The Zacks Consumer Staples sector houses companies that offer a wide range of daily essentials including food items, personal care products and household goods to name a few. Solid pricing initiatives, focus on innovation, product launches and diversification have helped to maintain the allure for the stocks in this space. Also, prudent takeovers, divestitures and alliances have helped many companies refine their portfolio.
These positives, along with stringent cost-containment and productivity enhancement efforts have helped stocks in the sector to collectively gain 7.4% in the past six months, compared with the S&P 500's rise of 6%. These upsides make us somewhat hopeful about Consumer Staples participants (ranked among top 19% out of the 16 Zacks sectors) this earnings season.
However, we are mindful of some of the persistent headwinds, which might impede performance of Consumer Staples stocks this earnings season as well. Adverse currency fluctuations and unfavorable product mix remain threats to the top line. Also, quite a number of companies in the space are grappling with escalated commodity and transportation costs. Moreover, as these firms operate in a highly competitive arena, they are compelled to invest heavily on promotion activities. These might weigh on margins to an extent and in turn affect profitability in the soon-to-be reported quarter.
The Zacks Consumer Staples sector is anticipated to witness top-line decline of 0.7% in this reporting cycle, while the bottom-line is expected to deteriorate 5.3%, per the Earnings Preview dated Apr 12, 2019.
Nevertheless, there are a few stocks that investors can place their bets on. Using the Zacks methodology, we have identified five consumer staples stocks that are poised to beat earnings estimates this time around. 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%.
5 Stocks Likely to Beat
Investors can count on The Estee Lauder Companies Inc. EL , which carries a Zacks Rank #1. This popular beauty company delivered average positive earnings surprise of 11.7% in the trailing four quarters. The company is scheduled to announce third-quarter fiscal 2019 results on May 1. The Zacks Consensus Estimate for earnings for the soon-to-be reported quarter is pegged at $1.29. The company has an Earnings ESP of +1.39%.
Kimberly-Clark Corporation KMB , which is set to report first-quarter 2019 results on Apr 22, is also a solid bet. The Zacks Consensus Estimate for first-quarter earnings is pegged at $1.55. This manufacturer and marketer of personal care products has an Earnings ESP of +0.76% and a Zacks Rank #2. It has long-term earnings growth rate of 5.5%.
Altria Group, Inc. MO with a Zacks Rank #3 and an Earnings ESP of +1.09%, also deserves a place in your portfolio. This manufacturer of cigarettes and lower-risk tobacco products is scheduled to come out with first-quarter 2019 results on Apr 25. The Zacks Consensus Estimate for earnings in the quarter is pegged at 92 cents. The company delivered average positive earnings surprise of 1.3% in the trailing four quarters. It has long-term earnings growth rate of 8.3%.
You may also consider Keurig Dr Pepper, Inc KDP , a popular beverage and coffee company. The stock has a Zacks Rank #3 and an Earnings ESP of +1.08%. The company is slated to release first-quarter 2019 results on May 9. The Zacks Consensus Estimate for earnings in the quarter is pegged at 23 cents. The company has a long-term earnings growth rate of 15.2%.
Campbell Soup Company CPB , which has a Zacks Rank #3 and an Earnings ESP of +1.04%, also appears to be a good bet. The Zacks Consensus Estimate for earnings in the quarter is pegged at 48 cents. The company delivered average positive earnings surprise of 10.3% in the trailing four quarters. It has a long-term earnings growth rate of 6%. This renowned food company is expected to release third-quarter fiscal 2019 results in May.