4 Consumer Staple Stocks to Protect Your Portfolio - Analyst Blog

The performance of the consumer staples sector has been generally weak over the past few quarters. Lower demand as a result of a difficult consumer spending environment is the main reason for this weakness.

Middle-class consumers in U.S are still struggling to cope with rising gas prices, delayed income tax refunds and higher payroll taxes. Slower recovery in Europe, difficult operating conditions in some Asian countries like China and foreign currency headwinds are adding to the woes. Companies in the sector are also witnessing sluggish growth in the developed markets and there is also little hope in the emerging economies due to changing pricing policies and an unfavorable currency environment.

Despite the prevailing macroeconomic challenges, let us look at some companies in the consumer staples sector that are well positioned and have the potential to maintain the momentum in the future.

Four Consumer Staple Stocks to Bank On

Here are four consumer staple stocks with strong earnings momentum, which can turn out to be valuable additions to your portfolio.

We suggest investing in Illinois-based Treehouse Foods Inc. (THS), which is a food manufacturer, serving primarily the retail grocery and foodservice distribution channels. The company is a premier manufacturer of pickles and non-dairy powdered creamer in the United States, and the largest manufacturer of private label salad dressings, powdered drink mixes and instant hot cereals in the United States and Canada, based on sales volume.

Estimates, especially for full-year 2014 and 2015, have largely been moving upward since the company reported strong second-quarter 2014 results in August. TreeHouse posted triple-digit year-over-year growth in its single serve coffee business during the quarter. It has also successfully developed new single serve coffee products, which are expected to boost volumes in the category over the near term.

The company also expects acquisitions to be a prime driver of sales. In fact, Treehouse Foods raised its fiscal 2014 earnings per share guidance to the range of $3.60 to $3.75 from $3.50 to $3.60, reflecting benefits from the recently acquired Flagstone Foods and Protenergy Natural Foods companies.

This Zacks Rank #2 (Buy) company looks to report strong earnings on Nov 6.

New York-based The Hain Celestial Group Inc. (HAIN) is another favorable investment pick. A leader in natural food and personal care product categories with an extensive portfolio of well-known brands and strong fundamentals, Hain Celestial is poised to surge as the economy gradually revives and the demand for organic food increases.

Hain Celestial constantly endeavors to expand its presence in organic and natural products. The company's latest move was the acquisition of Tilda Limited, a renowned name in Basmati rice and Rudi's Organic Bakery, the leading organic and gluten-free company. Recently, Hain Celestial fully acquired Hain Pure Protein Corporation.

Hain Celestial's strategic investments, coupled with continued efforts to contain costs, increase productivity and enhance cash flows and margins are expected to deliver healthy results in the coming quarters. Estimates for this Zacks Rank #1 (Strong Buy) has been rising for fiscal 2015 and fiscal 2016 since the company delivered strong fiscal 2014 results in August.

Rhode Island-based United Natural Foods, Inc. (UNFI) can also be considered in the portfolio. The company distributes and retails natural, organic and specialty foods, as well as non-food products primarily in the United States and Canada.

This Zacks Rank #2 company has delivered positive earnings surprises in three out of the four quarters in fiscal 2014, and the results were driven by continuous increases in demand for the company's organic and natural food products, along with UNFI's robust acquisitions. Trudeau Foods (acquired in the first quarter of fiscal 2014) and Tony's Fine Foods (acquired during fourth quarter fiscal 2014) together contributed net sales of approximately $64 million in fiscal 2014.

In fact, the company expects sales and earnings to increase double-digits for fiscal 2015 over fiscal 2014, primarily driven by the Tony's Fine Foods acquisition, on the back of high demand for perishable specialty products. Estimates are also rising sharply for fiscal 2015 since the company reported solid fiscal 2014 results last month.

Another stock that investors may look forward to is McCormick & Co., Inc. (MKC). This Maryland-based company manufactures, markets and distributes spices, seasoning mixes, condiments and other flavor products to retail outlets, food manufacturers and foodservice businesses. Driven by higher sales, cost savings and increased margins, the company posted record third-quarter 2014 results on Oct 2, 2014. It also raised its earnings outlook and cost savings target for 2014.

Going forward, the company continues to expect sales to increase in the range of 3% to 5% in 2014, with rapid growth in the international markets. For the upcoming holiday season, the company will re-launch the premium gourmet line in the U.S. The company also plans to increase its brand marketing support to boost revenues. The company currently holds a Zacks Rank #2.

Bottom Line

We believe that investment in these companies should yield strong returns for your portfolio in the short term.

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HAIN CELESTIAL (HAIN): Free Stock Analysis Report
 
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UTD NATURAL FDS (UNFI): Free Stock Analysis Report
 
TREEHOUSE FOODS (THS): Free Stock Analysis Report
 
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