Back to top

5 Consumer Staples Stocks That Escaped 2018 Sector Shortfall

Read MoreHide Full Article

The year 2018 hasn’t been that rosy for the Zacks Consumer Staples sector. Markedly, the space has witnessed a shortfall of close to 18% so far this year, wider than the S&P 500’s decline of almost 8%. Also, troubles over several consumer staple players have placed the sector among the bottom 19% (ranked 13) of the 16 Zacks sectors.



Well, the consumer staples universe is largely plagued by escalated commodity and transportation costs, with the latter bearing the brunt of lower driver availability. This, in turn, has raised freight costs for many players. Evidently, a lot of consumer staple companies, including food, beverage, cosmetic as well as cleaning material companies have been grappling with escalating input costs. These costs, along with rising marketing and advertising expenses keep margins under pressure.

Other than this, quite a few players are struggling with stiff competition, which has created significant pricing pressure, compelling companies to undertake aggressive promotional activities. These factors again pose major threats to margins, which have been plateaued for quite some time now. Moreover, significant exposure to international regions (especially emerging markets) keeps members of the consumer staples sector exposed to volatile currency movements. Also, tariff-related risks stemming from trade war with China remain a concern.

Are There Any Bright Spots Still?

Despite the barriers in the sector, there are some companies that have managed to stay strong on the back of solid pricing initiatives, focus on innovation, product launches and diversification. Also, benefits from acquisitions, divestitures and alliances have helped many companies refine their portfolio. Additionally, many firms are gaining from efforts to augment organic and natural offerings in response to rising health consciousness. To top these, stringent cost-containment efforts and efficient productivity programs have helped a host of consumer staple players stand apart.

Clearly, there’s always some light at the end of the tunnel, and on that note, we handpicked some bright spots in the consumer staples space, which is popular as a defensive zone among investors. Markedly, these stocks carry a Zacks Rank #2 (Buy) each, boast a market cap of at least $2 billion, have an impressive record of earnings surprises and possess a striking long-term growth rate. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

5 Stocks That Defied the Sector’s Trend

McCormick & Company, Incorporated (MKC - Free Report) is undoubtedly a solid bet. The Maryland-based company’s shares have gained 37.3% so far this year. McCormick, which has a four-quarter average positive earnings surprise of 5.2%, has been gaining from dedicated focus on buyouts, product innovations, cost-containment measures and efficient marketing initiatives. Notably, this leading manufacturer and distributor of spices and seasonings carries a long-term growth rate of 9% and has a market cap of $18.2 billion.

Investors can also bet on The Procter & Gamble Company (PG - Free Report) . While the consumer products biggie has returned just 2.5% this year, it fares much better than the sector. Also, the Ohio-based company, with a market cap of $222.6 billion holds immense potential — as evident from its sturdy savings and productivity enhancement efforts. Procter & Gamble, which has seen its earnings outpace the Zacks Consensus Estimate by an average of 3.2% in the trailing four quarters, possesses a long-term growth rate of 7%.  

Church & Dwight Co., Inc. (CHD - Free Report) is another promising pick, holding a market cap of roughly $16 billion. The company’s shares have surged nearly 32% year to date, courtesy of its impressive earnings surprise history. Notably, the New Jersey-based company has outperformed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 4.7%. The company’s robust potential is reflected in its key growth initiatives as well as its long-term growth rate of 10.1%.

Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) also warrants a look. The company, which has rallied 15.8% so far this year, flaunts a solid earnings surprise history. Notably, it has surpassed the consensus mark in each of the trailing four quarters by an average of 7.3%. Further, the Pennsylvania-based provider of food products, books, housewares, electronics and floor coverings among others, has a long-term growth rate of 24.7%. Moreover, the stock currently boasts a market cap of $3.9 billion.

Finally, Investors can count on Lamb Weston Holdings, Inc. (LW - Free Report) . The Idaho-based company possesses a market cap of $10.8 billion. Also, the company has seen its shares rally as much as 32% this year. Notably, Lamb Weston carries a long-term growth rate of 11.8% and its earnings beat the Zacks Consensus Estimate by an average of nearly 7% in the trailing four quarters — with a beat each time.

Despite the consumer staple challenges, investors can park their funds in the aforementioned picks, which are likely to continue their splendid show in 2019 on the back of well-chalked growth methods.

In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?

These 10 are painstakingly handpicked from over 4,000 companies covered by the Zacks Rank. They are our primary picks poised to outperform in the year ahead. Be among the first to see the new Zacks Top 10 Stocks >>



More from Zacks Analyst Blog

You May Like