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Inflationary Woes Continue Despite End of Iran War: 5 Defensive Picks
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Key Takeaways
Iran war's end and easing oil prices lifted sentiment, but inflation concerns persist.
AWR and PCG are highlighted as low-beta utility plays with expected earnings growth.
NYT, ARKO and KO stand out for earnings estimate revisions and growth potential.
Investor sentiment got a boost over the weekend on signs that the Iran war is finally ending. Stocks rallied and oil prices fell from earlier highs. The latest development comes just days after the University of Michigan’s latest survey of consumer sentiment showed an improvement in June.
Lower oil prices bode well for several sectors and are likely to be reflected in the next inflation report. The end of the Iran war is now expected to boost investors’ sentiment further. However, inflation remains sky-high, and the Federal Reserve is struggling to tame it.
Although the sentiment has improved, the crisis is far from over. Given this scenario, we recommend sticking to defensive picks from the utilities and consumer staples sector, such as American States Water Company (AWR - Free Report) , PG&E Corporation (PCG - Free Report) , The New York Times Company (NYT - Free Report) , Arko Corp. (ARKO - Free Report) , and The Coca-Cola Company (KO - Free Report) .
These stocks have seen positive earnings estimate revisions in the past 60 days, carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) at present, and are set for solid returns. You can see the complete list of today’s Zacks #1 Rank stocks here.
Consumer Sentiment Rebounds
The University of Michigan’s latest survey showed that consumer sentiment rose 9% to a preliminary reading of 48.9 in June. This is the first time in three months, or since the U.S.-Iran war began, that consumer sentiment rose.
Although sentiment remains low, signs of a rebound came as oil prices eased. Energy prices, which play a key role in shaping how people view the economy, have surged since the beginning of the war, denting consumer sentiment.
A rise in oil prices impacts the prices of goods and services, resulting in higher inflation. Consumer Price Index (CPI) rose 0.5% in May from the previous month after increasing 0.6% in April, according to the Commerce Department's report released Thursday.
Oil prices have eased in recent weeks, lifting consumer sentiment, which could get a further boost after the United States announced over the weekend that it has reached a peace deal with Iran, marking the end of the war. The two warring nations have also said that the end of the war would mark the reopening of the Strait of Hormuz, which would allow ships to pass more smoothly.
However, consumer sentiment remains lower than it was during the COVID-19 pandemic and even during the periods of high inflation in 2023 and 2024. It is also below the levels seen last year, when President Donald Trump rolled out a series of new tariffs.
It would thus be ideal to adopt a wait-and-watch mode and invest in safe-haven stocks.
5 Low-Beta Defensive Stocks With Growth Potential
American States Water Company
American States Water Company, along with its subsidiaries, provides fresh water, wastewater services and electricity to its customers in the United States. AWR principally works through its two major subsidiaries — Golden State Water Company and American States Utility Services.
American States Water Company has an expected earnings growth rate of 10.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.3% over the last 60 days. Currently, AWR has a Zacks Rank #2. American States Water Company has a beta of 0.60 and a current dividend yield of 2.59%.
PG&E Corporation
PG&E Corporation is the parent holding company of California’s largest regulated electric and gas utility, Pacific Gas and Electric Company. PCG generates revenues mainly through the sale and delivery of electricity and natural gas to customers.
PG&E Corporation has an expected earnings growth rate of 10% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 90 days. PG&E Corporation has a Zacks Rank #2. PG&E Corporation has a beta of 0.27 and a current dividend yield of 1.18%.
The New York Times Company
The New York Times Company is a leading global media organization focused on delivering high-quality journalism and information. Founded in 1851 and incorporated in 1896, NYT has evolved from a traditional newspaper publisher into a diversified digital-first media company with a strong global subscriber base and a growing portfolio of lifestyle and entertainment products.
The New York Times Company has an expected earnings growth rate of 19.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5% over the last 60 days. The New York Times Company has a Zacks Rank #2.NYT has a beta of 0.95 and a current dividend yield of 1.25%.
Arko Corp.
Arko Corp.’s primary asset is a controlling stake in GPM Investments. ARKO, formerly known as Haymaker Acquisition Corp. II, is based in Richmond, VA.
Arko Corp’s expected earnings growth rate for the current year is 93.3%. The Zacks Consensus Estimate for current-year earnings has improved 11.5% over the past 60 days. Arko Corp. has a Zacks Rank #1. ARKO has a beta of 0.98 and a current dividend yield of 1.39%.
The Coca-Cola Company
The Coca-Cola Company’s strong brand equity, marketing, research and innovation help it to garner a market share of more than 40% in the non-alcoholic beverage industry. KO is putting its best foot forward to evolve its business model to become a total beverage company with something for everyone to drink.
