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5 Consumer Staples Stocks Set to Beat Earnings This Season

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After a blissful holiday season, investors’ focus has shifted to the fourth quarter reporting cycle, which is probably the most significant among all quarters. The fourth-quarter outcome not only lends a deep insight into the companies’ annual performance but also gives signals for the next reporting year, helping investors take a stock of their portfolio.

This earnings season is on the verge of being in full swing and the trend so far appears quite good. Notably, 44 S&P 500 companies have already posted results with earnings up 11.4% on revenue growth of 7.5%, per the latest Earnings Preview report. Also, 77.3% of these companies topped on earnings and revenue estimates.

Focusing our attention on the Zacks Consumer Staples sector, we are yet to witness the main show from the space. Of the 16 Zacks sectors, this sector is ranked among the top 38% and seems quite well-placed for the ongoing earnings season on the back of favorable economic indicators as well as the companies’ strategic growth endeavors.

An Introspection of Consumer Staples Space

The Consumer Staples sector, considered defensive even in rough tides, has been benefiting from the uptick in the U.S. economy. With unemployment rate at its 17-year low, favorable consumer spending, upbeat consumer sentiment and increased business investments, the economy appears in good shape.  

To top it all, President Trump’s recent tax overhaul is likely to provide a major cushion to many consumer companies. Taking a look at the companies’ growth efforts such as focus on innovations, strategic buyouts as well as product launches, these factors are likely to keep driving the players in this space.

Certainly, these endeavors seem appropriate given the heightened competition, price wars, input cost inflation and promotional environment. Also, aggressive cost-saving initiatives and attempts to keep pace with changing consumer patterns make us optimistic about the stocks.

The impact of these factors is clearly visible in the overall expectations for the sector. For this earnings season, the bottom line of the Consumer Staples space is envisioned to climb 4.5% year over year with the top line anticipated to advance 3.5% (per the latest Earnings Trends report). Notably, these forecasts fare better than the previous quarter’s earnings and revenue improvements of 3.9% and 1.9%, respectively.

Picking the Prospective Winners for the Season

Finally, we used the Zacks methodology to identify Consumer Staples stocks that not only boast solid fundamentals but are also poised to beat estimates this earnings season. Our research shows that for stocks with the right combination of a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP, chances of a positive earnings surprise are as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Thus, investors can count on these stocks, which are most likely to trump estimates.

Church & Dwight Co., Inc. (CHD - Free Report) , slated to report fourth-quarter 2017 results on Feb 5, is a solid bet. The company’s Earnings ESP of +0.30% and Zacks Rank #2 make us reasonably confident of a positive surprise. We expect the company to continue gaining from constant investments in product innovations as well as its focus on buyouts. The Zacks Consensus Estimate for the fourth quarter and 2017 is pegged at 50 cents and $1.92, respectively.

We also suggest investing in Inter Parfums, Inc. (IPAR - Free Report) , expected to report fourth-quarter 2017 results on Mar 12. This manufacturer and distributor of fragrance and cosmetic products has an Earnings ESP of +5.77%. The Zacks Consensus Estimate for the quarter and full year is currently pegged at 10 cents and $1.29, respectively. Further, the company, which has delivered positive earnings surprises in all the trailing four quarters, carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Another stock worth considering is Craft Brew Alliance, Inc. , which has an Earnings ESP of +42.86% and is a Zacks #2 Ranked player. This Oregon-based brewer is expected to post fourth-quarter 2017 results on Mar 15. Craft Brew’s consensus mark for earnings is pegged at 4 cents for the fourth quarter and 12 cents for 2017. Notably, the company boasts an impressive bottom-line surprise history.

Another viable option is Kellogg Company (K - Free Report) , a major manufacturer and marketer of ready-to-eat cereals and convenience foods. The stock carries a Zacks Rank #3 and has an Earnings ESP of +1.44%. The Zacks Consensus Estimate for the quarter and full year is pegged at 96 cents and $4.03, respectively. The company with a solid earnings surprise history is slated to announce fourth-quarter 2017 results on Feb 8. We expect Kellogg to gain from its robust cost-saving initiatives as well as investments in brand building and innovations.

Investors can also place bets on Altria Group, Inc. (MO - Free Report) , scheduled to release fourth-quarter 2017 results on Feb 1.  This leading tobacco company has a long-term earnings growth rate of 7.4% and is likely to gain from its focus on expanding in the smokeless products category and efficient pricing. Notably, Altria’ Zacks Rank of 3 and an Earnings ESP of +0.62% indicate the company to likely post another earnings beat this time. The consensus mark for the to-be-reported quarter is pegged at 81 cents while the same for 2017 stands at $3.28.

Well, these five stocks are not the only bets to put money on. With the help of the Zacks Stock Screenerand some permutation and combination, investors may also discover other consumer staples stocks with strong potential to pull off a positive earnings surprise.

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