4 Consumer Staples Stocks to Bet on this Earnings
Despite improvement in homebuilding and labor market conditions, many consumer staples companies are still underperforming owing to lower consumer spending environment, and overall economic worries by the consumer. Further, slower recovery in Europe and difficult operating conditions in some Asian countries like China are also adding to the woes.
Lackluster top-line growth, lower unit volumes as well as currency headwinds have been a drag on the results of consumer staples companies in the first half of 2014 and have led many of them to provide a weak outlook for 2014. In such a scenario, many consumer staples companies managed to increase their earnings solely with the help of cost controls, inorganic growth and share buybacks, which signals a lack of real growth.
Thus, it may be a good idea to look at some companies in the consumer staples sector that have the potential to beat earnings in their upcoming releases. These stocks remain well positioned in today's market environment and could provide an improved guidance as a result of the aforementioned trends.
The Way to Pick Right Stocks
Obviously, there are quite a few companies in the consumer staples space, so it may be difficult to pick the right stock for your portfolio. One way to narrow down the list of choices is by looking at stocks with a favorable Zacks Rank of #1 (Strong Buy), #2 (Buy) or #3 (Hold) – and a positive Earnings ESP.
Earnings ESP is our proprietary methodology to determine which stocks have the best chance to surprise in their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Our research shows that for stocks with this combination, the chance of positive earnings surprise is as high as 70%.
Here are four consumer staple stocks currently equipped with the right combination of elements to post an earnings beat:
The WhiteWave Foods Company WWAV
Natural and organic food/beverages maker WhiteWave Foods has surpassed the Zacks Consensus Estimate for both earnings and revenues for four straight quarters. We note that the company has been benefiting from strong demand of natural/organic food products.
The company's acquisition of leading organic greens and produce brand - Earthbound Farms - has been a significant driver of sales and profits in the first half of 2014. Also, the recent acquisition announcement of dairy free products and beverages brand - So Delicious Dairy Free - has significant growth potential and will prove to be a strategic fit for WhiteWave's plant-based foods & beverages platform. In fact, buoyed by solid first-half results and higher accretion from the Earthbound Farms acquisition, the company has also raised its earnings forecast for 2014 during the second quarter conference call, as it expects to gain from the natural/organic food revolution.
WhiteWave Foods Company has a Zacks Rank #3 (Hold), while it has an ESP of +3.85%. The company looks to report earnings on Nov 10.
The J. M. Smucker Company SJM
J.M. Smucker is a leading marketer and manufacturer of fruit spreads, retail packaged coffee, peanut butter, shortening and oils, ice cream toppings, sweetened condensed milk, and natural foods products in North America. The food manufacturer has been bearing the brunt of lower price realization since fiscal 2013 (ending April) in response to lower input costs (green coffee), largely in retail and foodservice coffee segment.
With the rise in green coffee costs (announced in June), the company expects to realize higher prices from consumers, which will make up for the volume declines resulting from higher input costs. The impact of the price increase is expected will be fully realized in the second quarter of fiscal 2015 results, which are expected to be reported on Nov 19. Smucker has also provided a favorable earnings view for fiscal 2015 to reflect the rise in coffee prices.
Acquisitions like Sahale Snacks, Inc., Enray business and the Cumberland distribution agreement are also expected to expand the company's portfolio and boost sales.
Smucker has a Zacks Rank #3, while it has an ESP of +1.21%.
The Fresh Market, Inc. TFM
The Fresh Market is a growing specialty grocery retailer and operates 160 stores in 26 states across the United States.
Despite competitive pressure, the company foresees tremendous expansion opportunities in the core markets and expects to increase its store growth potential in the Southeastern United States to double its current store base in the region. The company has targeted solid sales and expanding merchandise margins in the third quarter of fiscal 2014, the results of which are likely to be reported on Nov 20.
Fresh Market has a Zacks Rank #3, while it has an ESP of +3.57%.
Coach, Inc. COH
Coach, Inc. provides luxury accessories and lifestyle collections for women and men in the United States and internationally.
The company currently has a Zacks Rank #3, along with an ESP of +6.67%. The firm is expected to report earnings on Oct 28.
Coach's proven strategy of investing in stores to enhance sales productivity through product innovation, compelling pricing strategy, new merchandise assortments and a cost-effective global sourcing model should favorably impact the quarter.
