Inflation has been climbing over the past couple of months, and hopes of a rate cut by the Federal Reserve are a distant dream now. The Federal Reserve is now considering hiking interest rates for the first time in nearly three years, as inflation remains elevated.
The Iran war, which has resulted in a surge in global oil prices, is now the main reason behind the steady jump in inflation over the past two months, which has made the Fed’s job even more challenging.
We, thus, recommend buying three defensive stocks from the consumer staples sector, namely, The New York Times Company NYT, Tyson Foods TSN and Arko Corp. ARKO.
These stocks have seen positive earnings estimate revisions in the past 60 days, carry a Zacks Rank #2 (Buy), and are set for solid returns. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Rate Hike Likely
The minutes of the Federal Reserve’s latest meeting show that most officials believe that a rate hike would be necessary if the Iran war continues to push up inflation. The Federal Reserve left interest rates unchanged in its current range of 3.5-3.75%.
However, the meeting received four “no” votes for the first time since 1992, indicating that there is a major conflict about the Federal Reserve’s future monetary policy path.
Inflation eased substantially last year and was on track to reach the Federal Reserve’s 2% target. However, the Iran war, which began at the end of February, has resulted in a surge in global oil prices. Energy costs have jumped nearly 40% since the beginning of the war, which has continued to aggravate inflation.
Consumer price index (CPI) rose 0.6% sequentially in April after jumping 0.9% in March, the Bureau of Labor Statistics reported earlier. Year over year, CPI rose 3.8% in April, the highest since May 2023. Core CPI, which strips out the volatile food and energy costs, gained 0.4% sequentially in April and 2.8% from the year-ago levels.
Right now, it remains unclear when the Iran war will end. Inflation is well above the Fed’s 2% target, and Fed officials believe a rate cut would be appropriate if it stays above the mark for a longer period.
3 Consumer Staple Stocks With Upside
The New York Times Company
The New York Times Company is a leading global media organization focused on delivering high-quality journalism and information. Founded in 1851 and incorporated in 1896, NYT has evolved from a traditional newspaper publisher into a diversified digital-first media company with a strong global subscriber base and a growing portfolio of lifestyle and entertainment products.
The New York Times Companyhas an expected earnings growth rate of 17.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.9% over the last 60 days. NYT has a beta of 0.98 and a current dividend yield of 1.23%.
Tyson Foods
Tyson Foods is the biggest U.S. chicken company that produces, distributes and markets chicken, beef, pork, and prepared foods. TSN’s products are marketed and sold primarily by sales staff to grocery retailers, grocery wholesalers, meat distributors, military commissaries, industrial food processing companies, chain restaurants, international export companies and domestic distributors.
Tyson Foods’expected earnings growth rate for the current year is 0.5%. The Zacks Consensus Estimate for the current-year earnings has improved 7% over the past 60 days. Tyson Foods has a beta of 0.40 and a current dividend yield of 3.14%.
Arko Corp.
Arko Corp.’s primary asset is a controlling stake in GPM Investments. ARKO, formerly known as Haymaker Acquisition Corp. II, is based in Richmond, VA.
Arko Corp’s expected earnings growth rate for the current year is 93.3%. The Zacks Consensus Estimate for current-year earnings has improved 11.5% over the past 60 days. ARKO has a beta of 0.94 and a current dividend yield of 1.57%.
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The New York Times Company (NYT): Free Stock Analysis Report
Tyson Foods, Inc. (TSN): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).