The Consumer Staples Sector
The sector is currently at the bottom of the Zacks sector list. Year to date, it has declined 12.4%, against 2% gain recorded by the S&P 500.
As of May 9, roughly 86.7% of the Consumer Staples companies in the S&P 500 group reported their results. Earnings collectively have grown 8.
In addition to the food industry, companies from the funeral services, textile, agriculture, beverage, soap and cleaning materials and others are included in the Consumer Staples sector. For the January-March quarter, earnings of this sector are predicted to increase 8.7% on revenue growth of 4.2%. For full-year 2018, earnings are anticipated to grow 8.2% and revenues to decrease 5.1%.
We here focus on the food industry, which is currently enjoying several tailwinds despite risks. The food industry has immense growth potential on the back of rising population, growing disposable income and higher standard of living. Also, rise in international trades is a boon for this industry. Growing desire for high quality and healthy products among consumers is driving the food companies to work on new and innovative products as well as maintain greater transparency in terms of ingredients used and nutritional benefits of their products.
On the flip side, growing preferences for low-calorie and vegetarian foods can be concerning for companies dealing in meat and chicken products. These companies are also at risk of an outbreak of livestock diseases, which might create sudden supply chain challenges. In particular, the turkey market is grappling with an oversupply situation and depressed turkey prices. Also, conflict in international trade policies among nations can hurt demand for food products.
Per the latest World Agricultural Supply and Demand Estimates report issued by U.S. Department of Agriculture, total supply of red meat (including beef, pork and others) in 2018 is predicted to be 59,920 million pounds, down 0.7% from its forecast issued in April. However, the demand for red meat is expected to stay low at 49,659 million pounds, down 0.9% from the earlier projection. Also, supply for poultry (including broiler, turkey and others) in 2018 is projected to be 49,666 million pounds, roughly 0.1% below the previous projection while demand will likely be 40,789 million pounds, down 0.1% from the previous estimates. However, demand and supply for both red meat and poultry products are projected to strengthen in 2019.
Zacks Model to Judge the Stocks
Investment decisions, especially during an earnings season, can be addressed by using some of Zacks models. A popular way is to opt for stocks that possess a combination of favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or (Hold) and a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.