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Wholesale Inflation Climbs on Surging Oil Prices: 4 Defensive Picks
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Key Takeaways
Wholesale inflation rose 0.4% in August, driven by a 4.2% jump in energy costs.
Darling Ingredients' expected earnings growth tops 100%, with estimates up 55.1%.
Dole, Vita Coco and Chefs' Warehouse see expected earnings growth of 16.7-64.7%.
Wholesale inflation increased in August, which was widely anticipated, as prices of goods and energy surged. Oil prices have been on the rise once again, as tensions in the Middle East have escalated over the past couple of weeks.
This has raised the chances of a rate hike by the Federal Reserve in its policy meeting next month. Also, it is almost certain that the consumer price index (CPI) reading will climb this month. Markets have already been volatile for most of August and September and are expected to remain so if tensions in the Middle East don’t ease.
Given this scenario, we recommend buying four defensive stocks from the consumer staples sector, namely, Darling Ingredients Inc. (DAR - Free Report) , Dole plc (DOLE - Free Report) , The Vita Coco Company, Inc. (COCO - Free Report) , The Chefs' Warehouse, Inc. (CHEF - Free Report) .
PPI Inflation Surges
The producer price index (PPI), an important gauge for the Federal Reserve to track its inflation target of 2%, increased in August. PPI increased 0.4% sequentially in August following an upwardly revised 0.1% in July, the Labor Department reported on Thursday.
Year over year, PPI increased 5.4% in August after climbing 4.8% in the month earlier. The jump was largely triggered by a 4.2% month-over-month jump in energy costs. Diesel prices surged 24.1%, leading to more than a third of the rise in the prices of producer goods.
Energy prices had eased for two consecutive months but have been increasing at an alarming pace over the past few weeks as tensions intensified in the Middle East. Oil prices surpassed the $100 mark on Thursday. The benchmark Brent crude settled above $105 a barrel on Thursday.
Wall Street has been gripped by volatility over the past couple of months, and investors are concerned that oil prices could jump further as neither the United States nor Iran has shown any signs of negotiations.
The Federal Reserve has held interest rates steady since last year but is finally expected to go for a rate hike at its FOMC meeting next month. Markets are pricing in a quarter percentage point interest rate hike by the central bank in its October meeting, which will further push borrowing costs higher.
4 Consumer Staples Stocks With Upside
Darling Ingredients
Darling Ingredients Inc. is a global developer and producer of sustainable natural ingredients derived from edible and inedible bio-nutrients. DAR serves customers across the pharmaceutical, food, pet food, animal feed, industrial, fuel, bioenergy and fertilizer markets.
Darling Ingredients’expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 55.1% over the past 60 days. DAR currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dole plc
Dole plc is a producer of fresh bananas and pineapples. DOLE will also have a growing presence in categories such as berries, avocados and organic produce.
Dole’s expected earnings growth rate for the current year is 16.7%. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the past 60 days. Currently, DOLE has a Zacks Rank #2.
The Vita Coco Company
The Vita Coco Company, Inc. provides a beverage platform. COCO’s brands include coconut water, Vita Coco; clean energy drink Runa; sustainable enhanced water, Ever & Ever, and protein-infused water, PWR LIFT.
The Vita Coco Company’s expected earnings growth rate for the current year is 64.7%. The Zacks Consensus Estimate for current-year earnings has improved 11.4% over the past 60 days. COCO currently sports a Zacks Rank #1.
The Chefs' Warehouse
The Chefs' Warehouse, Inc. is a distributor of specialty food products in the United States. CHEF is focused on serving the specific needs of chefs who own and operate restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools and specialty food stores.
CHEF’s expected earnings growth rate for the current year is 33.7%. The Zacks Consensus Estimate for the current-year earnings has improved 10% over the past 60 days. CHEF currently has a Zacks Rank #2.
View the Zacks #1 Rank List
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Wholesale Inflation Climbs on Surging Oil Prices: 4 Defensive Picks
Key Takeaways
Wholesale inflation increased in August, which was widely anticipated, as prices of goods and energy surged. Oil prices have been on the rise once again, as tensions in the Middle East have escalated over the past couple of weeks.
This has raised the chances of a rate hike by the Federal Reserve in its policy meeting next month. Also, it is almost certain that the consumer price index (CPI) reading will climb this month. Markets have already been volatile for most of August and September and are expected to remain so if tensions in the Middle East don’t ease.
Given this scenario, we recommend buying four defensive stocks from the consumer staples sector, namely, Darling Ingredients Inc. (DAR - Free Report) , Dole plc (DOLE - Free Report) , The Vita Coco Company, Inc. (COCO - Free Report) , The Chefs' Warehouse, Inc. (CHEF - Free Report) .
PPI Inflation Surges
The producer price index (PPI), an important gauge for the Federal Reserve to track its inflation target of 2%, increased in August. PPI increased 0.4% sequentially in August following an upwardly revised 0.1% in July, the Labor Department reported on Thursday.
Year over year, PPI increased 5.4% in August after climbing 4.8% in the month earlier. The jump was largely triggered by a 4.2% month-over-month jump in energy costs. Diesel prices surged 24.1%, leading to more than a third of the rise in the prices of producer goods.
Energy prices had eased for two consecutive months but have been increasing at an alarming pace over the past few weeks as tensions intensified in the Middle East. Oil prices surpassed the $100 mark on Thursday. The benchmark Brent crude settled above $105 a barrel on Thursday.
Wall Street has been gripped by volatility over the past couple of months, and investors are concerned that oil prices could jump further as neither the United States nor Iran has shown any signs of negotiations.
The Federal Reserve has held interest rates steady since last year but is finally expected to go for a rate hike at its FOMC meeting next month. Markets are pricing in a quarter percentage point interest rate hike by the central bank in its October meeting, which will further push borrowing costs higher.
4 Consumer Staples Stocks With Upside
Darling Ingredients
Darling Ingredients Inc. is a global developer and producer of sustainable natural ingredients derived from edible and inedible bio-nutrients. DAR serves customers across the pharmaceutical, food, pet food, animal feed, industrial, fuel, bioenergy and fertilizer markets.
Darling Ingredients’expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 55.1% over the past 60 days. DAR currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dole plc
Dole plc is a producer of fresh bananas and pineapples. DOLE will also have a growing presence in categories such as berries, avocados and organic produce.
Dole’s expected earnings growth rate for the current year is 16.7%. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the past 60 days. Currently, DOLE has a Zacks Rank #2.
The Vita Coco Company
The Vita Coco Company, Inc. provides a beverage platform. COCO’s brands include coconut water, Vita Coco; clean energy drink Runa; sustainable enhanced water, Ever & Ever, and protein-infused water, PWR LIFT.
The Vita Coco Company’s expected earnings growth rate for the current year is 64.7%. The Zacks Consensus Estimate for current-year earnings has improved 11.4% over the past 60 days. COCO currently sports a Zacks Rank #1.
The Chefs' Warehouse
The Chefs' Warehouse, Inc. is a distributor of specialty food products in the United States. CHEF is focused on serving the specific needs of chefs who own and operate restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools and specialty food stores.
CHEF’s expected earnings growth rate for the current year is 33.7%. The Zacks Consensus Estimate for the current-year earnings has improved 10% over the past 60 days. CHEF currently has a Zacks Rank #2.