Americans aren’t as confident about the economy’s health as they were till a few months back. A surge in oil prices, which has seen inflation climb again, continued geopolitical tensions, fears of a weakening labor market and uncertainty over the Federal Reserve’s plans for rate cuts have been denting consumers’ confidence.
Markets have remained volatile over the past two months, and economic uncertainty could further derail stocks.
Given this scenario, we recommend buying four defensive stocks from the consumer staples sector, namely, The Vita Coco Company, Inc. COCO, The Coca-Cola Company KO, John Wiley & Sons, Inc. WLY and Carriage Services, Inc. CSV.
Consumer Confidence Dips
Consumer confidence fell to 90.8 in July from an upwardly revised 92.2 a month earlier, the Conference Board said last week. The July reading was sharply lower than the consensus estimate of a rise to 92.3.
Consumers’ perception of the labor market remained weak, as they believe few jobs are being created. The Present Situation Index, a gauge of the consumers’ assessment of current business and labor market conditions, declined 3.6 points to 114.9. This is the third straight month of decline.
The Expectations Index, a gauge of consumers’ short-term outlook for income, business, and labor market conditions, was unchanged for July at 74.7.
The Federal Reserve left interest rates unchanged in its current range of 3.50-3.75% at the end of its FOMC meeting last week. The decision was highly anticipated, but consumers fear that the Federal Reserve could fall behind in its fight to curb inflation.
High inflation has been a major challenge for the Federal Reserve, which has been contemplating an interest rate hike by a quarter percentage point. A surge in oil prices since the beginning of the U.S.-Iran war in February has resulted in inflation spiking.
Inflation, however, eased in June after the United States and Iran signed a temporary memorandum of understanding to stop attacks. The consumer price index fell to 3.5% in June, more than the analysts’ expectations of a reading of 3.8%. The decline follows a reading of 4.2% in May.
However, the ceasefire deal has since been scrapped, and hostilities resumed in July, till the United States halted the attacks on Iran again last week. Although President Donald Trump said last week that another attempt is being made to hold peace talks, the crisis is far from over. These factors could keep markets volatile for a longer period.
4 Consumer Staples Stocks With Upside
The Vita Coco Company
The Vita Coco Company, Inc. provides a beverage platform. COCO’s brands include coconut water, Vita Coco; clean energy drink Runa; sustainable enhanced water, Ever & Ever and protein-infused water, PWR LIFT.
The Vita Coco Company’s expected earnings growth rate for the current year is 64.7%. The Zacks Consensus Estimate for current-year earnings has improved 14% over the past 90 days. COCO currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Coca-Cola Company
The Coca-Cola Company’s strong brand equity, marketing, research and innovation help it to garner a market share of more than 40% in the non-alcoholic beverage industry. KO is putting its best foot forward to evolve its business model to become a total beverage company with something for everyone to drink. The Coca-Cola Company has coped with the industry-wide flattening of soda sales over the years by going on a buying spree and making investments in healthier alternatives like coffee, sparkling water and sports drinks.
The Coca-Cola Company has an expected earnings growth rate of 9.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.2% over the past 90 days. The Coca-Cola Company has a Zacks Rank #2 (Buy).
John Wiley & Sons
John Wiley & Sons, Inc. is a global provider of knowledge and knowledge-enabled services that improve outcomes in areas of research, professional practice and education. Through the Research segment, WLY provides digital and print scientific, technical, medical and scholarly journals, reference works, books, database services, and advertising. John Wiley & Sons has a Zacks Rank #2.
John Wiley & Sons has an expected earnings growth rate of 14.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last 90 days. WLY has a Zacks Rank #2.
Carriage Services
Carriage Services is a leading provider of death care services and products in the United States. CSV provides a complete range of services relating to funerals, burials and cremations, including the use of funeral homes and motor vehicles, the performance of cemetery interment services, and management and maintenance of cemetery grounds.
Carriage Services has an expected earnings growth rate of 8.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the past 90 days. CSV presently has a Zacks Rank #2.
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CocaCola Company (The) (KO): Free Stock Analysis Report
Vita Coco Company, Inc. (COCO): Free Stock Analysis Report
Carriage Services, Inc. (CSV): Free Stock Analysis Report
John Wiley & Sons, Inc. (WLY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).