Is the Party Over for Consumer Staples?

Thursday, June 10, 2021

As I sat down to check in with the market, one piece of news caught my eye. “Campbell Soup Co.shares drop 7% in premarket trading after cutting its adjusted EPS.”

News in the consumer staples sector and concerning a dividend stalwart always catches my eye. So, of course, I headed right over to the company’s investor relations page to see what management announced.

For the quarter ending May 2, net sales decreased 11%, and earnings per share (EPS) decreased 2%. The company’s CEO noted that this was due to short-term increases in supply chain costs and some pressures as the company continues transformations in its snacks division.

While these numbers could be explained, investors were more upset by the new guidance numbers.

Instead of expecting 2021 EPS to increase by 3-5%, the management says the best-case scenario is that EPS will drop by 1% from 2020.

Sure, that’s bad news, but does it warrant a 7% drop in share prices?

I went over to the Weiss Ratings website to see what the data says.

On June 6, Campbell Soup Co. (NYSE: CPB) was upgraded from a “B-” to a “B” due to noticeable increases in three different indexes that the Ratings model calculates. This followed an increase on April 14, when the company was upgraded out of the “sell” range due to a decrease in debt to equity.

The company now sits solidly in that “buy” range, meaning Campbell’s is still a safe company to put your money in. The company is still paying investors a 2.9% dividend, and we can be sure brands such as Campbell’s, Prego, V8 and Pop Secret keep ending up in shopping carts ... even if our pantries aren’t as full as they were last year.

The flow of consumer dollars is one of the big trends I’m constantly following. And as I’ve said before, following its trail in relation to consumer staples and consumer discretionary tells us a lot about the economy as a whole ... and where we might want to invest.

So, while I was on the subject of consumer staples, I checked in on a few others with brands you’ve probably heard of ...

Hormel Foods Corp. (NYSE: HRL)

Founded: 1891

Some of Its Brands: Hormel, Jennie-O, Skippy, Spam, Applegate

Rating: Downgraded on March 3, but still in the “buy” range, where it’s been since Nov. 5, 2019

Dividend: 1.9%

Performance: Up 4.6% over the past six months and 3.6% in the past year

Conagra Brands Inc. (NYSE: CAG)

Founded: 1919

Some of Its Brands: Birds Eye, Marie Callender’s, Slim Jim, Chef Boyardee, Earth Balance, Vlasic

Rating: Upgraded to a “buy” on April 25

Dividend: 2.9%

Performance: Up 9.3% over the past six months and 17.9% in the past year

Flowers Foods, Inc. (NYSE: FLO)

Founded: 1919

Some of Its Brands: Dave’s Killer Bread, Wonder Bread, Canyon Bakehouse, Tastykake

Rating: Recently upgraded on April 19, but has been a “buy” since April 8

Dividend: 3.2%

Performance: Up 11.3% over the past six months and 10.7% in the past year

The J.M. Smucker Company (NYSE: SJM)

Founded: 1897

Some of Its Brands: Jif, Smucker’s, Crisco, Milk-Bone, Café Bustelo, Meow Mix

Rating: Recently upgraded on April 21, but has been a “buy” since March 28

Dividend: 2.6%

Performance: Up 17.6% over the past six months and 30% in the past year

B&G Foods, Inc. (NYSE: BGS)

Founded: 1822

Some of Its Brands: Green Giant, Cream of Wheat, Maple Grove Farms of Vermont, Ortega, SnackWell’s, Static Guard

Rating: Recently upgraded on May 10 back into the “buy” range

Dividend: 6.2%

Performance: Up 16.4% over the past six months and 35.4% in the past year

This is just a sampling of the many consumer staples that are still in the “buy” range according to the Weiss Ratings. Most of them pay out a nice dividend to their shareholders as well.

Unlike those Campbell’s shareholders, I don’t think it’s time for the great sell-off. But, as always, I’ll be keeping an eye on this trend.

Best,

Kelly Green

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