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5 Must-Buy Consumer Staples Stocks Ahead of Earnings Results
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Disappointing performance of the coronavirus-impacted first-quarter 2020 earnings season is still continuing. The pandemic-induced economic disaster has taken a significant toll on corporate earnings. However, the consumer staples sector has so far reported strong results and are likely to maintain the momentum for the rest of this earnings season.
Brief Review of First Quarter
U.S. GDP for first-quarter 2020 contracted 4.8% compared with an expansion of 2.1% in the previous quarter. This marks the first negative GDP quarter since the first-quarter 2014 and reflects the highest decline in GDP in any quarter since fourth-quarter 2008.
Notably, consumer spending, the largest component (67%) of the GDP plunged 7.6%. Durable goods spending plummeted 16.1% while expenditures on services declined 10.2%. Goods consumption dropped 1.3% while services shed 10.2%.
Several disappointing numbers including job data, industrial production, retail sales, manufacturing activities, home building and consumer confidence, revealed how badly the U.S. economy was hurt in the first quarter due to lockdowns, both domestic and international.
Disappointing First-Quarter Earnings Results So Far
As of Apr 29, 193 S&P 500 members reported first-quarter 2020 earnings results. Total earnings of these companies are down 17.1% from the same period last year on 0.6% higher revenues. Of the total, 64.8% surpassed EPS estimates and 60.6% outpaced revenue estimates. Overall, first-quarter earnings for the S&P 500 Index were projected to be down 15.5% year over year on 1.5% higher revenues. This is in sharp contrast to 4% earnings growth expected in early January. (Read More: The Coronavirus Pandemic and its Impact on Corporate Earnings)
Consumer Staples Sector is Doing Good
The consumer staples sector includes companies that provide necessities and products for daily use. This makes the sector defensive in nature. Therefore, this has always been a go-to place for investors, who want to play it safe during extreme market fluctuations. Adding stocks from the consumer staples basket lends more stability to portfolios during uncertain market conditions.
As of Apr 29, 66.3% of the sector’s market cap in the S&P 500 companies has reported. Total earnings of these companies are up 8.4% from the same period last year on 4.7% higher revenues. Of the total, 75% have surpassed EPS estimates and 50% have outpaced revenue estimates. Notably, in the first quarter of 2020, the S&P 500 plunged more than 20%, while the Consumer Staples Select Sector SPDR (XLP), one of the 11 broad sectors of the benchmark index, declined 13%.
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 soar after earnings release. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The chart below shows the price performance of our five picks in the last quarter.
The Clorox Co. (CLX - Free Report) manufactures and markets consumer and professional products worldwide. It operates through four segments: Cleaning, Household, Lifestyle, and International. The company has an Earnings ESP of +2.43% for the third quarter of fiscal 2020 (ending June 2020).
The Clorox has an expected earnings growth rate of 4.3% for the current year (ending June 2020). The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 7 days. It has a trailing four-quarter positive earnings surprise of 3.6%, on average. The company is set to release earnings results on May 1, before the opening bell.
Sprouts Farmers Market Inc. (SFM - Free Report) provides fresh, natural, and organic food products in the United States. It offers fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, baked goods, dairy products, frozen foods, beer and wine, natural body care and household items. The company has an Earnings ESP of +17.01%.
Sprouts Farmers Market has an expected earnings growth rate of 8.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.6% over the last 30 days. It has a trailing four-quarter positive earnings surprise of 28.7%, on average. The company is set to release earnings results on May 5, after the closing bell.
The Hain Celestial Group Inc. (HAIN - Free Report) manufactures, markets, distributes, and sells organic and natural products. It operates in seven segments: the United States, United Kingdom, Tilda, Ella's Kitchen UK, Canada, Europe and Hain Ventures. The company has an Earnings ESP of +9.24% for the third quarter of fiscal 2020 (ending June 2020).
The Hain Celestial Group has an expected earnings growth rate of 10.6% for the current year (ending June 2020). The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the last 30 days. It has a trailing four-quarter positive earnings surprise of 7%, on average. The company is set to release earnings results on May 7, before the opening bell.
Nomad Foods Ltd. (NOMD - Free Report) produces, markets, and distributes frozen foods in the United Kingdom, Italy, Germany, Sweden, France, Norway, Austria, Spain, and rest of Europe. The company has an Earnings ESP of +5.32%. Nomad Foods has a trailing four-quarter positive earnings surprise of 11.8%, on average. The company is set to release earnings results on May 7, before the opening bell.
Grocery Outlet Holding Corp. (GO - Free Report) owns and operates a chain of grocery stores primarily in the United States. It offers products such as grocery, dairy and deli, produce, refrigerated and frozen, floral, beer and wine, general merchandise as well as fresh meat and seafood and natural, organic, specialty and healthy products. The company has an Earnings ESP of +33.33%.
Grocery Outlet has an expected earnings growth rate of 13.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last 30 days. It has a trailing four-quarter positive earnings surprise of 31.1%, on average. The company is set to release earnings results on May 11, after the closing bell.
