Consumer Staples, a sector known for its dividend-paying stocks, has been performing poorly this year due to various factors. A surge in treasury yields, the rising popularity of weight-loss drugs, and concerns over elevated valuations have created a “perfect storm” for consumer staples stocks. As a result, investors have been selling off these stocks, leading to a decline of more than 9% in the sector compared to the S&P 500’s 12% climb. However, there is a sentiment shift on the horizon.
During the earnings season, positive commentary from C-suite executives has been encouraging. Procter & Gamble CEO Jon Moeller sees lower commodity costs positively impacting the company’s results, with an expected tailwind of $800 million for the fiscal year. Pepsico CFO Hugh Johnston also does not see any impact from weight-loss drugs on the company’s performance. Constellation Brands CEO Bill Newlands believes the fear of weight-loss drugs reducing demand for beer is overblown. These statements suggest that there may be buying opportunities in the downtrodden consumer staples sector for investors looking for bargains in the volatile market.
One of the best ways to play this sector is through Procter & Gamble, which beat third-quarter earnings estimates and is well-positioned among its peers. The company reported organic sales growth of 7% for the quarter, gaining market share in all 10 of its product categories. Johnson & Johnson, on the other hand, has been impacted by the increasing popularity of weight-loss drugs, leading to slowing sales in its Medtech division. However, the short-term impact is expected to be minimal, and the stock is already priced in accordingly. Lastly, The Hershey Company, despite its recent underperformance, still offers a reliable dividend. This iconic American company has raised its dividend for 13 consecutive years. Overall, there are opportunities for investors in the consumer staples sector, and these stocks should be considered for their long-term potential.
