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Kraft Heinz & 4 Consumer Staples Stocks to Binge On
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In the volatile global economic scenario, the consumer staples sector – normally defensive in nature – appears quite reliable.
Despite slowing growth in emerging markets like China and Brazil and fears of challenging economic/political conditions in Europe, post Brexit, the U.S. economy has remained strong this year. Improving home sales, stepped-up economic activities, robust business, higher government spending and a buildup in inventories have given a boost to the domestic economy.
However, lower crude oil prices have triggered worries like global deflation and economic slowdown. On the other hand, subsiding oil and natural gas prices mean that consumers are left with more disposable income. A rise in wages has also increased household wealth and encourage consumer spending. These positive sentiments are gradually translating into higher consumer spending in 2016.
An improving consumer spending power in-turn raises demand for goods sold by the consumer staples companies whose primary lines of business are food, beverages, tobacco and other household items.
Year to date, the U.S. consumer staples sector is a strong performer, with the S&P 500 Consumer Staples Index logging a 7.71% increase. Overall, the consumer staples sector reported modest results in the June quarter.
With positive momentum surrounding the consumer staples sector, it is fast becoming an enticing investment choice.
However, not all consumer staples companies are doing well. Some food companies like Kellogg Company (K - Free Report) , Mondelez International, Inc. (MDLZ - Free Report) and The Hershey Company (HSY - Free Report) are struggling with their sales due to shifting consumer preference toward natural and organic ingredients over packaged and processed food. Others like the consumer goods giant, The Procter & Gamble Company (PG - Free Report) , is also seeing weak sales due to a significant negative currency impact, weak volumes, brand divestures and slowing market growth primarily in emerging markets.
As such, concerns are building up over consumer staples being overbought following an improving economic picture in the U.S. Nonetheless, here we highlight some consumer staples stocks that are still worth buying.
We have narrowed down the list of choices by looking at stocks with a favorable Zacks Rank of #1 (Strong Buy) or #2 (Buy). These stocks have also witnessed significant share price increase year to date and positive estimate revisions in the past 30 days.
Kraft Heinz’ shares have had a good run this year, gaining 21.2% year to date. Over the past 30 days, the earnings estimates moved north by 5.5% for 2016 and 2.9% for 2017.
Though the Pittsburgh, PA, based packaged food company’s sales have been relatively soft, cost savings have led to better margins, mainly in the developed markets of the U.S. and Europe.
While organic sales rose only 0.3% in first-half 2016, adjusted EBITDA surged over 25% on a constant currency basis. A portion of its savings is also being re-invested in the business for innovation, brand building and marketing to stimulate top-line growth.
The Houston, TX-based packaged food company carries a Zacks Rank #2.
Sysco’s shares have gained almost 30% year to date. Over the past 30 days, fiscal 2017 (ending Jun 2017) earnings estimates moved north by 2.2% while that for 2018 increased 2.8%.
Sysco’s sales have improved consistently driven by acquisitions and volume growth. The company’s efforts to boost sales and margins are bearing fruit, as the company delivered positive gross margins in the last five consecutive quarters, after persistently declining for the last two fiscal years. Activist investor Nelson Peltz’s investment fund, Trian Fund Management, also bolstered its stake in the company earlier this month.
The Arkansas-based company produces, distributes and markets chicken, beef, pork, prepared foods and allied products. It carries a Zacks Rank #1. Its shares have risen almost 44% so far this calendar year.
Over the past 30 days, fiscal 2016 (ending Sep 2016) earnings estimates have risen 4% while that for 2017 have increased 9.3%.
Tyson Foods posted strong third-quarter fiscal 2016 results earlier this month, wherein both earnings and revenues beat the Zacks Consensus Estimate. While margins were strong, the company witnessed higher sales across most of its segments like chicken, beef, pork and prepared foods.
Pinnacle Foods Inc.
The NJ-based branded food products company has a Zacks Rank #2.
Its shares have risen 20% year to date. Over the past 30 days, 2016 earnings estimates have risen 1.4% while that for 2017 have increased 1.3%.
We are impressed with the company’s strong innovation program, robust acquisition strategy and effective productivity programs.
The New York-based beauty products company carries a Zacks Rank #1. Its shares have risen 10% so far this calendar year.
Over the past 30 days, fiscal 2017 (ending Jun 2017) earnings estimates have gone up almost 6% while that for 2018 have increased 2.5%.
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Kraft Heinz & 4 Consumer Staples Stocks to Binge On
In the volatile global economic scenario, the consumer staples sector – normally defensive in nature – appears quite reliable.
