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5 Value Stocks to Buy as Core Inflation Rises and Rate Hike Odds Climb
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Key Takeaways
Core inflation hit 2.6% in September, raising concerns as markets price in more Fed rate hikes.
Honda, Micron, Avnet, Delek US and Plains GP emerge as value picks with earnings yields above 10%.
The five stocks boast strong EPS growth projections and upward earnings estimate revisions.
The U.S. market enters the final stretch of 2026 under pressure from rising energy costs and a Federal Reserve that is tightening again.
The latest inflation data shows the strain. Consumer prices rose 0.6% in September, up from 0.4% in August. Energy was the main driver. Gasoline jumped 9.1% and accounted for about half of the monthly increase. The U.S.-Israeli war with Iran has pushed Brent crude above $106 a barrel, and diesel prices at the pump are at record highs. Markets now worry that higher fuel costs will soon reach grocery shelves.
The bigger worry for investors is the core reading, which excludes food and energy. Core prices rose 0.3% in the month against expectations of 0.2%. Annual core inflation reached 2.6%, above the 2.5% forecast. A rising core reading suggests that energy costs and tariffs are feeding into the wider economy rather than staying confined to the petrol pump.
Last month, the Fed raised its benchmark rate by 25 basis points, its first hike in three years, and signaled more increases ahead. Traders now put the odds of another hike at its Oct. 27-28 meeting at about 54%, and at more than 96% by year-end, per CME Group’s FedWatch tool.
With the mid-term elections approaching, investors face higher inflation, rising borrowing costs and geopolitical uncertainty at once. In such conditions, attention tends to move toward companies with solid earnings and reasonable valuations, which is where value stocks come in.
One metric widely used by value investors to identify potentially undervalued stocks is earnings yield. Calculated by dividing a company’s annual earnings per share by its current stock price, earnings yield indicates the amount of earnings generated for every dollar invested in a stock. Generally, a higher earnings yield suggests a stock may be undervalued relative to its earnings potential, while a lower earnings yield can indicate a richer valuation.
Earnings yield also provides a useful way to compare stocks with fixed-income investments such as bonds. When a stock’s earnings yield exceeds prevailing bond yields, it may offer a more attractive return potential, making it a valuable tool for investors searching for opportunities in an uncertain market.
Setting the Right Filters
We have set an Earnings Yield greater than 10% as our primary screening criterion but it alone cannot be used for picking stocks that have the potential to generate solid returns. So, we have added the following parameters to the screen:
Estimated EPS growth for the next 12 months greater than or equal to the S&P 500: This metric compares the 12-month forward EPS estimate with the 12-month actual EPS.
Average Daily Volume (20 Day) greater than or equal to 100,000: High trading volume implies that a stock has adequate liquidity.
Here we highlight five of the 41 stocks that qualified the screening:
Honda is a leading manufacturer of automobiles and the largest producer of motorcycles in the world. The Zacks Consensus Estimate for HMC’s fiscal 2027 and 2028 EPS implies year-over-year growth of 208% and 59%, respectively. EPS estimates for the current year and the next have moved up by 10 cents and 7 cents, respectively, over the past 30 days. Honda currently sports a Zacks Rank #1 and has a Value Score of A.
Micron is one of the leading worldwide providers of semiconductor memory solutions. The Zacks Consensus Estimate for HMC’s fiscal 2027 and 2028 EPS implies year-over-year growth of 135% and 19%, respectively. EPS estimates for the current year and the next have moved up by $19.89 and $22.54, respectively, over the past 30 days. Micron currently sports a Zacks Rank #1 and has a Value Score of B.
Avnet is one of the world’s largest distributors of electronic components and computer products. The Zacks Consensus Estimate for AVT’s fiscal 2027 and 2028 EPS implies year-over-year growth of 84% and 7%, respectively. EPS estimates for the current and the next fiscal year have moved up by 79 cents and 87 cents, respectively, over the past 60 days. Avnet currently sports a Zacks Rank #1 and has a Value Score of B.
Delek US Holdings is an independent refiner, transporter and marketer of petroleum products. The Zacks Consensus Estimate for DK’s 2026 EPS implies year-over-year growth of 142%. EPS estimates for the current and the next year have moved up by $4.02 and $4.73, respectively, over the past 30 days. Delek US Holdings currently sports a Zacks Rank #1 and has a Value Score of A.
Plains GP, through its subsidiaries, is involved in the transportation, storage, terminalling and marketing of crude oil and refined products. The Zacks Consensus Estimate for PAGP’s 2026 and 2027 EPS implies year-over-year growth of 236% and 12%, respectively. EPS estimates for the current and the next year have moved up by $1.87 and $3.15, respectively, over the past 60 days. Plains GP currently sports a Zacks Rank #1 and has a Value Score of A.
