Procter & Gamble, PepsiCo, Hershey: Consumer stocks to watch
Consumer staples stocks – long viewed as a top safety play – are among the worst performers this year. They declined more than 9% compared to S&P's 12% gain so far. A surge in treasury yields, signs of a weakening consumer and the strong dollar all weighed on the sector. But is now the time to scoop in and buy some of those beaten down names? Yahoo Finance spoke to experts across the industry to get their top stock picks.
UBS U.S. Household and Personal Care Analyst Peter Grom provided his thoughts on the consumer staples sector overall. Grom said, "You have this perfect storm of events that's driving the weaker performance of consumer staples ... last year, even though rates were rising, I think the market was more positioned with the defensive tilt, and I think we're kind of seeing some normalization of that."
PepsiCo (PEP) reported third quarter results that topped analyst estimates on both the top and bottom lines. PepsiCo CFO Hugh Johnston explained the company's approach with regard to the consumer. He said, “We plan the consumer conservatively, that's typically been our practice, and more often than not, the consumer surprises us on the upside. So, we put ourselves in a good position to meet or beat our guidance.”
Procter & Gamble (PG) reported first quarter results that topped Wall Street estimates. Regarding consumer spending, P&G CEO Jon Moeller said, “They're continuing to buy our products. Our market share in the quarter that we just completed, for example, in the US was up 50 basis points just from a value standpoint, 60 basis points on a volume standpoint. Our global aggregate share was up 40 basis points.”
Portfolio Wealth Advisors President & CIO Lee Munson provided his thoughts on consumer staples including Hershey (HSY). Munson said, "Hershey is down double digits from its high this year. There used to be a time when a stock had a 2.5% dividend that was actually higher than a ten-year treasury and people loved it. And I think that over the next year or two, that's going to come back en vogue.”
Video transcript
- Consumer staples stocks, long viewed as a top safety play are among the worst performers this year. The sector is off more than 9% so far this year compared to the S&P 512% gain weighed down by a surge in Treasury yields, inflation, and the strong dollar. But is this sector poised for a turnaround? And is now the time to scoop in and buy some of those beaten down names? Here's what business leaders, market strategists, and top analysts told us on Yahoo Finance Live.
PETER GROM: You've had this kind of perfect storm of events, if you will, that's really driving the weaker performance in consumer staples, I think. Last year even though rates were rising, I think the market was more positioned with a defensive tilt. And I think we're kind of seeing some normalization of that.
HUGH JOHNSTON: Where we sit right now is we've got good visibility into '24, both from the cost side of our P&L as well as our customer plans and the revenue side. And we plan the consumer conservatively. That's typically been our practice. And more often than not, the consumer surprises us on the upside. So we put ourselves in a good position to meet or beat our guidance.
JON MOELLER: We are acknowledging that the first quarter was very strong. Puts us on a very solid path to deliver against those guidance ranges, potentially at the higher end. They're continuing to buy our products. Our market share in the quarter that we just completed, for example in the US, was up 50 basis points from a value standpoint, 60 basis points on a volume standpoint. Our global aggregate share was up 40 basis points.
LEE MUNSON: Hershey, you know, they've got the salty snacks. This thing is down double digits from its high this year. There used to be a time, remember, a few years ago, when a stock had a 2.5% dividend, that was actually higher than a 10 year Treasury and people loved it. And I think that over the next year or two, that's going to come back in vogue.