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4 Grocery Stocks to Buy as Omicron Variant Raises Fresh Fears

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The coronavirus pandemic is far from over. Just when people were feeling confident after vaccination and stepping out of their homes or planning vacations, the Omicron variant of the coronavirus raised fresh fears.

On the one hand, the holiday season has brought a smile on retailers' faces with people returning to brick-and-mortar stores. On the other hand, the World Health Organization (WHO) has warned of the severity of the Omicron variant. This might once again send people indoors with stocks of essential goods.

Groceries are one of the essential goods and investing in grocery stocks like Target Corporation (TGT - Free Report) , Casey’s General Stores, Inc. (CASY - Free Report) , United Natural Foods (UNFI - Free Report) and SunOpta, Inc. (STKL - Free Report) would be a wise decision.

Fresh COVID-19 Scare

Last week, the WHO warned of a new COVID-19 variant Omicron that was first identified in South Africa but is believed to have originated in Botswana. The variant has new symptoms and has raised fresh fears of cases surging. In fact, many countries, including the United States, have issued a travel ban from South Africa and seven other African nations due to fears of the fast-mutating virus.

On Monday, the WHO warned that the new Omicron variant poses a “very high” risk to the global pandemic recovery and might have serious consequences with a new wave of infections. “Omicron has an unprecedented number of mutations, some of which are concerning for their potential impact on the trajectory of the pandemic,” the WHO said on Monday, according to a report in the Daily Mail.

The news comes just at a time when people had started feeling confident after their jab and the economy started reopening.

E-Commerce Driving Grocery Sales

The first wave of the pandemic in March-April 2020 saw millions stockpiling on essential goods. E-commerce was a major savior as millions shopped groceries and other essential goods online. This, in a way,saved the retail sector from a total collapse.

Since then, an increasing number of Americans have been shopping online, particularly groceries. E-commerce has been majorly driving the overall grocery sales. According to the Brick Meets Click/Mercatus Grocery Shopping Survey, the U.S. online grocery market jumped 1.3% in October accounting for a total of $8.1 billion in sales from $8 billion in September.

Moreover, almost 50% of the total U.S. households, which is 63.8 million, shopped groceries online in October. A monthly average user placed an average of 2.74 orders the previous month, which is 35% more than the pre-pandemic levels and just 6% lower than the record high attained in May 2020, when the pandemic was at its peak.

This shows the growing reliance on e-commerce for buying groceries. According to research firm Acosta’s “Growth of Online Grocery Shopping Shows No Signs of Slowing Down” report, 31% of Americans plan to increase shopping for their groceries and food online. Also, experts believe that e-commerce will continue to dominate this space as grocery players are fast shifting focus to online business.

Our Choices

This is thus an opportune time to invest in grocery stocks with a strong online presence as they should lead to solid returns going forward. We have picked four such stocks, each currently carrying either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Casey’s General Stores, Inc. offers a variety of food selections (including freshly prepared foods such as pizza, donuts and sandwiches), beverages, tobacco and nicotine products, health and beauty aids, school supplies, houseware, and pet supplies.CASY operates two stores under the name "Tobacco City," selling primarily tobacco and nicotine products, one liquor store, and one grocery store. Casey’s also offers a variety of food selection (including freshly prepared foods such as pizza, donuts and sandwiches), beverages, tobacco and nicotine products, health and beauty aids, school supplies, housewares and pet supplies.

Casey’s expected earnings growth rate for the current year is 3.6%. The Zacks Consensus Estimate for current-year earnings has improved 1.8% over the past 60 days. Shares of CASY have gained 4.9% in the past 30 days. Casey’s General Stores has a Zacks Rank #2.

SunOpta, Inc. is an operator of high-growth ethical businesses, focusing on integrated business models in the natural and organic food, supplements and health and beauty markets. STKL has three business units: the SunOpta Food Group, which specializes in sourcing, processing and distribution of natural and organic food products integrated from seed through packaged products; the Opta Minerals Group, a producer, distributor, and recycler of environmentally friendly industrial materials; and the SunOpta BioProcess Group which engineers and markets proprietary steam explosion technology systems for the pulp, bio-fuel and food processing industries. 

SunOpta’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings for STKL has improved 25% over the past 60 days. SunOpta has a Zacks Rank #2.

Target Corporation has evolved from being a pure brick & mortar retailer to an omni-channel entity. TGT has been investing in technologies, improving websites and mobile apps, and modernizing the supply chain to keep pace with the changing retail landscape and better compete with pure e-commerce players.

The company reported third-quarter fiscal 2021 earnings of adjusted earnings of $3.03 per share, beating the Zacks Consensus Estimate of $2.87 and rising 8.7% from the year-ago period. TGT’s total revenues for the quarter came in at $25,652 million,increasing 13.3% year over year and surpassing the Zacks Consensus Estimate of $24,906 million. 

Target Corporation’s expected earnings growth rate for the current year is 39.6%. The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the past 60 days. Shares of TGT have advanced 10.5% in the past six months. Target carries a Zacks Rank #2.

United Natural Foods is the leading distributor of natural, organic and specialty food and non-food products in the United States and Canada. UNFI carries more than 1,10,000 high-quality natural, organic and specialty products, consisting of national, regional and private label brands in six product categories. From an operating point of view, United Natural Foods has two principal divisions — the wholesale as well as the manufacturing and branded products unit.

United Natural Foods’expected earnings growth rate for the current year is more than 5.2%. The Zacks Consensus Estimate for UNFI’s current-year earnings has improved 29.5% over the past 60 days. Shares of UNFI have gained 17.1% in the past 30 days. United Natural Foods has a Zacks Rank #2.

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