Americans are feeling a shade more confident about the economy after a halt to the hostilities between the United States and Iran. Oil prices have eased substantially over the past few weeks but the crisis is far from over.
Although consumer confidence saw some improvement in June, it remains close to historic lows. The Federal Reserve is once again faced with the challenge of taming sky-high inflation and an interest rate hike is almost inevitable now.
Given this scenario, we recommend sticking to defensive picks from the consumer staples sector, such as John Wiley & Sons, Inc. WLY, Tyson Foods TSN, Arko Corp. ARKO and The New York Times Company NYT.
These stocks have seen positive earnings estimate revisions in the past 60 days, carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) at present, and are set for solid returns. You can see the complete list of today’s Zacks #1 Rank stocks here.
Consumer Confidence Remains Low
The consumer confidence index rose to 91.2 in June from a downwardly revised reading of 90.6 in the prior month, the Conference Board reported earlier this week. A separate report showed that consumer sentiment improved in June but remained near historic lows.
The University of Michigan's Surveys of Consumers showed the consumer sentiment index rose to a final reading of 49.5 in June from 44.8 in the month earlier, May, after the preliminary reading showed 48.9.
The marginal improvement comes after the United States and Iran signed a temporary memorandum of understanding in mid-June to end hostilities in the Middle East. Oil prices fell sharply from record highs, boosting consumers’ confidence. However, hostilities have not ceased completely and have continued over the past weekend amid ongoing attempts at negotiations between the two warring nations.
A steep rise in oil prices in the initial months of the war saw inflation spike to a three-year high. Higher prices of goods have been weighing on the economy. The initial rise in oil prices is worrying consumers as they believe the impact is going to last long.
There are several other factors that have been denting consumers’ confidence. Households’ perception of the labor market situation has been deteriorating for several months now, with portions of the survey viewing jobs as difficult to get hitting a five and a half year high.
Latest data from ADP ADP shows that private sector payrolls increased 98,000 in June, down from an unrevised 122,000 job additions in May and lower than the consensus estimate of 110,000 jobs.
High inflation has made the Federal Reserve’s job more challenging, with markets now pricing in a 25-basis-point rate hike by the end of this year.
4 Low-Beta Consumer Staples Stocks With Growth Potential
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. John Wiley & Sons has a beta of 0.27 and a current dividend yield of 2.93%.
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 1%. The Zacks Consensus Estimate for the current-year earnings has improved 5.3% over the past 60 days. TSN has a Zacks Rank #2. Tyson Foods has a beta of 0.40 and a current dividend yield of 3.56%.
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 Corp. has a Zacks Rank #1. ARKO has a beta of 0.99 and a current dividend yield of 1.49%.
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 5% over the last 60 days. The New York Times Company has a Zacks Rank #2. NYT has a beta of 0.96 and a current dividend yield of 1.31%.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