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5 Value Stocks to Buy as Core Inflation Rises and Rate Hike Odds Climb
Key Takeaways
The U.S. market enters the final stretch of 2026 under pressure from rising energy costs and a Federal Reserve that is tightening again.
The latest inflation data shows the strain. Consumer prices rose 0.6% in September, up from 0.4% in August. Energy was the main driver. Gasoline jumped 9.1% and accounted for about half of the monthly increase. The U.S.-Israeli war with Iran has pushed Brent crude above $106 a barrel, and diesel prices at the pump are at record highs. Markets now worry that higher fuel costs will soon reach grocery shelves.
The bigger worry for investors is the core reading, which excludes food and energy. Core prices rose 0.3% in the month against expectations of 0.2%. Annual core inflation reached 2.6%, above the 2.5% forecast. A rising core reading suggests that energy costs and tariffs are feeding into the wider economy rather than staying confined to the petrol pump.
Last month, the Fed raised its benchmark rate by 25 basis points, its first hike in three years, and signaled more increases ahead. Traders now put the odds of another hike at its Oct. 27-28 meeting at about 54%, and at more than 96% by year-end, per CME Group’s FedWatch tool.
With the mid-term elections approaching, investors face higher inflation, rising borrowing costs and geopolitical uncertainty at once. In such conditions, attention tends to move toward companies with solid earnings and reasonable valuations, which is where value stocks come in.
Value investors can consider stocks such as Honda Motor (HMC - Free Report) , Micron Technology (MU - Free Report) , Avnet, Inc. (AVT - Free Report) , Delek US Holdings (DK - Free Report) and Plains GP Holdings, L.P. (PAGP - Free Report) , which have high earnings yield.
Understanding Earnings Yield Metric
One metric widely used by value investors to identify potentially undervalued stocks is earnings yield. Calculated by dividing a company’s annual earnings per share by its current stock price, earnings yield indicates the amount of earnings generated for every dollar invested in a stock. Generally, a higher earnings yield suggests a stock may be undervalued relative to its earnings potential, while a lower earnings yield can indicate a richer valuation.
Earnings yield also provides a useful way to compare stocks with fixed-income investments such as bonds. When a stock’s earnings yield exceeds prevailing bond yields, it may offer a more attractive return potential, making it a valuable tool for investors searching for opportunities in an uncertain market.
Setting the Right Filters
We have set an Earnings Yield greater than 10% as our primary screening criterion but it alone cannot be used for picking stocks that have the potential to generate solid returns. So, we have added the following parameters to the screen:
Estimated EPS growth for the next 12 months greater than or equal to the S&P 500: This metric compares the 12-month forward EPS estimate with the 12-month actual EPS.
Average Daily Volume (20 Day) greater than or equal to 100,000: High trading volume implies that a stock has adequate liquidity.
Current Price greater than or equal to $5.
Buy-Rated Stocks: Stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have been known to outperform peers in any type of market environment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our Picks
Here we highlight five of the 41 stocks that qualified the screening:
Honda is a leading manufacturer of automobiles and the largest producer of motorcycles in the world. The Zacks Consensus Estimate for HMC’s fiscal 2027 and 2028 EPS implies year-over-year growth of 208% and 59%, respectively. EPS estimates for the current year and the next have moved up by 10 cents and 7 cents, respectively, over the past 30 days. Honda currently sports a Zacks Rank #1 and has a Value Score of A.
Micron is one of the leading worldwide providers of semiconductor memory solutions. The Zacks Consensus Estimate for HMC’s fiscal 2027 and 2028 EPS implies year-over-year growth of 135% and 19%, respectively. EPS estimates for the current year and the next have moved up by $19.89 and $22.54, respectively, over the past 30 days. Micron currently sports a Zacks Rank #1 and has a Value Score of B.
Avnet is one of the world’s largest distributors of electronic components and computer products. The Zacks Consensus Estimate for AVT’s fiscal 2027 and 2028 EPS implies year-over-year growth of 84% and 7%, respectively. EPS estimates for the current and the next fiscal year have moved up by 79 cents and 87 cents, respectively, over the past 60 days. Avnet currently sports a Zacks Rank #1 and has a Value Score of B.
Delek US Holdings is an independent refiner, transporter and marketer of petroleum products. The Zacks Consensus Estimate for DK’s 2026 EPS implies year-over-year growth of 142%. EPS estimates for the current and the next year have moved up by $4.02 and $4.73, respectively, over the past 30 days. Delek US Holdings currently sports a Zacks Rank #1 and has a Value Score of A.
Plains GP, through its subsidiaries, is involved in the transportation, storage, terminalling and marketing of crude oil and refined products. The Zacks Consensus Estimate for PAGP’s 2026 and 2027 EPS implies year-over-year growth of 236% and 12%, respectively. EPS estimates for the current and the next year have moved up by $1.87 and $3.15, respectively, over the past 60 days. Plains GP currently sports a Zacks Rank #1 and has a Value Score of A.