Bottom Line
We therefore believe that investing in these companies, which have an earnings beat potential, should yield strong returns for your portfolio in the short term. So, if you are inclined to invest in the Consumer Staples sector, you should check these four stocks out for a solid earnings beat.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
WHITEWAVE FOODS WWAV: Free Stock Analysis Report
SMUCKER JM SJM: Free Stock Analysis Report
FRESH MARKET TFM: Free Stock Analysis Report
COACH INC COH: Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
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Lackluster top-line growth, lower unit volumes as well as currency headwinds have been a drag on the results of consumer staples companies in the first half of 2014 and have led many of them to provide a weak outlook for 2014. In such a scenario, many consumer staples companies managed to increase their earnings solely with the help of cost controls, inorganic growth and share buybacks, which signals a lack of real growth.
Thus, it may be a good idea to look at some companies in the consumer staples sector that have the potential to beat earnings in their upcoming releases. These stocks remain well positioned in today's market environment and could provide an improved guidance as a result of the aforementioned trends.
The Way to Pick Right Stocks
Obviously, there are quite a few companies in the consumer staples space, so it may be difficult to pick the right stock for your portfolio. One way to narrow down the list of choices is by looking at stocks with a favorable Zacks Rank of #1 (Strong Buy), #2 (Buy) or #3 (Hold) – and a positive Earnings ESP.
Earnings ESP is our proprietary methodology to determine which stocks have the best chance to surprise in their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Our research shows that for stocks with this combination, the chance of positive earnings surprise is as high as 70%.
Here are four consumer staple stocks currently equipped with the right combination of elements to post an earnings beat:
The WhiteWave Foods Company WWAV
Natural and organic food/beverages maker WhiteWave Foods has surpassed the Zacks Consensus Estimate for both earnings and revenues for four straight quarters. We note that the company has been benefiting from strong demand of natural/organic food products.
The company's acquisition of leading organic greens and produce brand - Earthbound Farms - has been a significant driver of sales and profits in the first half of 2014. Also, the recent acquisition announcement of dairy free products and beverages brand - So Delicious Dairy Free - has significant growth potential and will prove to be a strategic fit for WhiteWave's plant-based foods & beverages platform. In fact, buoyed by solid first-half results and higher accretion from the Earthbound Farms acquisition, the company has also raised its earnings forecast for 2014 during the second quarter conference call, as it expects to gain from the natural/organic food revolution.
WhiteWave Foods Company has a Zacks Rank #3 (Hold), while it has an ESP of +3.85%. The company looks to report earnings on Nov 10.
The J. M. Smucker Company SJM
J.M. Smucker is a leading marketer and manufacturer of fruit spreads, retail packaged coffee, peanut butter, shortening and oils, ice cream toppings, sweetened condensed milk, and natural foods products in North America. The food manufacturer has been bearing the brunt of lower price realization since fiscal 2013 (ending April) in response to lower input costs (green coffee), largely in retail and foodservice coffee segment.
With the rise in green coffee costs (announced in June), the company expects to realize higher prices from consumers, which will make up for the volume declines resulting from higher input costs. The impact of the price increase is expected will be fully realized in the second quarter of fiscal 2015 results, which are expected to be reported on Nov 19. Smucker has also provided a favorable earnings view for fiscal 2015 to reflect the rise in coffee prices.
Acquisitions like Sahale Snacks, Inc., Enray business and the Cumberland distribution agreement are also expected to expand the company's portfolio and boost sales.
Smucker has a Zacks Rank #3, while it has an ESP of +1.21%.
The Fresh Market, Inc. TFM
The Fresh Market is a growing specialty grocery retailer and operates 160 stores in 26 states across the United States.
Despite competitive pressure, the company foresees tremendous expansion opportunities in the core markets and expects to increase its store growth potential in the Southeastern United States to double its current store base in the region. The company has targeted solid sales and expanding merchandise margins in the third quarter of fiscal 2014, the results of which are likely to be reported on Nov 20.
Fresh Market has a Zacks Rank #3, while it has an ESP of +3.57%.
Coach, Inc. COH
Coach, Inc. provides luxury accessories and lifestyle collections for women and men in the United States and internationally.
The company currently has a Zacks Rank #3, along with an ESP of +6.67%. The firm is expected to report earnings on Oct 28.
Coach's proven strategy of investing in stores to enhance sales productivity through product innovation, compelling pricing strategy, new merchandise assortments and a cost-effective global sourcing model should favorably impact the quarter.
Bottom Line
We therefore believe that investing in these companies, which have an earnings beat potential, should yield strong returns for your portfolio in the short term. So, if you are inclined to invest in the Consumer Staples sector, you should check these four stocks out for a solid earnings beat.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
WHITEWAVE FOODS WWAV: Free Stock Analysis Report
SMUCKER JM SJM: Free Stock Analysis Report
FRESH MARKET TFM: Free Stock Analysis Report
COACH INC COH: Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
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