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3 Consumer Staples Stocks to Buy as Rate Cuts Get Delayed
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Consumer staples have been having a steady year, with the S&P 500 Select Sector SPDR (XLP) rising 6.2% over a 12-month period that ended in February. Per Zacks data, the consumer staples sector has grown 4.6% in the first quarter of 2024 itself.
With inflation under control and no interest rate hikes expected in the year, it seems likely that the sector will continue to gain. The primary reason behind this is the availability of more cash in hand for consumers to spend. When rate hikes end, purchasing power rises, and spending on staples gets a boost. The sector has historically done well in the aftermath of Fed rate hikes.
While rate hikes have ended and a string of rate cuts are being expected this year, comments coming from top Fed officials are suggesting that the central bank would like to sit on the fringes at the current juncture and only intervene by bringing rates down when it is sufficiently confident that such a move is necessary. If one goes by the CME FedWatch, investors expecting a 25 bps rate cut, earliest by June, are now hovering around the 60% mark. Markets are going to remain volatile for a while on rate-cut expectations.
In such an environment, it would also not be prudent to ignore the very defensive nature of these stocks. Market volatility does not have a lasting impact on the sector. Consumers need their staples regardless of what transpires. The sector, thus, is fundamentally strong and resistant to the vagaries of the market.
Consumer staples may not have the highest earnings growth or year-over-year revenue growth, but the sector has experienced relatively little disruption historically. On the positive side, these stocks make up for modest growth with low price volatility, reliable profits, dividends and defensive positioning.
We have thus selected three such stocks that we believe should be gaining ground in the ensuing months and should be looked into now. The stocks below flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum; the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
Molson Coors Beverage Company (TAP - Free Report) is a producer of beer and other malt beverages. Its product line comprises hard seltzers, craft and ready-to-drink products.
Molson Coors’ expected earnings growth rate for the current year is 4.2%. For the next year, it is 5.1%. The Zacks Consensus Estimate for its current-year earnings has improved 3.1% over the past 60 days. Molson Coors has a Zacks Rank #2 and a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Post Holdings, Inc. (POST - Free Report) is a consumer packaged goods holding company.
Post’s expected earnings growth rate for the current year is 3.4%. For the next year, it is 16.9%. The Zacks Consensus Estimate for its current-year earnings has improved 7.8% over the past 60 days. Post has a Zacks Rank #1 and a VGM Score of B.
Grocery Outlet Holding Corp. (GO - Free Report) is a retailer of fresh products and consumables operating primarily in the United States.
Grocery Outlet’s expected earnings growth rate for the current year is 10.3%. For the next year, it is 8.3%. The Zacks Consensus Estimate for its current-year earnings has improved 3.5% over the past 60 days. The company has a Zacks Rank #2 and a VGM Score of B.
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3 Consumer Staples Stocks to Buy as Rate Cuts Get Delayed
Consumer staples have been having a steady year, with the S&P 500 Select Sector SPDR (XLP) rising 6.2% over a 12-month period that ended in February. Per Zacks data, the consumer staples sector has grown 4.6% in the first quarter of 2024 itself.
With inflation under control and no interest rate hikes expected in the year, it seems likely that the sector will continue to gain. The primary reason behind this is the availability of more cash in hand for consumers to spend. When rate hikes end, purchasing power rises, and spending on staples gets a boost. The sector has historically done well in the aftermath of Fed rate hikes.
While rate hikes have ended and a string of rate cuts are being expected this year, comments coming from top Fed officials are suggesting that the central bank would like to sit on the fringes at the current juncture and only intervene by bringing rates down when it is sufficiently confident that such a move is necessary. If one goes by the CME FedWatch, investors expecting a 25 bps rate cut, earliest by June, are now hovering around the 60% mark. Markets are going to remain volatile for a while on rate-cut expectations.
In such an environment, it would also not be prudent to ignore the very defensive nature of these stocks. Market volatility does not have a lasting impact on the sector. Consumers need their staples regardless of what transpires. The sector, thus, is fundamentally strong and resistant to the vagaries of the market.
Consumer staples may not have the highest earnings growth or year-over-year revenue growth, but the sector has experienced relatively little disruption historically. On the positive side, these stocks make up for modest growth with low price volatility, reliable profits, dividends and defensive positioning.
We have thus selected three such stocks that we believe should be gaining ground in the ensuing months and should be looked into now. The stocks below flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum; the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
Molson Coors Beverage Company (TAP - Free Report) is a producer of beer and other malt beverages. Its product line comprises hard seltzers, craft and ready-to-drink products.
Molson Coors’ expected earnings growth rate for the current year is 4.2%. For the next year, it is 5.1%. The Zacks Consensus Estimate for its current-year earnings has improved 3.1% over the past 60 days. Molson Coors has a Zacks Rank #2 and a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Post Holdings, Inc. (POST - Free Report) is a consumer packaged goods holding company.
Post’s expected earnings growth rate for the current year is 3.4%. For the next year, it is 16.9%. The Zacks Consensus Estimate for its current-year earnings has improved 7.8% over the past 60 days. Post has a Zacks Rank #1 and a VGM Score of B.
Grocery Outlet Holding Corp. (GO - Free Report) is a retailer of fresh products and consumables operating primarily in the United States.
Grocery Outlet’s expected earnings growth rate for the current year is 10.3%. For the next year, it is 8.3%. The Zacks Consensus Estimate for its current-year earnings has improved 3.5% over the past 60 days. The company has a Zacks Rank #2 and a VGM Score of B.