People purchase staples during both economic booms and downturns, making consumer staples stocks reliable performers regardless of the broader economic conditions. They are often considered safe havens amid weak or uncertain economic conditions.
Considering the current uncertainties surrounding the market and the economy, investors could consider buying fundamentally sound consumer staples stocks Walmart Inc. (WMT), Colgate-Palmolive Company (CL), and Primo Water Corporation (PRMW) for steady returns.
The U.S. unemployment rate has risen to 4.3%, exceeding expectations. Many economists predict a soft landing for the U.S. economy in 2024, with slowing GDP growth but no recession. However, there remains a possibility that Federal Reserve policies could decelerate the economy.
Consumer staple stocks represent noncyclical businesses because they produce or sell goods or services that are always in demand. With steady but modest growth, the consumer staples sector offers a safe haven for investors during periods of economic weakness. These stocks appeal to those looking for consistent growth, reliable dividends, and low volatility.
Let’s take a look at the fundamentals of the three best consumer staples stocks.
Walmart Inc. (WMT)
WMT engages in the operation of retail, wholesale, other units, and eCommerce worldwide. It operates through three segments: Walmart U.S.; Walmart International; and Sam’s Club. The company operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, and discount stores under the Walmart and Walmart Neighborhood Market brands
On June 13, WMT announced the private brand transformation of one of its largest and most well-known fashion brands, No Boundaries. The over $2 billion brand for young adults will bring customers a modern, relevant, and youthful assortment with new fabrication, shapes, and styles, all at the same great prices.
WMT’s trailing-12-month ROCE of 24.65% is 128.4% higher than the industry average of 10.79%. Also, the stock’s trailing-12-month ROTC and ROTA of 11.49% and 7.46% are 65.4% and 68.5% higher than the industry averages of 6.95% and 4.43%, respectively.
For the fiscal first quarter that ended April 30, 2024, WMT’s total revenues increased 6% year-over-year to $161.51 billion. Its adjusted operating income grew 13.7% from the year-ago value to $7.09 billion. The company’s consolidated net income attributable to Walmart came in at $5.10 billion and $0.63 per common share, up 205.1% and 200% year-over-year, respectively.
Analysts expect WMT’s revenue for the fiscal year ending January 2025 to increase 4.7% year-over-year to $672.59 billion. For the same period, Street expects its EPS to increase 9.8% year-over-year to $2.43. The company surpassed its revenue and EPS estimates in each of the trailing four quarters, which is promising.
WMT’s stock has soared 10.4% over the past three months to close the last trading session at $66.91.
WMT’s POWR Ratings reflect an impressive outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Sentiment and Stability and a B for Momentum. It is ranked #13 in the 37-stock A-rated Grocery/Big Box Retailers industry.
Beyond what is stated above, we’ve also rated WMT for Growth and Value. Get all WMT ratings here.
Colgate-Palmolive Company (CL)
CL manufactures and sells consumer products internationally. It operates in two segments: Oral, Personal, and Home Care; and Pet Nutrition. The company offers toothpaste, toothbrushes, mouthwash, bar and liquid hand soaps, shower gels, shampoos, conditioners, deodorants and antiperspirants.
CL’s trailing-12-month net income margin of 14.25% is 143.5% higher than the industry average of 5.85%. Its trailing-12-month EBIT margin of 21.20% is 133.7% higher than the 9.07% industry average. Also, the stock’s trailing-12-month EBITDA margin of 24.17% is 90.4% higher than the 12.69% industry average.
CL’s net sales for the second quarter that ended June 30, 2024, increased 5% year-over-year to $5.06 billion. Its non-GAAP operating profit grew 13% from the year-ago quarter to $1.12 billion. Non-GAAP net income attributable to CL came in at $0.91 per share, up 18.2% from the year-ago quarter.
Analysts expect CL’s revenue to increase 2.1% year-over-year to $5.02 billion, accompanied by a projected 2.8% year-over-year rise in EPS to $0.88 for the fiscal quarter ending September 2024. Moreover, the company has surpassed consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Shares of CL have gained 36.2% over the past month to close the last trading session at $102.43.
CL’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. CL has an A grade for Quality and a B for Stability and Sentiment. It is ranked #13 out of 51 stocks in the B-rated Consumer Goods industry.
In addition to the POWR Ratings highlighted above, one can access CL’s ratings for Growth, Value, and Momentum here.
Primo Water Corporation (PRMW)
PRMW provides pure-play water solutions for residential and commercial customers. It offers bottled water, water dispensers, purified bottled water, self-service refill drinking water, mineral water, sparkling and flavored essence water, filtration units, and coffee.
On June 17, 2024, PRMW and an affiliate of BlueTriton Brands, Inc. (BlueTriton) announced the entry into a definitive agreement to create a leading North American pure-play healthy hydration company in an all-stock transaction that their respective Boards unanimously approved of Directors.
The Transaction offers a compelling strategic rationale and combines Primo Water's and BlueTriton's complementary strengths, creating a North American leader in pure-play healthy hydration with diversified offerings across products, formats, channels, and consumer occasions.
PRMW’s trailing-12-month gross profit margin of 64.56% is 82.1% higher than the industry average of 35.45%. Also, the stock’s trailing-12-month EBIT margin of 9.85% is 8.7% higher than the 9.07% industry average.
During the first quarter ended March 30, 2024, PRMW’s net revenue stood at $452 million, up 9.6% year-over-year. Its adjusted EBITDA grew 24.2% over the prior-year quarter to $93.90 million. In addition, its adjusted net income and EPS increased 172.3% and 171.4% from the year-ago quarter to $30.50 million and $0.19, respectively.
For the quarter ended June 30, 2024, PRMW’s EPS is expected to increase 2.1% year-over-year to $0.25. Its revenue is expected to be $477.40 million in the same quarter.
Over the past three months, the stock has gained 8.3%, closing the last trading session at $21.80.
PRMW’s strong fundamentals are reflected in its POWR Ratings. Its overall rating is B, which equates to Buy in our proprietary rating system. PRMW has a B grade for Growth, Sentiment, and Quality. It is ranked #11 out of 33 stocks in the B-rated Beverages industry.
Click here to access the additional PRMW ratings (Value, Momentum, and Stability).
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
WMT shares were trading at $66.99 per share on Thursday morning, up $0.08 (+0.12%). Year-to-date, WMT has gained 28.35%, versus a 10.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
3 Consumer Staples Stocks for Steady Returns StockNews.com
