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5 Consumer Staples Stocks Set to Top Earnings Estimates in Q4

Zacks Equity Research

With the earnings season in focus again, investors are eagerly waiting for the quarterly results, more so as the fourth-quarter reporting cycle reflects the companies’ full-year performances. However, we note that the Zacks Consumer Staples sector has been somewhat troubled over the past year, by hurdles like elevated input and freight costs along with intense competition.



Unfortunately, a lot of consumer staples companies, including food, beverage, cosmetic and cleaning material companies, have been grappling with escalated commodity and transportation costs. Also, several players are facing heightened competition, which has created significant pricing pressure, compelling companies to undertake aggressive promotional activities. All these factors have kept margins of many consumer staples companies under pressure for a while now.

Owing to these hurdles and tariff-related risks stemming from trade war with China, the consumer staples sector has tumbled 14.1% in a year compared with the S&P 500’s drop of 5%. Further, the sector is placed among the bottom 32% out of the 16 Zacks sectors. Nevertheless, the Zacks Consumer Staples sector is anticipated to witness bottom-line growth of 0.3% this season, while the top line is expected to increase 0.9%, per the latest Earnings Preview. Certainly, the space that is popular as the defensive zone among investors is not devoid of bright spots.

Are There Any Prospective Winners in the Space?

Despite the aforementioned barriers, there are many players in this space that appear lucrative this season, thanks to their efforts to counter the odds. Notably, companies have been trying all means to stay firm on the back of solid pricing initiatives, focus on innovation, product launches and diversification. Also, prudent takeovers, divestitures and alliances have helped many companies refine their portfolio. These positives along with stringent cost-containment and productivity enhancement efforts do paint a bright picture for some consumer staples players amid the otherwise not so rosy landscape.

On that note, we used the Zacks methodology and identified consumer staples stocks that are poised to beat earnings estimates this reporting cycle. Our research shows that for stocks with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP, the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

5 Stocks With Solid Chances to Beat

Investors can count on Archer Daniels Midland Company ADM, one of the leading food processing companies. The company delivered average positive earnings surprise of 26.9% in the trailing four quarters. The Zacks Consensus Estimate for earnings in the quarter is pegged at 92 cents. The company, which is scheduled to announce fourth-quarter 2018 results on Feb 5, has an Earnings ESP of +2.45% and a Zacks Rank #1. You can seethe complete list of today’s Zacks #1 Rank stocks here.

Newell Brands Inc. NWL, which is expected to report fourth-quarter 2018 results on Feb 15, is also a solid bet. It has long-term earnings growth rate of almost 5%. The Zacks Consensus Estimate for earnings in the quarter under review is pegged at 41 cents. The company delivered average positive earnings surprise of 36.3% in the trailing four quarters. This manufacturer and marketer of consumer and commercial products has an Earnings ESP of +13.11% and a Zacks Rank #1.

You may also consider Colgate-Palmolive Company CL, which has a Zacks Rank #3 and an Earnings ESP of +1.02%. The Zacks Consensus Estimate for earnings in the quarter is pegged at 73 cents. The company hasn’t missed earnings estimates even once in the trailing four quarters. It has long-term earnings growth rate of 6.9%. This global consumer products manufacturer is slated to come out with fourth-quarter 2018 results on Jan 25.

Kimberly-Clark Corporation KMB, with a Zacks Rank #3 and an Earnings ESP of +0.70%, also deserves a place in your portfolio. The Zacks Consensus Estimate for earnings in the quarter is pegged at $1.68. The company has delivered average positive earnings surprise of 1.9% in the trailing four quarters. It has long-term earnings growth rate of 6.2%. This manufacturer and marketer of a wide range of consumer products is scheduled to come out with fourth-quarter 2018 results on Jan 23.

Another lucrative option is Monster Beverage Corporation MNST, which is a marketer and distributor of energy drinks and alternative beverages. The stock has a Zacks Rank #3 and an Earnings ESP of +0.31%. The Zacks Consensus Estimate for earnings in the quarter is pegged at 40 cents. The company registered positive earnings surprises in the preceding two quarters. It has long-term earnings growth rate of 16%. The company is likely to release fourth-quarter 2018 results on Feb 27.

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