Wall Street is reeling under severe volatility injected by heightened trade conflict between the United States and China. Meanwhile, the second-quarter 2019 earnings session is gradually approaching its end. Interestingly, although the pace of earnings growth has declined, overall results are not as bad as initially expected. Notably, the consumer staple stocks have so far performed impressively.
Why Consumer Staple Stocks?
The consumer staple sector includes companies that provide necessities and products used in daily lives, which make them defensive in nature. So, this has always been the go-to place for investors, who want to play it safe during extreme market fluctuations.
Consequently, adding stocks from the consumer staple basket usually lends more stability to portfolios in an uncertain market condition. Moreover, the sector remains a lucrative space for income-seeking investors given its strong dividend yield.
Notably, year to date, the Consumer Staple Select Sector SPDR (XLP) has gained 14.6%, almost in line with the broad-market S&P 500 Index’s gain of 15%. However, during the past three months, when volatility resurfaced for the first time in 2019 in Wall Street, XLP gained 1.6% compared with the benchmark index’s loss of 1.7%.
From the second quarter earnings perspective, as of Aug 2, 67.7% of consumer staple companies within the S&P 500 Index reported their earnings results. Total earnings for these companies are up 7.1% from the same period last year on 7.3% higher revenues. Moreover, 71.4% companies surpassed EPS estimates while 61.9% outpaced revenue estimates. (Read More: The Earnings Picture is Good Enough)
We have narrowed down our search to four consumer companies. Each of these stocks carries either a Zacks Rank #2 (Buy) or 3 (Hold) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that for stocks with the combination of a Zacks Rank #3 or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are expected to gain after earnings release.
The chart below shows price performance of our four picks in the past three months.
e.l.f. Beauty Inc. (ELF - Free Report) is a beauty company which, provides cosmetic and skin care products under the e.l.f. brand name worldwide. It carries a Zacks Rank #2. e.l.f. Beauty has an Earnings ESP of +25.72% for the current quarter.
The Zacks Consensus Estimate for the current year improved 5.3% over the last 30 days. The company delivered positive earnings surprise in the last four quarters with an average beat of 68%. e.l.f. Beauty is expected to release earnings results on Aug 7, after the closing bell.
Monster Beverage Corp. (MNST - Free Report) develops markets, sells and distributes energy drink beverages and concentrates in the United States and internationally. It operates through three segments: Monster Energy Drinks, Strategic Brands, and Other. It carries a Zacks Rank #3. Monster Beverage has an Earnings ESP of +1.12% for the current quarter.
The company has an expected earnings growth rate of 16.7% and 16.8% for the current quarter and year, respectively. The company delivered positive earnings surprise in the last four quarters with an average beat of 7.5%. Monster Beverage is expected to release earnings results on Aug 7, after the closing bell.
The Kraft Heinz Co. (KHC - Free Report) manufactures and markets food and beverage products in the United States and internationally offering condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee, and other grocery products, as well as infant and nutrition products.
The company carries a Zacks Rank #3. It has an Earnings ESP of +8% for the current quarter. The Kraft Heinz is expected to release earnings results on Aug 8, before the opening bell.
The Estée Lauder Companies Inc. (EL - Free Report) is one of the world's leading manufacturers and marketers of quality skin care, makeup, fragrance and hair care products. It carries a Zacks Rank #2. The Estée Lauder Companies has an Earnings ESP of +2.46% for the current quarter.
The company has an expected earnings growth rate of 15.7% for the current year. The Zacks Consensus Estimate for the current quarter and year improved 4% and 0.2%, respectively, over the last 30 days.
The company delivered positive earnings surprise in the last four quarters with an average beat of 62.7%. The Estée Lauder Companies is expected to release earnings results on Aug 19, before the opening bell.
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