The Coca-Cola Company has an expected earnings growth rate of 8.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past 60 days. The Coca-Cola Company has a Zacks Rank #2. KO has a beta of 0.35 and a current dividend yield of 2.57%.
View the Zacks #1 Rank List
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Inflationary Woes Continue Despite End of Iran War: 5 Defensive Picks
Key Takeaways
Investor sentiment got a boost over the weekend on signs that the Iran war is finally ending. Stocks rallied and oil prices fell from earlier highs. The latest development comes just days after the University of Michigan’s latest survey of consumer sentiment showed an improvement in June.
Lower oil prices bode well for several sectors and are likely to be reflected in the next inflation report. The end of the Iran war is now expected to boost investors’ sentiment further. However, inflation remains sky-high, and the Federal Reserve is struggling to tame it.
Although the sentiment has improved, the crisis is far from over. Given this scenario, we recommend sticking to defensive picks from the utilities and consumer staples sector, such as American States Water Company (AWR - Free Report) , PG&E Corporation (PCG - Free Report) , The New York Times Company (NYT - Free Report) , Arko Corp. (ARKO - Free Report) , and The Coca-Cola Company (KO - Free Report) .
These stocks have seen positive earnings estimate revisions in the past 60 days, carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) at present, and are set for solid returns. You can see the complete list of today’s Zacks #1 Rank stocks here.
Consumer Sentiment Rebounds
The University of Michigan’s latest survey showed that consumer sentiment rose 9% to a preliminary reading of 48.9 in June. This is the first time in three months, or since the U.S.-Iran war began, that consumer sentiment rose.
Although sentiment remains low, signs of a rebound came as oil prices eased. Energy prices, which play a key role in shaping how people view the economy, have surged since the beginning of the war, denting consumer sentiment.
A rise in oil prices impacts the prices of goods and services, resulting in higher inflation. Consumer Price Index (CPI) rose 0.5% in May from the previous month after increasing 0.6% in April, according to the Commerce Department's report released Thursday.
Oil prices have eased in recent weeks, lifting consumer sentiment, which could get a further boost after the United States announced over the weekend that it has reached a peace deal with Iran, marking the end of the war. The two warring nations have also said that the end of the war would mark the reopening of the Strait of Hormuz, which would allow ships to pass more smoothly.
However, consumer sentiment remains lower than it was during the COVID-19 pandemic and even during the periods of high inflation in 2023 and 2024. It is also below the levels seen last year, when President Donald Trump rolled out a series of new tariffs.
It would thus be ideal to adopt a wait-and-watch mode and invest in safe-haven stocks.
5 Low-Beta Defensive Stocks With Growth Potential
American States Water Company
American States Water Company, along with its subsidiaries, provides fresh water, wastewater services and electricity to its customers in the United States. AWR principally works through its two major subsidiaries — Golden State Water Company and American States Utility Services.
American States Water Company has an expected earnings growth rate of 10.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.3% over the last 60 days. Currently, AWR has a Zacks Rank #2. American States Water Company has a beta of 0.60 and a current dividend yield of 2.59%.
PG&E Corporation
PG&E Corporation is the parent holding company of California’s largest regulated electric and gas utility, Pacific Gas and Electric Company. PCG generates revenues mainly through the sale and delivery of electricity and natural gas to customers.
PG&E Corporation has an expected earnings growth rate of 10% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 90 days. PG&E Corporation has a Zacks Rank #2. PG&E Corporation has a beta of 0.27 and a current dividend yield of 1.18%.
The New York Times Company
The New York Times Company is a leading global media organization focused on delivering high-quality journalism and information. Founded in 1851 and incorporated in 1896, NYT has evolved from a traditional newspaper publisher into a diversified digital-first media company with a strong global subscriber base and a growing portfolio of lifestyle and entertainment products.
The New York Times Company has an expected earnings growth rate of 19.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5% over the last 60 days. The New York Times Company has a Zacks Rank #2.NYT has a beta of 0.95 and a current dividend yield of 1.25%.
Arko Corp.
Arko Corp.’s primary asset is a controlling stake in GPM Investments. ARKO, formerly known as Haymaker Acquisition Corp. II, is based in Richmond, VA.
Arko Corp’s expected earnings growth rate for the current year is 93.3%. The Zacks Consensus Estimate for current-year earnings has improved 11.5% over the past 60 days. Arko Corp. has a Zacks Rank #1. ARKO has a beta of 0.98 and a current dividend yield of 1.39%.
The Coca-Cola Company
The Coca-Cola Company’s strong brand equity, marketing, research and innovation help it to garner a market share of more than 40% in the non-alcoholic beverage industry. KO is putting its best foot forward to evolve its business model to become a total beverage company with something for everyone to drink.
The Coca-Cola Company has an expected earnings growth rate of 8.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past 60 days. The Coca-Cola Company has a Zacks Rank #2. KO has a beta of 0.35 and a current dividend yield of 2.57%.