The stock market is reacting to President Trump’s latest round of tariffs and China’s retaliation. White House representatives have been talking about how we shouldn’t worry because China is hurting more and because margins have held up relatively well across sectors so far this earnings season. So the feeling is that China won’t be able to keep up with the obviously stronger U.S. economy, especially since its growth numbers over the last few years may have been “cooked up.”
Whatever be the case, this definitely isn’t a good time to get into stocks with China exposure because heaven knows where the trade war is headed or how long it will continue. And while we can have lots of confidence in the consumer given the jobs report and essentially steady profitability of companies, it’s obvious that people are going to prioritize their spending. And the top priorities no matter where the market goes, have always been things like food, clothes, personal care products and other fast-moving consumer goods (FMCG). That’s what makes the consumer staples sector a really good defensive play in uncertain times.
The sector has returned 16.4% year to date. Moreover, of the 67 consumer staples companies that have reported this quarter, 48 or 72% have topped estimates, 6 (9%) have met expectations while 13 (19%) missed. That’s a pretty good showing considering all the problems, not only from the trade war but also the escalating input cost. There are 28 positive estimate revisions and 19 negative revisions.
Nearly half the sub-industries within the sector are currently in buy territory and some of the others also have things going for them. While the Food-confectionery, Textile-apparel, Funeral Services, Publishing-books, Publishing-newspapers, Cosmetics and Agricultural-operations sub-industries remain attractive, Textile-apparel and Cosmetics being larger, have a greater influence-
Here are some attractive picks-
Crocs, Inc. ( CROX Quick Quote CROX - Free Report)
Crocs is a world leader in innovative casual footwear for men, women and children. It offers a broad portfolio of colorful, all-season products, while remaining true to its core molded footwear heritage. All Crocs shoes are made from Croslite, a proprietary, revolutionary material that imparts a soft, comfortable, lightweight, stain-resistant and odor-resistant quality.
Zacks Rank #1
Average positive surprise in last four quarters 140.8%
Revenue and earnings are expected to grow 10.2% and 57.0% this year
Current year (2019) estimate remains unchanged in the last 60 days, but 2020 estimate jumped from $1.36 to $1.44 in the last 7 days
The expected growth rate of 15.0% over the next 5 years is better than the industry’s 13.4%
PEG ratio of 1.19 is better than the industry’s 1.48
VGM Score A
Delta Apparel, Inc. DLA
Delta Apparel is a vertically integrated knitwear producer for the entire family from the field to the end consumer both in the U.S. and in international markets. Its popular brands include Delta Pro-Weight, Delta Magnum Weight, Healthknit and Quail Hollow Sportswear. It also produces finished products for America's leading retailers, corporate industry programs and sports licensed apparel marketers.
Zacks Rank #1
Average positive surprise in last four quarters 34.5%
Revenue and earnings are expected to grow 3.2% and 29.6% in 2020
Current year (2019) estimate remains unchanged, but 2020 estimate jumped from $1.55 to $1.75 in the last 7 days
The expected growth rate of 15% over the next 5 years is better than the industry’s 13.4%
PEG ratio of 1.16 is better than the industry’s 1.49
Helen of Troy Limited HELE
Helen of Troy Limited offers a diversified portfolio of well-recognized and widely trusted brands that reach consumers through the Housewares, Health & Home, Nutritional Supplements and Beauty units. Their Housewares segment provides a broad range of products to help with food preparation, cooking, cleaning, organization, beverage service.
Zacks Rank #1
Average positive surprise in last four quarters 14.1%
Current year (2020) estimate up from $8.38 to $8.53 in last 30 days
PEG ratio of 2.60 is better than the industry’s 2.76
P/E of 17.40X is also better than the industry’s 27.90X
The Hershey Company HSY
The Hershey Company is a global confectionery leader with a broad spread of chocolate, sweets, mints and snacks. The company has more than 80 brands around the world, including such iconic brand names as Hershey's, Reese's, Hershey's Kisses, Jolly Rancher, Ice Breakers and Brookside. Building on its core business, Hershey is expanding its portfolio to include a range of healthy and tasty snacks.
Zacks Rank #2
Average positive surprise in last four quarters 4.3%
Current year estimate is up from $5.70 to $5.74 in the last 30 days
Current year revenue and earnings are expected to grow a respective 2.1% and 7.1%
P/E of 25.97X is better than the industry’s 28.60X
PEG of 3.25 is better than the industry’s 3.58
VGM Score B
Carriage Services, Inc. CSV
Carriage Services is a leading provider of death care services and products in the U.S. Its range of services relate to funerals, burials and cremations, including the funeral homes and motor vehicles, the performance of cemetery interment services and the management and maintenance of cemetery grounds. It also sells related products and merchandise including caskets, burial vaults, garments, stone and bronze memorials, as well as other items.
Zacks Rank #2
Current year estimate is up a penny to $1.39 while 2020 estimate is up 3 cents to $1.58 in the last 7 days
Current year revenue and earnings are expected to grow a respective 1.2% and 18.8%
PEG of 1.07 is better than the industry’s 1.16
VGM Score A
You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
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