Time New York: Sun 23 Sep 04:35 am  |  Save 15% on H&R Block Online


Dump Campbell, Buy These 4 Consumer Staples Stocks Instead


The Consumer Staples sector is home to daily-use products that makes it to an extent immune to economic headwinds. In fact, the sector is considered defensive and is currently benefiting from buoyant economy and improving consumer confidence, despite a competitive landscape and geopolitical turmoil.

Despite belonging to the sector, Campbell Soup Company CPB, the manufacturer and marketer of high-quality, branded convenience food products, has been struggling to find place in investors’ good books. This Zacks Rank #5 (Strong Sell) company’s shares have declined 23.6% so far this year, wider than the industry’s loss of 10.2%.

A Deeper Insight Into Campbell’s Performance

We note that Campbell’s top and bottom-line results have lagged the Zacks Consensus Estimate in the last two quarters. Moreover, the company has reported an average negative earnings surprise of 1.2% in the trailing four quarters.

Furthermore, the company’s top-line has missed the Zacks Consensus Estimate in nine of the trailing 10 quarters, and hasn’t witnessed a single quarter of year-over-year top-line growth for a while now. As Campbell is known for its canned foods, much of its sales debacle could be attributed to consumers’ changing eating patterns and their evolving preferences for healthy, fresh and organic food products. Also, the company’s Campbell Fresh division has just witnessed slight recovery in the final quarter of fiscal 2017, before which it was marred by lingering constraints from the Bolthouse Farms Protein PLUS drinks recall in June 2016.

Moving ahead, the company expects the operating environment to remain tough in fiscal 2018, wherein it also expects to witness cost inflation. Well, management stated that it anticipates the first-half results to remain significantly soft, which clearly remains a concern in the near term.

Additionally, the company faces intense global competition for nearly all its key products. Consequently, excessive pressure from competitors is likely to cause Campbell to incur greater marketing and other costs or reduce prices, all of these are likely to hurt the company's overall performance.

How is the Consumer Staples Sector Positioned?

Though Campbell is plagued with problems at the moment, there are many stocks in the Consumer Staples space that seems to be gaining from the improving economic situation. A look at the sector’s performance shows that it has gained 10.1% year to date, narrower than the S&P 500 Index’s growth of 13.8%. Nevertheless, it carries a Zacks Sector Rank of #3 (out of 16), placing it at the top 19% of the Zacks classified sectors.

4 Trending Picks

While Campbell deals with the aforementioned challenges, here is a look at the four food companies that carry a strong Zacks Rank and look well-positioned to benefit from the current scenario. Also, our research shows that a stock with a Zacks Rank #1 (Strong Buy) or 2 (Buy), combined with a VGM Score of A or B, has robust growth potentials.

First on the list is, Tyson Foods, Inc. TSN, a leading U.S. chicken company, and producer, and marketer of chicken, beef, pork as well as prepared foods. Notably, the company’s shares have rallied 17% in the past three months, faring better than the industry’s gain of 12.4%. Currently, the stock sports a Zacks Rank #1 and has a VGM Score of A, which highlights its inherent strengths. You can see the complete list of today’s Zacks #1 Rank stocks here.

Another lucrative option is Pilgrim's Pride Corporation PPC engaged in the processing, production, marketing and distribution of frozen, fresh as well as value-added chicken products. The stock boasts a VGM Score of A and a Zacks Rank #1. Also, the company’s shares have surged 34% in the past three months, ahead of the industrys growth of 12.4%.

Sysco Corporation SYY, the leading marketer and distributor of food and related products primarily to the foodservice or food-away-from-home industry, is also a solid bet. The company’s shares have advanced 7.4% in the past three months, as against the industry’s fall of 2.6%. Currently, the stock has a VGM Score of A and a long-term earnings growth rate of 8.4%. It carries a Zacks Rank #2.

Finally, United Natural Foods, Inc. UNFI, the leading distributor of natural, organic and specialty food and non-food products in the United States and Canada, looks promising too. A glimpse of the company’s share price performance reveals that it has witnessed growth of 12.6% in the last three months against the industry’s fall of 2.6%. Also, the stock boasts a VGM Score of A and a Zacks Rank #2. Further, it has a long-term earnings growth rate of 5%.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>

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

To read this article on Zacks.com click here.

Zacks Investment Research
<-- You can share this post with your network,
or give us your opinion and leave a comment.
Be sure to check our RSS feeds for updates.