The first quarter earnings season is about to end, and the majority of consumer staples stocks have already announced their financial results. While the category as a whole has seen mixed results, these 3 stocks have strong potential.
The first quarter earnings season is about to end, and the majority of consumer staples stocks have already announced their financial results. While the sector benefited from an improved economic picture, better job scenario, and lower fuel costs, many consumer staples companies were hurt by a competitive environment, unfavorable weather conditions at the beginning of the year, currency headwinds, a slowdown in international markets (including continued slowdown in China), political turmoil in Russia, sluggishness in Japan, and an unfavorable economic environment in Europe.
Consumer staple companies such as McCormick & Co, Inc. (MKC -Analyst Report), Energizer Holding, Inc. (ENR - Analyst Report), General Mills, Inc. (GIS - Analyst Report), Molson Coors Brewing Co. (TAP - Analyst Report), Tyson Foods, Inc. (TSN -Analyst Report) posted positive earnings surprises of 9.4%, 14.5%, 4.5%, 7% and 2.7%, respectively. On the contrary, Monster Beverage Corp. (MNST - Analyst Report) and Sysco Corp. (SYY - Analyst Report) fell short of their respective Zacks Consensus Estimate.
In such a scenario, it may be a good idea to look at some consumer staples stocks that have strong growth potential.
3 Cheap Consumer Staples Stocks to Buy Now
With the help of our new style score system, we have identified 3 consumer staples stocks that have excellent prospects and might prove to be profitable for long-term investors.
Our Value Style Score condenses all valuation metrics into one actionable score that helps investors steer clear of ‘value traps’ and identify stocks that are truly trading at a discount. Our research shows that stocks with Style Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best upside potential.
To arrive at the best value picks, we first shortlisted stocks that either have a Zacks Rank #1 or #2 with a Value Style Score of ‘A’ or ‘B.’ Then, among them, we selected those with long-term growth of over 10% and finally zeroed in on three stocks that have a market capitalization of over $100 million.
Texas-based Helen of Troy Limited has a Zacks Rank #1 and a Value Score 'B.' It is a leading designer, developer and worldwide marketer of brand-name housewares, health care/home environment, nutritional supplement, and personal care consumer products.
It trades at a trailing P/E (price-to-earnings) of 16.23x, which is favorable compared with the peer group average of 26.16x. Further, Helen of Troy has delivered positive surprises in three of the last four quarters, leading to an impressive average positive earnings surprise of 26.11%.
Helen of Troy expects to deliver sustainable organic growth by making investments in talent and resources, solid innovation program and brand building advertising.
Houston, TX-based Service Corporation International carries a Zacks Rank #2 along with a Value Score 'B.' The company provides deathcare products and services in the United States and Canada.
Though the stock looks a bit pricey with a forward P/E multiple of 23.25x, higher than the peer average of 16.62x, this should not bother investors given the company’s strong fundamentals. It has a long term EPS growth rate of 10%. However, full year 2015 EPS is estimated to increase 11.41%. Over the last 4 quarters, Service Corporation has delivered an average positive earnings surprise of 4.27%.
Based in New York, G-III Apparel carries a Zacks Rank #2 and a Value Score “A”. The company designs, manufactures, and markets women’s and men’s apparel. Its products include outerwear, dresses, sportswear, swimwear, women’s suits, and women’s performance wear.
It possesses a forward P/E of 22.38x and P/S of 1.24x. Compared to the peer average, this is pretty favorable as the overall space has an average P/E and P/S of 24.23x and 1.57x, respectively. It has a long term EPS growth rate of 17.25%. Further, for fiscal year 2016 ending January, EPS is estimated to grow 15.17%. Over the last four quarters, G-III Apparel has delivered positive surprises in all the four straight quarters, translating to an average positive earnings surprise of 59.56%.
This article originally appeared at Zacks.com. Reprinted with permission.
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