Despite slowing growth in emerging markets like China and Brazil and fears of challenging economic/political conditions in Europe, post Brexit, the U.S. economy has remained strong this year. Improving home sales, stepped-up economic activities, robust business, higher government spending and a buildup in inventories have given a boost to the domestic economy.
However, lower crude oil prices have triggered worries like global deflation and economic slowdown. On the other hand, subsiding oil and natural gas prices mean that consumers are left with more disposable income. A rise in wages has also increased household wealth and encourage consumer spending. These positive sentiments are gradually translating into higher consumer spending in 2016.
An improving consumer spending power in-turn raises demand for goods sold by the consumer staples companies whose primary lines of business are food, beverages, tobacco and other household items.
Year to date, the U.S. consumer staples sector is a strong performer, with the S&P 500 Consumer Staples Index logging a 7.71% increase. Overall, the consumer staples sector reported modest results in the June quarter.
With positive momentum surrounding the consumer staples sector, it is fast becoming an enticing investment choice.
However, not all consumer staples companies are doing well. Some food companies like Kellogg Company (K - Free Report) , Mondelez International, Inc. (MDLZ - Free Report) and The Hershey Company (HSY - Free Report) are struggling with their sales due to shifting consumer preference toward natural and organic ingredients over packaged and processed food. Others like the consumer goods giant, The Procter & Gamble Company (PG - Free Report) , is also seeing weak sales due to a significant negative currency impact, weak volumes, brand divestures and slowing market growth primarily in emerging markets.
As such, concerns are building up over consumer staples being overbought following an improving economic picture in the U.S. Nonetheless, here we highlight some consumer staples stocks that are still worth buying.
We have narrowed down the list of choices by looking at stocks with a favorable Zacks Rank of #1 (Strong Buy) or #2 (Buy). These stocks have also witnessed significant share price increase year to date and positive estimate revisions in the past 30 days.
The Kraft Heinz Company (KHC - Free Report)
Kraft Heinz carries a Zacks Rank #2.
Kraft Heinz’ shares have had a good run this year, gaining 21.2% year to date. Over the past 30 days, the earnings estimates moved north by 5.5% for 2016 and 2.9% for 2017.
Though the Pittsburgh, PA, based packaged food company’s sales have been relatively soft, cost savings have led to better margins, mainly in the developed markets of the U.S. and Europe.
While organic sales rose only 0.3% in first-half 2016, adjusted EBITDA surged over 25% on a constant currency basis. A portion of its savings is also being re-invested in the business for innovation, brand building and marketing to stimulate top-line growth.
Sysco Corporation (SYY - Free Report)
The Houston, TX-based packaged food company carries a Zacks Rank #2.
Sysco’s shares have gained almost 30% year to date. Over the past 30 days, fiscal 2017 (ending Jun 2017) earnings estimates moved north by 2.2% while that for 2018 increased 2.8%.
Sysco’s sales have improved consistently driven by acquisitions and volume growth. The company’s efforts to boost sales and margins are bearing fruit, as the company delivered positive gross margins in the last five consecutive quarters, after persistently declining for the last two fiscal years. Activist investor Nelson Peltz’s investment fund, Trian Fund Management, also bolstered its stake in the company earlier this month.
Tyson Foods Inc. (TSN - Free Report)
The Arkansas-based company produces, distributes and markets chicken, beef, pork, prepared foods and allied products. It carries a Zacks Rank #1. Its shares have risen almost 44% so far this calendar year.
Over the past 30 days, fiscal 2016 (ending Sep 2016) earnings estimates have risen 4% while that for 2017 have increased 9.3%.
Tyson Foods posted strong third-quarter fiscal 2016 results earlier this month, wherein both earnings and revenues beat the Zacks Consensus Estimate. While margins were strong, the company witnessed higher sales across most of its segments like chicken, beef, pork and prepared foods.
Pinnacle Foods Inc.
The NJ-based branded food products company has a Zacks Rank #2.
Its shares have risen 20% year to date. Over the past 30 days, 2016 earnings estimates have risen 1.4% while that for 2017 have increased 1.3%.
We are impressed with the company’s strong innovation program, robust acquisition strategy and effective productivity programs.
Coty, Inc. (COTY - Free Report)
The New York-based beauty products company carries a Zacks Rank #1. Its shares have risen 10% so far this calendar year.
Over the past 30 days, fiscal 2017 (ending Jun 2017) earnings estimates have gone up almost 6% while that for 2018 have increased 2.5%.
Now See Our Private Investment Ideas
While the above ideas are being shared with the public, other trades are hidden from everyone but selected members. Would you like to peek behind the curtain and view them? Starting today, for the next month, you can follow all Zacks' private buys and sells in real time from value to momentum . . . from stocks under $10 to ETF and option moves . . . from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trades >>