A number of Consumer Staple players are yet to release their quarterly numbers this earnings season. Certainly, the opportunities and challenges created by the coronavirus outbreak remain the highlight of the releases this time as well.
Incidentally, a number of companies in the consumer staples space have been benefiting from burgeoning demand for essentials like packaged foods and beverages, cleaning products, and household and personal care products. Demand for these products has been getting a boost amid the pandemic-led increased stay at-home; dine at-home as well as pantry-loading trends. This is evident from results of companies like Kellogg K, PepsiCo PEP, Kimberly-Clark KMB and Church & Dwight, to name a few.
While higher at-home consumption has been driving retail demand, a number of food and beverage players have been grappling with declines in the away-from-home channel amid the increased social-distancing trends. Although restaurants, cafes and other foodservice joints have been opening up, traffic remains below pre-pandemic level. In fact, weak store traffic has been a concern for several cosmetic players as well, which are also under pressure due to low makeup sales and soft travel retail amid the pandemic. Though trends have improved from the early days of the pandemic, full recovery is likely to take some time. In fact, the resurgence in cases and fears surrounding a second wave is likely to have kept consumers home bound.
That being said, companies in the Consumer Staples sector have been taking big strides to bolster digital businesses, given the increased preference for online shopping. Apart from this, their robust pricing endeavors and focus on innovation have been yielding favorably. Also, industry players have been undertaking stringent actions to curtail discretionary expenditures and boost financial flexibility amid the pandemic. These efforts are likely to have offered cushion to companies witnessing high COVID-19-related costs (such as higher incentives and expenses related to safety and sanitization) and escalated selling, marketing and promotional expenses. Additionally, supply-chain bottlenecks cannot be ignored.
Per the latest Earnings Preview report, the Consumer Staples sector is expected to see a 0.5% drop in revenues, while earnings are likely to grow 4.7% in the quarter under review. This suggests a sharp improvement from a 6.8% and 7.5% decline in the top and bottom line, respectively in the preceding quarter. All said, we used the Zacks Stock Screener to identify five well-ranked consumer staple stocks, which have the potential to beat earnings estimates this reporting cycle.
Our research shows that for stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), the chances of a positive earnings surprise are as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
5 Staples With a Beat Potential
Tyson Foods, Inc. TSN, with a Zacks Rank #2 and an Earnings ESP of +9.57%, is slated to report on Nov 16. The Zacks Consensus Estimate for its current-quarter earnings is pegged at $1.15 per share. This renowned meat products player delivered an earnings surprise of 55.6% in the last reported quarter. The Arkansas-based company has been seeing burgeoning demand in its retail channel, thanks to increased at-home consumption amid the pandemic. In the last reported quarter, the company witnessed higher demand at supermarkets, club stores and other retail channels. In fact, given the rising demand, the company has shifted part of its foodservice production to focus on retail. Such efforts are yielding results. Apart from this, management expects e-commerce demand in the grocery and foodservice channel to remain high. Certainly, Tyson Foods is benefiting from its brand strength, robust geographical reach and ability to manufacture locally in its international markets and cater well to the evolving global demand. You can see the complete list of today’s Zacks #1 Rank stocks here.
Tyson Foods, Inc. Price and EPS Surprise
Tyson Foods, Inc. price-eps-surprise | Tyson Foods, Inc. Quote
Grocery Outlet Holding Corp. GO, which is a grocery chain operator, appears quite promising. The stock has a Zacks Rank #2 and an Earnings ESP of +10.76%. The Zacks Consensus Estimate for its current=quarter earnings is currently pegged at 23 cents, suggesting growth of 4.6% from the prior-year quarter. The company has a trailing four-quarter earnings surprise of 33.6 %, on average. Markedly, the company has been benefiting from coronavirus-led demand, thanks to increased at-home dining and stock hoarding. Apart from this, Grocery Outlet looks well poised on the back of its differentiated business model as well as ever-changing product offering. The company is slated to report results on Nov 10.
Grocery Outlet Holding Corp. Price and EPS Surprise
Grocery Outlet Holding Corp. price-eps-surprise | Grocery Outlet Holding Corp. Quote
Purple Innovation, Inc. PRPL, with a Zacks Rank #2 and an Earnings ESP of +5.82%, is worth betting on. The Zacks Consensus Estimate for its earnings is pegged at 25 cents per share, suggesting growth of 31.6% year over year. This provider of mattresses, cushions and pillows has seen its bottom line surpass the Zacks Consensus Estimate by a significant margin in the trailing four-quarter quarters, on average. The company is scheduled to release results on Nov 10. Purple innovation’s revenues in the last reported quarter were fueled by increased demand due to the shelter-at-home trend. Also, the company saw robust growth in its online business. On its second-quarter earnings call, management stated that the solid momentum also continued into the third quarter, which raises optimism.
PURPLE INNOVATION, INC. Price and EPS Surprise
PURPLE INNOVATION, INC. price-eps-surprise | PURPLE INNOVATION, INC. Quote
The Hershey Company HSY currently carries a Zacks Rank #3 and has an Earnings ESP of +2.17%. The Zacks Consensus Estimate for the to-be-reported earnings is pegged at $1.71 per share, suggesting improvement of 6.2% from the year-ago period. Hershey has a trailing four-quarter earnings surprise of roughly 4%, on average. Increased at-home consumption and solid price realization have been aiding Hershey. In the last reported quarter, the company saw strength in food, mass, dollar and e-commerce channel. Management on its second-quarter earnings call projected stronger second-half sales in the North America unit, backed by continued higher at-home consumption, sales recovery in food service and specialty retail networks, price realization, and replenishment of retailer and distributor inventory levels. Well, this popular confectionery products company is slated for earnings release on Nov 6.
Hershey Company The Price and EPS Surprise
Hershey Company The price-eps-surprise | Hershey Company The Quote
Investors can also consider Energizer Holdings, Inc. ENR, with a Zacks Rank #3 and an Earnings ESP of +1.67%. The company’s earnings are scheduled to release on Nov 12. Notably, the Zacks Consensus Estimate for the soon-to-be-reported earnings is pegged at 80 cents per share. Strength in acquired businesses and organic sales growth have been aiding its performance. Also, the batteries and lighting product manufacturer’s endeavors to boost productivity remain impressive. Notably, the company recently raised its sales outlook for fiscal 2020, backed by higher demand for batteries and continued growth in auto care.
Energizer Holdings, Inc. Price and EPS Surprise
Energizer Holdings, Inc. price-eps-surprise | Energizer Holdings, Inc. Quote
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>
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