Traditionally, consumer staples stocks are seen by the Street primarily as safe havens during recessions. But that tradition was formed during a 50-year period in which America experienced very little of what we’re seeing now: relatively strong economic growth and relatively high inflation. During such periods, some staples providers are often able to raise prices faster than their costs are climbing. As a result, these firm’s stocks can be worth buying for conservative investors, value investors and growth-at-a-reasonable-price investors who are looking for a low-risk stock with some growth potential. Consumer staples stocks carry little risk because well-established staples providers are not going to go bankrupt and the chances of their shares tumbling tremendously are quite low. Moreover, in many cases, their valuations are quite attractive.
On the other hand, during the period when most of the Street was wrongly convinced that a recession was inevitable, many staples stocks became very expensive and some of them remain too costly. But there are some names from the category whose valuation is attractive. Here are three consumer staples stocks that are in the latter category.
Mondolez (MDLZ)
Snack maker Mondolez (NYSE:MDLZ) had a very sweet year in 2023 as its top line soared 14.4% to $36 billion while its earnings per share surged 19% to $3.19. The firm says that it’s number two in the chocolate category and number one in biscuits worldwide, while it’s in third position globally in cakes and pastries.
Latin America was especially lucrative for the firm in 2023 as it raised its prices in the region by 31 percentage points, leading to a 35% increase in its sales there. In Europe and North America, it hiked its prices by 13.8% and 9.5%, respectively, producing revenue increases of 14.5% and 9.5%.
Going forward, Mondolez plans to grow through distributing to more retail outlets and acquiring other firms, CEO Dirk Van de Put said. That it will also continue to raise prices meaningfully for the foreseeable future. de Put also correctly pointed out that the firm’s large presence in high-growth emerging markets positions it very well going forward.
Given MDLZ’s strong growth, its enterprise value EBITDA ratio of 15 times is quite attractive and it is one of the best consumer staples stocks to buy now.
Costco (COST)
Costco (NYSE:COST) is the premiere supermarket chain in America because it attracts so many upper-middle-class consumers who spend a great deal of money.
The retailer recently expanded into the sale of precious metals gold and silver. With the prices of those metals rapidly climbing, I believe that a meaningful number of new members will join Costco because they want to easily and quickly get their hands on some silver and gold.
Meanwhile, in March, the company’s net sales soared 9.4% versus the same period a year earlier. Last quarter, its comparable sales climbed a healthy 4.8% in the U.S., excluding the impact of its gasoline revenue. In Canada, its revenue jumped 9% YOY, excluding gasoline and foreign exchange fluctuations.
Bank of America is a big fan of Costco, it includes it in its list of the best U.S. stocks. Analysts, on average, expect its earnings per share to surge to $17.4 next year, up from $14.16 in 2023.
Molson Coors (TAP)
For many consumers, beer is indeed a staple. Molson Coors (NYSE:TAP) is clearly benefiting from the trend, along with price increases and market share gains.
Last quarter, the firm’s net sales jumped 10.7% YOY to $2.6 billion. Meanwhile its bottom line soared 74% YOY to $203 million.
The beer maker reported that it got lifts from higher sales volumes in the Americas, along with price increases globally. Among the other factors boosting its bottom line were cost reductions and reduced raw materials costs.
The firm’s top brands, Coors Lite and Miller Lite, had enjoyed industry-leading growth after the Super Bowl.
Despite the company’ strong growth, its shares are changing hands for a low forward price-earnings ratio of just 11.2 times.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
