The Zacks Analyst Blog Highlights: Dean Foods, Campbell Soup, Inter Parfumes and Energizer Holdings
For Immediate Release
Chicago, IL – November 09, 2015 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Dean Foods Company (DF), Campbell Soup Company (CPB), Inter Parfumes, Inc. (IPAR) and Energizer Holdings, Inc. ( ENR).
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Here are highlights from Friday’s Analyst Blog:
4 Consumer Staples Stocks to Count On This Earnings Season
Consumer staple stocks seem to have rebounded in October, following August’s market rout and a slump in September. After a weak second quarter, marked by earnings decline, sluggish growth rates and weak revenues, the picture has likely improved in the third quarter. Stocks seem to have overcome broad macro headwinds including weak economic reports from China and global growth worries.
Hints from Federal Reserve
The Federal Reserve has recently hinted at a December rate hike in its two-day FOMC meeting. The Fed stated that it will “assess progress toward its goals of maximum employment and 2% annual inflation” in determining whether to increase the interest rates for the first time in almost a decade at its next meeting on December 15–16. It cited that recent headwinds are fading with substantial positive developments seen in the global economy and financial market lately. In particular, the Chinese economy is showing signs of stabilization on the back of better-than-expected GDP growth data and another rate cut while the Japanese and European central banks are taking additional stimulus measures to revive their economies.
Dovish Monetary Stance from ECB, China
European Central Bank (ECB) President Mario Draghi’s dovish comments on Oct 22 also had a positive impact on broader markets. He indicated that the central bank could expand its quantitative easing measures at its December meeting.
Separately, the People's Bank of China (PBOC) announced on Oct 23 that they reduced the key rates in order to boost the economy. PBOC reduced the one-year benchmark bank lending rate and one-year benchmark deposit rate by 25 basis points to 4.35% and 1.5%, respectively, effective from Oct 24.
A soft monetary stance from the ECB and China’s central bank contributed to strong market gains in October.
Besides improving macro factors, consumers are also benefiting from rising wages and cheaper fuel. With oil and natural gas prices subsiding, consumers are left with more disposable income. Consumers are also expecting lower inflation primarily due to lower gas prices. Commodity costs have in many cases stabilized.
A decline in commodity prices are also improving profit margins for certain staples companies.
However, there are many consumer staple stocks, which are still suffering from continued pressure in the face of limited consumer spending, foreign exchange headwinds, declining unit volumes and other global issues. Continued appreciation of the U.S. dollar relative to most foreign currencies has become a serious headwind to the earnings of U.S.-based staples companies with significant international operations like Kimberly-Clark Corporation (KMB), Mondelez International, Inc. (MDLZ), The Procter & Gamble Co. (PG), Altria Group, Inc. (MO) and General Mills, Inc. (GIS). All these companies reported weak top line growth in the third quarter due to significant currency headwinds. Moreover, they do see currency headwinds abating anytime in the near future.
Fetching higher returns amid such an investment climate is a Herculean task. However, we have identified four stocks, which not only have strong fundamentals but are also likely to report solid quarterly numbers. So it’s better to grab these retail stocks now before they start touching new highs after their results.
The Way to Pick the 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:
4 Prominent Choices
You may bet on Dean Foods Company (DF), which processes and distributes milk, and other dairy and dairy case products in the United States. The stock carries a Zacks Rank #3 and has an Earnings ESP of +4.00%. The current Zacks Consensus Estimate for the third quarter of 2015 stands at 25 cents a share. The Dallas, TX-based company delivered an average positive earnings surprise of 31.26% over the trailing four quarters and has a long-term earnings growth rate of 10.00%. The company is slated to report results on Nov 9.
Investors can also count on Campbell Soup Company ( CPB), which is a global manufacturer and marketer of high quality, branded convenience food products. The stock holds a Zacks Rank #3 and has an Earnings ESP of +2.63%. The Zacks Consensus Estimate for the first quarter of fiscal 2016 stands at 76 cents a share.
This Camden, NJ-based company registered an average positive earnings surprise of 6.72% over the trailing four quarters, and has a long-term earnings growth rate of 4.34%. The company is expected to report results on Nov 24.
We also suggest investing in Inter Parfumes, Inc. (IPAR), a manufacturer and marketer of a range of fragrances and fragrance related products worldwide. Based in New York, Inter Parfumes carries a Zacks Rank #2 and has an Earnings ESP of +15.00%. The Zacks Consensus Estimate for the third quarter 2015 stands at 40 cents a share. The stock has a long-term earnings growth rate of 15.00%. The company is expected to report results on Nov 9.
St. Louis, United States-based Energizer Holdings, Inc. (ENR) can also be an attractive stock for investors. This consumer goods company has a Zacks Rank #3 and an Earnings ESP of +13.12%. The Zacks Consensus Estimate for the fourth quarter of fiscal 2015 stands at 61 cents a share. The company is expected to report results on Nov 12.
Bottom Line
We believe that investing in these companies, which have an earnings beat potential, should yield strong returns for your portfolio in the short term.
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DEAN FOODS CO (DF): Free Stock Analysis Report
CAMPBELL SOUP (CPB): Free Stock Analysis Report
INTER PARFUMS (IPAR): Free Stock Analysis Report
ENERGIZER HLDGS (ENR): Get Free Report
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