Back to top

Image: Bigstock

4 Consumer Staples Stocks to Buy in the Recent Market Slump

Read MoreHide Full Article

The market is caught between economic reports, Fed rate hike and anticipation building around the next round of reporting cycle.

Last week, the Federal Reserve increased its benchmark interest rate a quarter point for the second time in three months. The widely anticipated move, in view of strengthening labor market and stabilizing inflation, takes the Fed rate from 0.5–0.75% to 0.75–1%. Further, the Fed indicated that it anticipates the next hike in June and another one in December, which signals rising consumer confidence as well as the U.S. economy’s growth.

Why Is the Market Gloomy?

A rise in Fed rates generally increases the demand for government bonds. However, this time the news pushed government bond yields lower while major averages in the stock market moved higher, as the market participants had anticipated a more aggressive stance on rate hike. Fed’s maintenance of a conservative approach in its policy statements weighed on the dollar, which along with a surprise decline in domestic crude inventories boosted oil prices and eventually energy stocks.

The rate hike also hints at an impending aggressive fiscal policy under President Donald Trump. However, investors remain skeptical about the realization of the changes promised by the Trump.

Major market indices including The Dow Jones Industrial Average declined 1.4%, Nasdaq was down 1.5% and The S&P 500 fell 1.8% post-Fed rate hike on Mar 15.

Though economic data have been impressive with rising consumer and home builder confidence and surging manufacturing numbers, it did not to transfer to actual growth. With Q1 earnings season knocking at the door, we note that the earnings growth might slow down when compared with the preceding quarter.

Consumer Staple Stocks – a Safe Haven

Amid this scenario, you need to position yourself in stocks with the strongest chances of long-term success. The consumer staples sector is considered as the most attractive bet in times of economic turbulence.

Per the Zacks Earnings Trend, earnings of the consumer staple companies enlisted on the S&P 500 are expected to increase 2.8% on 4.0% revenues for first-quarter 2017 as of Mar 17.

Let’s look into the stocks that have remained in the green despite an overall gloomy picture, based on their fundamental strengths.

How to Pick the Best Stocks?

Just picking stocks on the basis of their price performance is not a good investment decision. One should check out the other factors before zeroing in on the profitable stocks.

With the help of our new style score system, we have identified four consumer staples stocks that have excellent prospects and are good bets for value investors.

Our Value Style Score condenses all valuation metrics into one actionable score that helps investors steer clear of value traps and identify stocks that are truly trading at a discount. Our research shows that stocks with Style Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best upside potential. You can see the complete list of today’s Zacks #1 Rank stocks here.

To arrive at the best value picks, we have shortlisted consumer staple stocks that have a Zacks Rank #1 or #2 with a Value Style Score of ‘B’.

The Picks

Heineken NV (HEINY - Free Report)

Amsterdam, Netherlands-based Heineken is engaged in producing and distributing beverages.

Heineken has a Zacks Rank #2 with a Value Score ‘B’ and it trades at a forward P/E (price-to-earnings) of 20.22x, which is compares favorably with the industry average of 28.20x. The company is expected to witness earnings growth of 6.87% and 10.34% in 2017 and 2018, respectively.

If we look into past three months performance, Heineken’s shares have outperformed the Zacks categorized Beverages-Alcoholic industry. The stock increased by 16.0% in comparison to the above mentioned industry’s growth of 9.2%.

Sysco Corporation (SYY - Free Report)

Houston, Texas-based Sysco Corp markets and distributes a range of food and related products primarily to the foodservice or food-away-from-home industry in the United States, Bahamas, Canada, Ireland, Costa Rica, and Mexico.

Sysco holds a Zacks Rank #2 and a Value Score of ‘B.’ The company posted positive earnings surprise in all the past four quarters, making for an average positive surprise of 9.29%. The company is expected to witness earnings growth of 17.35% and 10.78% in fiscal 2017 and fiscal 2018, respectively.

In fact, Sysco’s shares have been outperforming the Zacks-categorized Food-Miscellaneous/Diversified industry over the past six months. The stock has increased by 4.5% in comparison to the Zacks-categorized Food-Miscellaneous/Diversified industry, which declined 0.6%.

Hillenbrand, Inc. (HI - Free Report)

Headquartered in Batesville, Indiana, Hillenbrand, Inc. operates as a diversified industrial company worldwide.

The company has a Value score of ‘B’ and carries a Zacks Rank #2. It delivered an average positive earnings surprise in three of the past four quarters. It possesses a forward P/E of 18.29x, lower than the S&P average of 20.10x. The company is expected to witness earnings growth of 0.25% and 7.69% in fiscal 2017 and fiscal 2018, respectively.

In fact, Hillenbrand’s shares have been outperforming the Zacks-categorized Funeral Services industry over the past six months. The stock has increased by 14.0% in comparison to the above mentioned Zacks-categorized industry, which grew 9.1%.

Unilever N.V.

Netherlands based Unilever N.V. operates in the fast-moving consumer goods industry worldwide. It sports a Zacks Rank #1 along with a Value Score ‘B.’

It possesses a forward P/E of 22.33x, lower than the industry average of 24.10x. Further, for 2017 and 2018, earnings per share are estimated to grow 7.9% and 10.9%.

Coming to the share price movement, the stock has rallied 22.4% since past three months, outperforming the Zacks categorized Soap & Cleaning Preparations industry which gained 12.5%.

Bottom Line

An intelligent selection of stocks greatly benefits investors. The above mentioned stocks can prove to be valuable additions to your portfolio.

You can also use the Zacks Stock Screener to find other stocks with this winning combination. Your search ends at stocks with a favorable Zacks Rank of either #1 or #2, which encompasses its strong fundamentals, promises price movement and highlights analysts’ constructive view on the same via positive estimate revisions. As we know, a sturdy portfolio always gives favorable returns.

5 Trades Could Profit "Big-League" from Trump Policies

If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.

Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>


Unique Zacks Analysis of Your Chosen Ticker


Pick one free report - opportunity may be withdrawn at any time


Sysco Corporation (SYY) - $25 value - yours FREE >>

Hillenbrand Inc (HI) - $25 value - yours FREE >>

Heineken NV (HEINY) - $25 value - yours FREE >>

Published in