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This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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5 Must-Buy Consumer Staples Stocks Ahead of Earnings Results
Disappointing performance of the coronavirus-impacted first-quarter 2020 earnings season is still continuing. The pandemic-induced economic disaster has taken a significant toll on corporate earnings. However, the consumer staples sector has so far reported strong results and are likely to maintain the momentum for the rest of this earnings season.
Brief Review of First Quarter
U.S. GDP for first-quarter 2020 contracted 4.8% compared with an expansion of 2.1% in the previous quarter. This marks the first negative GDP quarter since the first-quarter 2014 and reflects the highest decline in GDP in any quarter since fourth-quarter 2008.
Notably, consumer spending, the largest component (67%) of the GDP plunged 7.6%. Durable goods spending plummeted 16.1% while expenditures on services declined 10.2%. Goods consumption dropped 1.3% while services shed 10.2%.
Several disappointing numbers including job data, industrial production, retail sales, manufacturing activities, home building and consumer confidence, revealed how badly the U.S. economy was hurt in the first quarter due to lockdowns, both domestic and international.
Disappointing First-Quarter Earnings Results So Far
As of Apr 29, 193 S&P 500 members reported first-quarter 2020 earnings results. Total earnings of these companies are down 17.1% from the same period last year on 0.6% higher revenues. Of the total, 64.8% surpassed EPS estimates and 60.6% outpaced revenue estimates. Overall, first-quarter earnings for the S&P 500 Index were projected to be down 15.5% year over year on 1.5% higher revenues. This is in sharp contrast to 4% earnings growth expected in early January. (Read More: The Coronavirus Pandemic and its Impact on Corporate Earnings)
Consumer Staples Sector is Doing Good
The consumer staples sector includes companies that provide necessities and products for daily use. This makes the sector defensive in nature. Therefore, this has always been a go-to place for investors, who want to play it safe during extreme market fluctuations. Adding stocks from the consumer staples basket lends more stability to portfolios during uncertain market conditions.
As of Apr 29, 66.3% of the sector’s market cap in the S&P 500 companies has reported. Total earnings of these companies are up 8.4% from the same period last year on 4.7% higher revenues. Of the total, 75% have surpassed EPS estimates and 50% have outpaced revenue estimates. Notably, in the first quarter of 2020, the S&P 500 plunged more than 20%, while the Consumer Staples Select Sector SPDR (XLP), one of the 11 broad sectors of the benchmark index, declined 13%.
Our Top Picks
We have narrowed down our search to five consumer staples stocks. Each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank 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 soar after earnings release. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The chart below shows the price performance of our five picks in the last quarter.
The Clorox Co. (CLX - Free Report) manufactures and markets consumer and professional products worldwide. It operates through four segments: Cleaning, Household, Lifestyle, and International. The company has an Earnings ESP of +2.43% for the third quarter of fiscal 2020 (ending June 2020).
The Clorox has an expected earnings growth rate of 4.3% for the current year (ending June 2020). The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 7 days. It has a trailing four-quarter positive earnings surprise of 3.6%, on average. The company is set to release earnings results on May 1, before the opening bell.
Sprouts Farmers Market Inc. (SFM - Free Report) provides fresh, natural, and organic food products in the United States. It offers fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, baked goods, dairy products, frozen foods, beer and wine, natural body care and household items. The company has an Earnings ESP of +17.01%.
Sprouts Farmers Market has an expected earnings growth rate of 8.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.6% over the last 30 days. It has a trailing four-quarter positive earnings surprise of 28.7%, on average. The company is set to release earnings results on May 5, after the closing bell.
The Hain Celestial Group Inc. (HAIN - Free Report) manufactures, markets, distributes, and sells organic and natural products. It operates in seven segments: the United States, United Kingdom, Tilda, Ella's Kitchen UK, Canada, Europe and Hain Ventures. The company has an Earnings ESP of +9.24% for the third quarter of fiscal 2020 (ending June 2020).
The Hain Celestial Group has an expected earnings growth rate of 10.6% for the current year (ending June 2020). The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the last 30 days. It has a trailing four-quarter positive earnings surprise of 7%, on average. The company is set to release earnings results on May 7, before the opening bell.
Nomad Foods Ltd. (NOMD - Free Report) produces, markets, and distributes frozen foods in the United Kingdom, Italy, Germany, Sweden, France, Norway, Austria, Spain, and rest of Europe. The company has an Earnings ESP of +5.32%. Nomad Foods has a trailing four-quarter positive earnings surprise of 11.8%, on average. The company is set to release earnings results on May 7, before the opening bell.
Grocery Outlet Holding Corp. (GO - Free Report) owns and operates a chain of grocery stores primarily in the United States. It offers products such as grocery, dairy and deli, produce, refrigerated and frozen, floral, beer and wine, general merchandise as well as fresh meat and seafood and natural, organic, specialty and healthy products. The company has an Earnings ESP of +33.33%.
Grocery Outlet has an expected earnings growth rate of 13.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last 30 days. It has a trailing four-quarter positive earnings surprise of 31.1%, on average. The company is set to release earnings results on May 11, after the closing bell.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>