The stock market has remained highly volatile owing to concerns over high inflation and the Fed’s monetary policy tightening, which many analysts expect to push the economy into a recession. While consumer prices moderated in April and are expected to be flat in May, a healthy labor market is expected to keep the Fed on track to tighten the monetary policy, leading to continued market volatility.
Amid the uncertainties surrounding the economy and the stock market, consumer staples stocks could offer stable returns because of the inelastic demand these companies enjoy. Investors’ interest in consumer staples stocks is evident from the First Trust Consumer Staples AlphaDEX ETF’s (FXG) 4.9% returns over the past three months versus the SPDR S&P 500 Trust ETF’s (SPY) 1.2% loss.
Therefore, it could be wise to invest in fundamentally sound consumer staples stocks General Mills, Inc. (GIS), PepsiCo, Inc. (PEP), Tyson Foods, Inc. (TSN), Danone S.A. (DANOY), and Campbell Soup Company (CPB) to protect your portfolio from the impact of high inflation.
General Mills, Inc. (GIS)
GIS manufactures and markets branded consumer foods, including snacks, ready-to-eat cereal, convenient meals, yogurt, wholesome natural pet food, super-premium ice cream, baking mixes and ingredients, and refrigerated and frozen dough. The company also supplies branded and unbranded food products to the food service and commercial baking industries. It has a 0.44 beta.
On May 11, 2022, GIS entered into a definitive agreement to acquire TNT Crust, a manufacturer of high-quality frozen pizza crusts highly complementary to GIS’ existing frozen baked goods portfolio. Also, GIS will acquire two manufacturing facilities in Green Bay, Wisconsin, and one in St. Charles, Missouri. Expected to close in the first quarter of fiscal 2023, this acquisition advances GIS’ Accelerate strategy and further strengthens its position in the fast-growing away-from-home frozen baked goods category and better serves key foodservice distributors and pizza chain operators.
GIS paid a $0.51 quarterly cash dividend on May 2, 2022. The stock pays a $2.04 per share dividend annually, translating to a 2.96% yield. The company’s dividend has grown at a 1.22% rate over the past five years.
For its fiscal 2022 third quarter ended February 27, 2022, GIS’ total net sales increased marginally year-over-year to $4.54 billion. While its adjusted net earnings increased 1.1% year-over-year to $513.90 million, its adjusted EPS grew 2.4% to $0.84. As of February 27, 2022, the company had $844.40 million in cash and cash equivalents.
Analysts expect the company’s EPS to improve 3.7% year-over-year to $3.83 for fiscal 2023, ending May 31, 2023. It surpassed Street EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $18.89 billion for the same fiscal year represents a 0.9% rise from the prior-year period. The company’s EPS is expected to grow at a rate of 4.1% per annum over the next five years. Over the past three months, the stock has gained 8.1% to close yesterday’s trading session at $68.90.
GIS’ POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has a B grade for Stability and Quality. Click here to see the additional ratings for GIS’ Growth Sentiment, Value, and Momentum. GIS is ranked #23 of 86 stocks in the B-rated Food Makers industry.
PepsiCo, Inc. (PEP)
PEP manufactures or uses contract manufacturers, markets, and sells a variety of grain-based snacks, carbonated and non-carbonated beverages, and foods worldwide. The company markets its products through a network of direct-store-delivery, customer warehouses, distributor networks, and e-commerce platforms and retailers. It has a 0.59 beta.
On March 30, 2022, PEP and Schneider Electric SE, a French multinational company providing energy and digital automation solutions for efficiency and sustainability, announced pep+ Renew. The collaboration will help value chain partners accelerate the adoption of renewable electricity and create a more resilient and carbon-efficient food system as part of its goal to achieve net-zero emissions by 2040.
PEP will pay a $1.15 quarterly cash dividend on June 30, 2022. The stock pays a $4.60 per share dividend annually, translating to a 2.78% yield. The company’s dividend has grown at a 7.39% rate over the past five years.
For its fiscal 2022 first quarter ended March 19, 2022, PEP’s net revenue increased 9.3% year-over-year to $16.20 billion. The company’s non-GAAP gross profit came in at $8.88 billion, up 9.4% from the prior-year period. Its non-GAAP operating profit came in at $2.39 billion for the quarter, representing a 5.7% rise from the prior-year period. PEP’s non-GAAP net income came in at $1.80 billion, indicating a 6.6% year-over-year improvement. Its non-GAAP EPS increased 6.6% year-over-year to $1.29. The company had $6.56 billion in cash and cash equivalents as of March 19, 2022.
The consensus EPS estimate of $6.66 for fiscal 2022 ending December 31, 2022, represents a 6.4% rise from the year-ago period. It surpassed Street EPS estimates in each of the trailing four quarters. Analysts estimate the company’s revenue to improve 4% year-over-year to $82.66 billion for the same fiscal year. PEP’s EPS is expected to grow at a 7.5% rate per annum over the next five years. Over the past three months, the stock has gained 5% to close yesterday’s trading session at $165.73.
PEP’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has an A grade for Quality. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for PEP’s Momentum, Stability, Sentiment, Value, and Growth here. PEP is ranked #11 of 34 stocks in the A-rated Beverages industry.
