5 Consumer Staples Stocks with Strong Growth Prospects

Backed by an improving economy, the consumer staples sector has been performing really well among most product categories over the past few months. Further, lower gas prices and increasing consumer confidence are doing the trick for the stocks in this space.

Consumer Confidence Surges

Consumer confidence – a key determinant of the economy’s health – surged during the month of August, indicating that the economy is on the recovery path after a dismal show during the first half of the year. Cheaper gasoline prices and a strong labor market helped increase household wealth, which eventually boosted consumer spending.

In August, consumer confidence surged to its highest level in 11 months. The consumer confidence index increased 4.4 points to 101.1, well above the expected level of 97.4.Additionally, the expectations index increased to 86.4, but remained below the highest level achieved since the end of the 2008 recession.

Buildup of Bullish Data

Fed Vice Chairman Stanley Fisher is also optimistic about the state of the economy. Fisher said that the labor market was extremely close to full employment levels. Housing data released in August was also encouraging owing to favorable durable goods and industrial production. The only disappointment was the Department of Commerce’s second estimate for second-quarter GDP. Though GDP growth of 1.1% in the second quarter improved from first-quarter’s 0.8% growth, it was down a tenth of a percent from the initial reading.

Despite sluggish GDP, household consumption increased on an annualized basis of 4.4%, higher than the rate of 4.2% estimated earlier.

Hence, there is enough evidence that the economic picture may rebound in the third quarter, owing to improved residential construction and strong labor market conditions.

The Winning Strategy

Investing in the consumer staples stocks is safe because of their defensive nature. Surging consumer confidence is another indicator that the economy is poised to grow stronger in the second half of the year. In fact, consumer staple stocks have the potential to face headwinds from Brexit aftershocks, the Federal Reserve’s still pending decision over the rate hike, currency headwinds and other global growth issues.

That is why it may be a good idea to pick consumer-related stocks at this point. However, picking winning stocks may prove to be difficult.

With the help of our new style score system, we have shortlisted five stocks that have excellent prospects and hold immense growth potential. Our Growth Style Score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth. Our research shows that stocks with Growth Style Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best investment opportunities in the growth investing space.

All the stocks selected herein flaunt a Zacks Rank #1 or 2, with a Growth Style Score of ‘A’ and certainly have bright prospects to ride out the impending volatility.

5 Prominent Picks

Sysco Corporation SYY

We recommend investing in packaged food company, Sysco. This Houston, TX-based packaged food company has delivered an average positive surprise of 8.32% in the trailing four quarters. It is expected to witness earnings growth of 10.24% in fiscal 2017 and 12.40% in fiscal 2018.

Sysco’s sales have improved consistently, driven by acquisitions and volume growth. The company’s efforts to boost sales and margins are bearing fruit, as it delivered positive gross margins in the last five consecutive quarters, after persistent declines in the last two fiscal years.

This Zacks Rank #2 stock has a long-term earnings growth rate of 8.60%, beta of 0.56 and a Growth Score of ‘A’.

SYSCO CORP Price, Consensus and EPS Surprise

 

SYSCO CORP Price, Consensus and EPS Surprise | SYSCO CORP Quote

Tyson Foods, Inc. TSN

Springdale, AR-based Tyson Foods is the world's largest fully-integrated producer, processor and marketer of chicken and poultry-based food products. The company offers a wide array of meat products and enhances its portfolio through innovation and acquisitions. Its sales-boosting initiatives and strong international presence are also appealing.

The company has delivered an average positive earnings surprise of 12.24% in three out of the trailing four quarters. It is expected to witness earnings growth of 43.33% in fiscal 2016 and 6.76% in fiscal 2017.

With a Growth Score of ‘A’, beta of 0.26, long-term earnings growth rate of 11% and an attractive Zacks Rank #2, this stock is a hot pick for investors.

TYSON FOODS A Price, Consensus and EPS Surprise

 

TYSON FOODS A Price, Consensus and EPS Surprise | TYSON FOODS A Quote

Primo Water Corporation PRMW

Winston-Salem, NC-based Primo Water Corporation operates as a provider of three- and five-gallon purified bottled water and water dispensers sold through major retailers nationwide. It holds a Zacks Rank #2 and a Growth Score of ‘A’.

The company has delivered an average positive surprise of 270.00% over the past four straight quarters. It has a beta of 0.32 and a long-term EPS growth rate of 10%.

Currently, Primo Water is believed to be one of the better long-term growth investments in the market, as the water market is booming. Consumers have been substituting sugary drinks for less-sugary, healthier alternatives like water.

PRIMO WATER CP Price, Consensus and EPS Surprise

 

PRIMO WATER CP Price, Consensus and EPS Surprise | PRIMO WATER CP Quote

Nu Skin Enterprises, Inc. NUS

Nu Skin Enterprises is engaged in the development and distribution of consumer products, offering beauty and wellness solutions under its Nu Skin personal care, Pharmanex nutrition brand and ageLOC anti-aging category brands in over 50 markets worldwide. The Provo, UT-based firm sports a Zacks Rank #1 and has a Growth Score of ‘A’.

The company’s operating results have shown improvement in the near term, primarily due to innovation. Further, this skin care and nutritional products retailer raised its outlook for 2016 owing to new product launches and a favorable view on currency.

The company is expected to witness earnings growth of 2.22% in 2016 and 13.75% in 2017, and targets a long-term EPS growth rate of 6.16%.

NU SKIN ENTERP Price, Consensus and EPS Surprise

 

NU SKIN ENTERP Price, Consensus and EPS Surprise | NU SKIN ENTERP Quote

Elizabeth Arden, Inc. RDEN

Based in Pembroke Pines, FL, Elizabeth Arden carries a Zacks Rank #2 and a Growth Score of ‘A’. It manufactures and sells beauty products in the U.S. and internationally.

The company has delivered an average positive surprise in the last two consecutive quarters. It is expected to witness earnings growth of 52.40% in fiscal 2017 and 116.81% in fiscal 2018.

ELIZABETH ARDEN Price, Consensus and EPS Surprise

 

ELIZABETH ARDEN Price, Consensus and EPS Surprise | ELIZABETH ARDEN Quote

Bottom Line

Intelligently selecting stocks for investments greatly benefits investors. The abovementioned stocks can prove to be valuable additions to your portfolio.

You can also use the Zacks Stock Screener to find other stocks with this winning combination. Your search ends at stocks with a favorable Zacks Rank of either #1 or #2, which encompasses its strong fundamentals, promises price movement and highlights analysts’ constructive view on the same via positive estimate revisions. As we know, a sturdy portfolio always gives favorable returns.

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PRIMO WATER CP (PRMW): Free Stock Analysis Report
 
ELIZABETH ARDEN (RDEN): Free Stock Analysis Report
 
NU SKIN ENTERP (NUS): Free Stock Analysis Report
 
SYSCO CORP (SYY): Free Stock Analysis Report
 
TYSON FOODS A (TSN): Free Stock Analysis Report
 
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