Yahoo Finance 4 Grocery Stocks to Buy Amid Ongoing Price Challenges
U.S. GDP fell more than expected in the first quarter of 2023 as high inflation continues to slow down the economy. One of the biggest sufferers has been the retail sector, as sky-high prices have dampened consumer spending. This comes as the Fed gears up to increase interest rates next week.
Amid these doldrums, people are spending cautiously on necessities and aggressively cutting down on luxuries. However, spending on basic necessities is almost unavoidable. Hence, grocery is one such section that is still showing growth although at a slower pace.
Given this situation, stocks like Conagra Brands, Inc. CAG, McCormick & Company, Incorporated MKC, General Mills, Inc. GIS and Lamb Weston Holdings, Inc. LW are likely to benefit in the near term.
Grocery Sales Still Growing
Retail sales have been slowing at an alarming pace as people are aggressively cutting down on spending owing to sky-high prices. However, grocery sales are still up. According to the Mastercard SpendingPulse, U.S. retail sales advanced 4.7% in March on a year-over-year basis.
This was down from February’s growth of 6.7%. Grocery has been one of the key drivers of retail sales lately. According to the report, grocery sales jumped 5.6% year over year in March.
A separate report from Brick Meets Click/Mercatus Grocery Shopping Survey also showed a rise in online grocery sales. According to the report, online grocery sales totaled $8 billion in March.
Since there is little room to reduce spending on necessities like food items, groceries have been the bright spot in the retail sector. Groceries fall under the consumer staples’ sector, given that they are basic necessities. Their demand is generally resilient to changes in the economic cycle. Companies in this fundamentally strong and mature category are thus defensive.
Wholesale prices have declined lately, which is a sign of easing inflation. The Labor Department said earlier this month that Producer Price Index (PPI) fell 0.5% in March. This comes after it remained unchanged in the first two months of the year.
Year over year, PPI increased 2.7% in March, significantly less than February’s jump of 4.7%. However, signs of slowing inflation came a bit too late, and the economy had already taken a hit by that time, with U.S. GDP slowing more than expected in the first quarter.
Preliminary data released by the Commerce Department showed that GDP grew a meager 1.1% in the first quarter of 2023, slower than expectations of a rise of 2%. Understandably, this is a tough year as GDP grew 2.6% in the final quarter of 2022. Moreover, the Fed is gearing up to increase borrowing rates by another 25 basis points, which would take the federal funds target to a range of 5% to 5.25%.
This will further escalate borrowing rates. However, the groceries segment is unlikely to be affected much during these trying times, given its defensive nature. The Consumer Staples Select Sector SPDR (XLP) has gained 5.7% over the past six months compared to the S&P 500 Index’s growth of 1.6%.
Our Choices
Given this situation, it would be wise to invest in these four food and grocery stocks. Each of the stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Conagra Brands, Inc. is one of the leading branded food companies of North America. CAG offers premium edible products with a refined focus on innovation. Conagra Brands maintains a highly dynamic product portfolio and incorporates alterations within it, per the preference pattern of end-users.
Conagra Brands’ expected earnings growth rate for the current year is 16.5%. The Zacks Consensus Estimate for current-year earnings has improved 3.4% over the past 60 days. CAG currently has a Zacks Rank #2.
McCormick & Company, Incorporated is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors to the entire food industry across the entire globe. MKC’s key sales, distribution and production facilities are located in North America and Europe.
McCormick & Company’s expected earnings growth rate for the current year is 3.6. The Zacks Consensus Estimate for current-year earnings has improved 1.6% over the past 60 days. MKC currently has a Zacks Rank #2.
General Mills, Inc. is a global manufacturer and marketer of branded consumer foods sold through retail stores. The company also serves the foodservice and commercial baking industries. General Mills’ principal product categories include ready-to-eat cereals, convenient meals, snacks (including grain, fruit and savory snacks, nutrition bars, and frozen hot snacks), super-premium ice creams, as well as baking mixes and ingredients.
General Mills’ expected earnings growth rate for the current year is 7.4%. The Zacks Consensus Estimate for current-year earnings has improved 1.2% over the past 60 days. GIS currently carries a Zacks Rank #2.
Lamb Weston Holdings, Inc. is a leading global manufacturer, marketer and distributor of value-added frozen potato products, particularly French fries, and provides a range of appetizers. LW, along with its joint venture allies, is the top frozen potato products supplier in North America, while it also operates internationally, with a robust and growing presence in emerging markets.
Lamb Weston’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current-year earnings has improved 14.2% over the past 60 days. LW presently sports a Zacks Rank #1.
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General Mills, Inc. (GIS) : Free Stock Analysis Report
Conagra Brands (CAG) : Free Stock Analysis Report
McCormick & Company, Incorporated (MKC) : Free Stock Analysis Report
Lamb Weston (LW) : Free Stock Analysis Report
