Hostilities have resumed in the Middle East, with the United States carrying out its 10th consecutive night of strikes on Iran. Oil prices have again been surging, and consumers fear that inflation, which somewhat eased in June, might increase again.
Markets have remained volatile for most of June and July, triggered by concerns over the sustainability of tech stocks. Renewed fears of a slowing economy could further derail stocks. Given this scenario, we recommend buying three defensive stocks from the consumer staples sector, namely, The New York Times Company NYT, The Vita Coco Company, Inc. COCO and Hormel Foods Corporation HRL.
Volatility Grips Wall Street
Oil prices have surged more than 5% since the United States resumed its attack on Iran earlier this month after President Donald Trump declared that the ceasefire is “over.” On Tuesday, energy prices moved up and down as investors closely watched a fresh diplomatic push toward ending the ongoing hostilities.
West Texas Intermediate crude futures rose 2% to settle at $84.91 a barrel, while international benchmark Brent was up 2% to end at $91.01 per barrel.
Inflation eased substantially in June after a temporary memorandum of understanding was reached by the United States and Iran to end hostilities. The consumer price index (CPI) dipped 0.4% month over month in June, after increasing 0.5% in May. The monthly decline in CPI was the biggest since April 2020.
Year over year, CPI declined to 3.5% in June, more than the consensus estimate of a reading of 3.8%. The decline follows a reading of 4.2% in May.
However, concerns have been growing that inflation could spike again if oil prices continue to surge after renewed hostilities between the United States and Iran. Markets have already been volatile over the past month, triggered by a massive tech sell-off on growing worries over the sustainability of AI-related stocks.
Although inflation eased in June, it remains sharply higher than the Federal Reserve’s 2% target. High inflation has posed a major challenge for the Fed. The central bank has been contemplating an interest rate hike by the end of this year.
Markets are pricing in a 25-basis-point rate hike by the Fed sometime this year. Higher borrowing costs could further impact the spending power of consumers and the broader economy.
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 Company has an expected earnings growth rate of 19.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1% over the last 60 days. The New York Times Company has a beta of 0.96 and a current dividend yield of 1.22%. NYT has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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 48.7%. The Zacks Consensus Estimate for the current year’s earnings has improved 0.6% over the past 60 days. COCO currently has a Zacks Rank #2 (Buy). The Vita Coco Company has a beta of 0.77.
Hormel Foods Corporation
Hormel Foods Corporation is a leading manufacturer as well as marketer of various meat and food products in the United States and international markets.
Hormel Foods Corporation has an expected earnings growth rate of 9.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.5% over the last 60 days. HRL has a Zacks Rank #2. Hormel Foods Corporation has a beta of 0.34 and a current dividend yield of 4.63%.
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The New York Times Company (NYT): Free Stock Analysis Report
Vita Coco Company, Inc. (COCO): Free Stock Analysis Report
Hormel Foods Corporation (HRL): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).