Consumer Staples a Safe Bet Amid Economic Woes: 5 Picks

The International Monetary Fund (IMF) again lowered its global economic forecast for 2020 citing greater-than-anticipated negative impact of the coronavirus outbreak. IMF expects the global economy to shrink 4.9% in 2020. Further, the agency projects the U.S. economy to contract 8% in 2020, a significant downgrade from its earlier forecast of a 5.9% decline. However, the IMF anticipates the U.S. economy to grow 4.5% in 2021, which is still two percentage points lower than its prior projection.

Clearly, these worries have left investors jittery, with the need of a safe zone emerging in the current scenario. Let’s find out whether there is one.

Consumer Staples a Defensive Zone

While the coronavirus outbreak has dealt a huge blow to many sectors, the Consumer Staples sector has been resilient. The sector, which includes food, beverage and tobacco products, non-durable household goods and personal products, has historically outperformed during economic slowdowns and periods of uncertainty.

In fact, it is safe to say that even amid the pandemic, people continued to spend on consumer staples like groceries, household goods and hygiene products. Thus, a number of consumer staple players have been seeing an upward sales trend since March owing to the coronavirus-induced pantry loading frenzy. Moreover, the sector players have undertaken actions like preserving cash and strengthening liquidity to deal with the crisis.

Moreover, companies in this space make continued investments to enhance their offerings through customer-friendly innovation as well as acquisitions and other expansions. Also, consumer staple players have been keen on undertaking prudent divestitures to focus on areas with higher growth potential.

All said, we have shortlisted five rock-solid consumer staple stocks on the basis of a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.

5 Prominent Picks

B&G Foods, Inc. BGS, which sports a Zacks Rank #1 at present, is poised to gain from strategic pricing efforts and cost-saving initiatives. Also, the provider of shelf-stable and frozen food products has been witnessing an uptick in demand since the second half of March 2020, thanks to the coronavirus-led stockpiling and higher at-home consumption. Moreover, the company actively pursues strategic acquisitions to boost growth. B&G Foods has a VGM Score of B and a trailing four-quarter positive earnings surprise of 5.4%, on average. Additionally, the company’s shares have surged 50.8% in the past three months.

United Natural Foods, Inc. UNFI offers grocery and general merchandise, perishables and frozen foods, sports nutrition and nutritional supplements, to name a few. The Zacks Rank #1 company, whose shares have more than doubled in the past three months, is witnessing robust coronavirus-led demand since mid-March. The acquisition of SUPERVALU has provided better competing grounds to the company in the grocery space by augmenting offerings. United Natural has a VGM Score of A.

Kimberly-Clark Corporation KMB, the provider of essential hygiene products like toilet paper, tissues, wet wipes and paper towels among others across more than 150 countries, is witnessing a spike in demand due to the pantry hoarding trend amid the coronavirus outbreak. The company has an expected long-term earnings growth rate of 5.1%. Kimberly-Clark has a trailing four-quarter positive earnings surprise of 2.7%, on average. The stock has a Zacks Rank #2 and a VGM Score of A. Also, shares of the company have gained 12% in the past three months.

The Procter & Gamble Company PG, which has returned 7.7% in the past three months, offers products which play a key role in meeting the daily health, hygiene and cleaning needs of consumers around the world. This has led to increased consumer demand for this Zacks Rank #2 company’s products during the pandemic when people are largely at home to curb the spread of the virus. The stock has a VGM Score of B and an expected long-term earnings growth rate of 7.2%

The Clorox Company CLX, which carries a Zacks Rank #2, possesses an expected long-term earnings growth rate of 5.8%. The company remains strong footed as its disinfectant wipes, sprays, bleach, floor cleaners and other products are in great demand now. The company’s focus on IGNITE Strategy aimed at pacing up innovation in each area of business bodes well. Moreover, the stock has a VGM score of B and has rallied 24.8% in the past three months. The company has a trailing four-quarter positive earnings surprise of 6.6%, on average.

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