & Dwight Co. Inc. (CHD - Free Report) has been benefiting from the favorable consumer demand for its brands. CHD’s regular innovation, product introductions and acquisitions have helped it curate a solid portfolio. Brand strength, efficient pricing and productivity gains have been working well.
CHD develops, manufactures and markets a broad range of household, personal care and specialty products. CHD boasts power brands, such as ARM & HAMMER, Trojan, OxiClean, Spinbrush, Nair, Orajel, WATERPIK, FLAWLESS, Batiste and TheraBreath, which represent the majority of its consumer sales.
Zacks Rank #2 Church & Dwight has an expected revenue and earnings growth rate of 4.5% and 8.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 30 days.