Tyson Foods, Inc. (TSN)
TSN is a protein-focused food company that produces, distributes, and markets chicken, beef, pork, prepared foods, and related allied products worldwide. The company's products are marketed and sold to national and regional grocery retailers, regional grocery wholesalers, meat distributors, warehouse club stores, military commissaries, and industrial food processing companies. It has a 0.69 beta.
On April 22, 2022, TSN announced that six of its plants achieved Zero Waste to Landfill (ZWTL) Gold level validation for reducing the production of all by-products like animal fats, hides, and inedible proteins and reusing or recycling the remaining by-products to support conservation and efficiency. TSN had designed an integrated waste management system to ensure resources are reused to the extent possible and help save costs by reducing their dependence on landfills. This marks the company’s progress in reducing greenhouse gas (GHG) emissions.
TSN will pay a $0.46 quarterly cash dividend on September 15, 2022. The stock pays a $1.84 per share dividend annually, translating to a 2.11% yield. The company’s dividend has grown at a 17.2% rate over the past five years.
TSN’s sales for its fiscal 2022 second quarter ended April 2, 2022, increased 16.1% year-over-year to $13.12 billion. The company’s gross profit came in at $1.74 billion, representing a 38.5% year-over-year improvement. Its adjusted operating income came in at $1.16 billion for the quarter, up 57.1% from the year-ago period. TSN’s net income came in at $829 million, indicating a 74.2% rise from the prior-year period. Its adjusted EPS increased 70.9% year-over-year to $2.29. The company had $1.15 billion in cash and cash equivalents as of April 2, 2022.
Analysts expect TSN’s EPS to improve 9.7% year-over-year to $9.08 in fiscal 2022, ending September 30, 2022. The company surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. The consensus revenue estimate of $52.79 billion for the same fiscal year indicates a 12.2% year-over-year improvement. The company’s EPS is expected to grow at a 7.5% rate per annum over the next five years. Over the past three months, it has lost 5.4% to close yesterday’s session at $87.31.
TSN’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
The stock has an A grade for Value and a B grade for Sentiment. Click here to see the additional ratings for TSN (Momentum, Stability, Growth, and Quality). The stock is ranked #11 in the Food Makers industry.
Danone S.A. (DANOY)
Headquartered in Paris, France, DANOY is a global food and beverage company that operates through Essential Dairy & Plant-Based; Specialized Nutrition; and Waters segments. The company also offers specialized nutrition products for pregnant and breastfeeding mothers, infants, and young children. It distributes its products through retail chains, traditional market outlets, convenience stores, hospitals, clinics, pharmacies, and e-commerce. It has a 0.53 beta.
On April 29, 2022, Chile-based diversified beverages manufacturer Compañía Cervecerías Unidas’ (CCU) Argentina business acquired a large minority stake in DANOY’s Aguas Danone de Argentina (Waters business). The companies announced a strategic alliance that enriches their beverage offerings and strengthens their operations.
DANOY paid a $0.41 annual per share cash dividend on June 2, 2022, translating to a 3.52% yield. The company’s dividend has grown at a 1.35% rate over the past five years.
DANOY’s fiscal 2022 first-quarter total revenues increased 10.2% year-over-year to €6.24 billion ($6.68 billion). DANOY surpassed Street revenue estimates in each of the trailing four quarters, which is impressive. The consensus revenue estimate of 28 billion for fiscal 2022 ending December 31, 2022, represents a 2% year-over-year improvement. Over the past three months, the stock has gained 10.7% to close yesterday’s trading session at $11.57.
DANOY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has a B grade for Value and Stability. Click here to see the additional ratings for DANOY (Growth, Momentum, Sentiment, and Quality). DANOY is ranked #20 in the Food Makers industry.
Campbell Soup Company (CPB)
CPB manufactures and markets branded convenience food products, including soups and sauces, biscuits and confectionery, and food service through its Meals & Beverages and Snacks segments. The company sells its products through retail food chains, mass discounters and merchandisers, club stores, convenience stores, drug stores, dollar stores, e-commerce, and independent contractor distributors. It has a 0.39 beta.
CPB will pay a $0.37 quarterly cash dividend on August 1, 2022. The stock pays a $1.48 per share dividend annually, translating to a 3.13% yield. The company’s dividend has grown at a 1.68% rate over the past five years.
For its fiscal 2022 third quarter ended May 1, 2022, CPB’s revenue increased 7.4% year-over-year to $2.13 billion. The company’s adjusted gross profit came in at $671 million, representing a 10.4% rise from the prior-year period. Its net income came in at $212 million for the quarter, indicating a 40.4% year-over-year improvement. CPB’s adjusted EPS came in at $0.70, representing a 37.3% rise from the year-ago period. It had $196 million in cash and cash equivalents as of May 1, 2022.
CPB surpassed Street EPS estimates in each of the trailing four quarters. The company’s EPS is expected to grow at a 0.8% rate per annum over the next five years. Over the past three months, the stock has gained 11.8% to close yesterday’s trading session at $47.31.
CPB’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has a B grade for Quality. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for CPB’s Momentum, Stability, Sentiment, Value, and Growth here. CPB is ranked #19 in the Food Makers industry.
GIS shares . Year-to-date, GIS has gained 2.32%, versus a -15.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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