With another strong jobs report in the bag, the concept of targeting consumer staples stocks might seem overly cautious. Here’s the thing: nothing lasts forever.
Last year, an alarming statistic pointed out that 93% of homebuyers have regrets about purchasing a home in 2023. That’s the real issue that investors need to be aware of. If circumstances were so bullish, why such a high magnitude of regret?
It’s time to read between the lines. The American people have struggled for years now with high inflation and high borrowing costs. While I’m not suggesting an economic meltdown, a focus on the essentials may materialize. If so, you’ll want to keep close tabs on these consumer staples stocks.
Kellanova (K)
Food manufacturing firm Kellanova (NYSE:K) – formerly known as Kellogg’s – needs no introduction. It’s part of the everyday staple in American households, particularly in the breakfast pantry. However, the market doesn’t seem to be giving K stock too much credit. Since the beginning of the year, it lost more than 6%. The red ink could represent a relatively discounted opportunity.
Admittedly, some of the volatility stems from analysts’ concerns. Specifically, by the end of this fiscal year, they anticipate sales to land at $12.82 billion. However, this figure represents a 2.3% decline from last year’s sales tally of $13.12 billion. Still, the good news is that in 2025, experts believe that Kellanova will generate $13.22 billion. That would put the company on the right track.
Also for 2025, analysts believe earnings per share will land at $3.82 on average. That would be a solid expansion from the EPS of $3.23 in 2023.
Referring to Barchart’s Trader’s Cheat Sheet, investors should expect support at $53.39. Heavy resistance starts to come in at around $58.
Archer Daniels Midland (ADM)
A food processing and commodities trading corporation, Archer Daniels Midland (NYSE:ADM) plays an important role among consumer staples stocks. Basically, it serves the global food supply chain – and of course, we all gotta eat. However, the market has a very dim view of ADM. Per The Wall Street Journal, the company placed its CFO on administrative leave while it investigates internal accounting practices.
Obviously, it’s a bad look. Since the start of the year, ADM is down 25%. Still, if you want an aggressive exposure to consumer staples stocks, this might be it. The thesis is basically that the worst of the crisis has been baked into the security.
Of course, this would be a gutsy call. Even without the distraction, analysts weren’t really particularly thrilled with the enterprise. Heading into its fourth-quarter earnings report (on March 12), analysts project sales to hit $94.72 billion in 2023, down 7% from the prior year.
Still, an unexpectedly good result could spike up ADM stock. Per Barchart, investors should expect support from $52.80 to $54.09.
Costco (COST)
As a membership-only big-box retailer, Costco (NASDAQ:COST) is a candidate for consumer staples stocks. When you consider Costco’s demographics, the brand resonates with younger, upwardly mobile customers with annual six-figure incomes. That means COST stock should be inherently resilient. Still, the market is not exactly responding well.
To be fair, Costco missed its Q2 revenue expectations, particularly signaling a negative impact from lower gasoline prices. Nevertheless, as Reuters pointed out, at least seven brokerages raised their price target on COST stock. Jefferies raised it the most to $905.
I’m with the bullish camp and view the volatility as a long-term prospect to get in at discounted prices. Yes, Costco may be hurting with lower gasoline prices now. However, given the geopolitical climate, that’s not guaranteed at all to last.
Overall, analysts rate COST a consensus moderate buy with a $752.72 average price target. That implies only about 4% upside potential. However, with Jefferies’ $905 target, its experts are looking at nearly 25% upside off Friday’s close. That seems to be more realistic again based on outside circumstances.
Ollie’s Bargain Outlet (OLLI)
A chain of discount closeout retailers, Ollie’s Bargain Outlet (NASDAQ:OLLI) ranks among the top consumer staples stocks. During rough times – or ambiguous economic cycles such as the present juncture – people gravitate toward discount retailers. Sure enough, for much of this year, OLLI stock has been moving in the northward direction.
However, shares have been volatile recently. In the past five sessions, for example, they suffered a decline of 6%. Still, this red ink may be an overreaction. By the end of the current fiscal year, analysts believe that revenue will hit $2.1 billion. If so, that would represent a 15.1% increase from 2023’s haul of $1.83 billion.
Looking out to 2025, sales may reach $2.29 billion. That would come out to a 9.1% increase from 2024’s projected revenue. During this time, EPS may come in at $2.83 and $3.21, respectively, in 2024 and 2025.
Overall, analysts peg shares a consensus moderate buy with an $83.50 average price target. That implies 12% upside. The highest price target hits $91.
Coca-Cola (KO)
An icon among consumer staples stocks, Coca-Cola (NYSE:KO) is practically a symbol of American capitalism. Fundamentally, the everyday relevance of its products – caffeine for cheap – should keep the lights on and then some. After all, with more workers returning back to the office these days, caffeinated products should see increased demand. Still, KO is flat for the year.
Some of the pensive trading is explained by analysts’ expectations. For this fiscal year, they believe revenue will land at $45.77 billion. That’s basically in line with last year’s haul. Looking ahead, though, 2025 sales should be just over $48 billion or 5% higher from 2024’s projected top line.
Keep in mind those are average targets. The high-side revenue estimate for 2024 and 2025 is $46.5 billion and $48.78 billion, respectively. As well, Coca-Cola offers a forward dividend yield of 3.26%.
Analysts overall view KO as a consensus moderate buy with a $66 price target. The high-side lands at $70, which implies about 18% upside potential.
Procter & Gamble (PG)
A giant among consumer staples stocks, Procter & Gamble (NYSE:PG) has a permanent seat at the table whenever the underlying topic comes to light. We all need to brush our teeth and clean up after ourselves, which is what makes P&G so relevant. In addition, many if not most of us have grown up with the brand. That’s what I would call generational consumer loyalty.
Sure enough, it’s paying off. Since the beginning of this year, PG stock gained almost 8% of equity value. It may be on tap for more. For this year, analysts project revenue to reach $84.76 billion. If so, that would be a 3.4% lift from last year’s sales of just over $82 billion. In 2025, they see the top line rising to $88.1 billion. That would be a 3.9% lift from 2024’s projected revenue.
Analysts view shares as a consensus moderate buy with a $168.60 average price target. That’s only 5% up from Friday’s close. However, the high-side estimate sees $180 as a possibility. If that’s the case, we’re looking at 12% up – and don’t forget about the 2.36% dividend yield.
Philip Morris (PM)
When we talk about consumer staples stocks, the narrative mostly concentrates on what we buy (obviously). However, that also includes more mature categories such as tobacco. And that’s why Philip Morris (NYSE:PM) belongs on this list. First, it does technically belong. Second, despite declining global smoking prevalence rates, it’s still a popular practice.
Not only that, vaporizers or e-cigarettes have really taken over. Granted, that has a darker side to it because of the underage popularity component. However, the focus really should be on the legal market – this is a huge industry and it’s only getting bigger.
Per analysts, the tobacco giant’s 2024 revenue should land at $37.17 billion, which would take it 5.4% above last year’s haul of $35.25 billion. In 2025, they anticipate sales to reach $39.56 billion, a 6.4% increase from 2024’s projected top line. EPS in 2024 and 2025 should clock in at $6.40 and $7.03, respectively.
Finally, analysts rate shares as a consensus moderate buy with a $101.94 price target. That’s 10% up from Friday’s close. The high-side target hits $113, implying nearly 22% upside potential.
On the date of publication, Josh Enomoto 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.
