Even in the pandemic-ravaged economy, the Consumer Staples sector has been a relatively safe spot. As the sector houses companies offering essentials like packaged foods and beverages, cleaning products, and household and personal care products among others – it has been in a good position.
Demand for such products was spurred by stock piling and increased at-home consumption. Quite obviously, these factors are likely to have played a key role in shaping the performance of these players in the quarter gone by.
Definitely, opportunities created and challenges posed by the pandemic will be the highlight of the releases. Although some companies in the space were affected by customer store closures and supply-chain hurdles at some point of the quarter, gradual reopening and lifting of certain restrictions since May has brought businesses of a number of companies on track. Further, as cases have been constantly rising, demand for essentials has been high when compared with the pre-pandemic levels.
In fact, several consumer staple players (especially packaged food and cleaning material companies) are likely to have benefited on the back of burgeoning demand stemming from coronavirus-led social distancing. We expect these upsides to be reflected in the performance of many players from the Consumer Staples space this earnings season.
Apart from this, contributions from buyouts, product innovation and other brand-building efforts are likely to have benefited performances of these companies. Further, their stringent cost saving and restructuring efforts have been helping them tackle cost inflation as well as expenditures related to managing operations amid the COVID-19 crisis. Certainly, any deleverage in SG&A expenses, adverse foreign currency fluctuations and unfavorable product/volume mix might have put pressure on margins.
Per the latest Zacks Earnings Outlook report, margins for the Consumer Staples sector are expected to dip 1% year over year for the second quarter of 2020. Also, total earnings for the space are likely to fall 16.3% on revenue decline of 9.4% in the same quarter.
Notwithstanding the same, we have a few Consumer Staples stocks that investors can place their bets on. With the help of our Zacks Stock Screener, we have zeroed in on five such stocks having earnings beat potential this time around. Our research shows that for stocks with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP, the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
5 Potential Winners
Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) , which offers food products and other health and beauty products, appears quite promising. The stock has a Zacks Rank #1 and an Earnings ESP of +8.86%. The Zacks Consensus Estimate for its second-quarter fiscal 2020 earnings is currently pegged at 86 cents, suggesting growth of 145.7% from the prior-year quarter. The company has a trailing four-quarter earnings surprise of 4.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Recently, management issued updates for fiscal second quarter ending Aug 1, which is slated to release on Aug 27. It expects net sales of approximately $515 million, indicating a sharp increase of 54.2% year over year and 47.4% sequentially. Ollie's Bargain anticipates comparable-store sales growth of roughly 40%. In the year-ago quarter, the company had reported a decline of 1.7%. Its robust business model, cost-containment initiatives and store-productivity endeavors add to the strengths.
Next, Nu Skin Enterprises, Inc. (NUS - Free Report) with a Zacks Rank #1 and an Earnings ESP of +6.35% is slated to report on Aug 5. The Zacks Consensus Estimate for its second-quarter 2020 earnings is pegged at 63 cents, up from 49 cents pegged 30 days ago. This personal care and wellness products’ company has a trailing four-quarter earnings surprise of 13.5%, on average.
Recently, Nu Skin Enterprises raised its sales guidance for the second quarter in the range of $603-$608 million, up from $520-$550 million projected earlier. The uptick can be attributed to higher consumer growth globally, primarily driven by strength in the Europe and Americas business. Moreover, the company’s investments in enhancing its technological and digital abilities are likely to have contributed to the quarter’s growth. Notably, Nu Skin’s e-commerce business represented more than 80% of volumes in the quarter.
Flowers Foods, Inc. (FLO - Free Report) , with a Zacks Rank #2 and an Earnings ESP of +9.41%, is worth betting on. The Zacks Consensus Estimate for its second-quarter 2020 earnings is pegged at 28 cents per share, suggesting growth of 12% year over year. This packaged bakery foods’ dealer has a trailing four-quarter earnings surprise of 5.7%, on average.
On Jul 20, Flowers Foods issued preliminary information on its second quarter, for which it projects net sales growth of nearly 4.5-5% year over year. Also, adjusted earnings are likely to fall in the band of 30-33 cents a share, indicating year-over-year growth of 20-32%. The company has been gaining from coronavirus-led stockpiling apart from strength in branded retail, with Nature's Own, Canyon Bakehouse, DKB and Wonder brands. Second-quarter 2020 results are slated to release on Aug 6.
Investors can also count on Energizer Holdings, Inc. (ENR - Free Report) with a Zacks Rank #3 and an Earnings ESP of +2.25% for third-quarter 2020 scheduled to release on Aug 5. Notably, the Zacks Consensus Estimate for the soon-to-be-reported earnings is pegged at 59 cents per share, suggesting improvement of more than 59% from the year-ago period. Strength in the acquired businesses and organic sales growth have been aiding its performance. Also, the batteries and lighting products’ manufacturer’s strategic endeavors to boost productivity remain impressive.
Another worthwhile option is Newell Brands Inc. (NWL - Free Report) , with a Zacks Rank #3 and an Earnings ESP of +1.97%. The Zacks Consensus Estimate for its second-quarter 2020 earnings is pegged at 18 cents per share, improving 3 cents in the past seven days. This consumer products’ manufacturer, which is scheduled to report quarterly results tomorrow, has outperformed earnings estimates in the trailing four quarters by an average surprise of 28.3%. It has been benefiting as consumer preference has shifted to certain products. Newell’s FUEL initiative to boost productivity and e-commerce-enhancing efforts also look encouraging.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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