The October 2024 Global Financial Stability Report by the IMF highlights that while near-term financial stability risks are contained, rising economic and geopolitical uncertainty heightens the likelihood of adverse shocks. This growing disconnect between low financial volatility and elevated uncertainty could amplify future risks and expose underlying vulnerabilities.
Amid this backdrop, investors could consider investing in sound consumer staples stocks Target Corporation (TGT), The Kroger Co. (KR), and Tyson Foods, Inc. (TSN), which are currently trading at a discount.
Consumer sentiments seem to be dampening this month after two months of small gains, as seen in the University of Michigan’s consumer sentiment index slipping to 68.9 in October from 70.1 in September.
Consumer staples provide stability during economic uncertainties and downturns because they consist of essential goods that people need regardless of their financial situation. These include products that maintain consistent demand even when consumers cut back on discretionary spending.
Companies in this sector often see steady sales and cash flows during economic downturns, making consumer staples stocks less volatile and a safe investment during periods of economic stress. Additionally, many of these companies offer dividends, providing reliable income for investors.
Given these market trends, let’s look at the fundamentals of the top consumer staples stocks such as TGT, KR, and TSN.
Target Corporation (TGT)
TGT operates as a general merchandise retailer. It provides apparel for women, men, boys, girls, toddlers, infants, and newborns, jewelry, accessories, shoes, beauty and personal care, baby gear, cleaning, paper products, and pet supplies.
In terms of forward Price/Sales, TGT is trading at 0.64x, 50.9% lower than the industry average of 1.31x. Likewise, the stock’s forward Price/Book multiple of 4.55 is 56.3% lower than the industry average of 2.91. Also, its forward Price/Cash Flow of 9.53x is 28.6% lower than the industry average of 13.34x.
On June 24, TGT partnered with Shopify Inc. (SHOP), a global e-commerce platform, to offer a selection of its popular merchants and their products on Target Plus, the retailer's third-party, highly curated digital marketplace.
The strategic partnership with Shopify expanded TGT through a hand-selected assortment of new and on-trend products and brands like True Classic, Caden Lane, and more, giving consumers even more options to explore at affordable prices and with exceptional quality.
For the second quarter that ended on August 3, 2024, TGT’s total revenue increased 2.7% from the prior year period to $25.45 billion, and its operating income came in at $1.64 billion, indicating growth of 36.6% year-over-year. Also, the company’s net earnings and EPS totaled $1.19 billion and $2.57, up 42.7% and 42.8% from the prior year’s quarter, respectively.
Furthermore, the company’s cash and cash equivalents stood at $3.50 billion as of August 3, 2024, compared to $1.62 billion as of July 29, 2023.
According to the guidance for the third quarter, TGT expects adjusted EPS between $2.10 and $2.40. Also, for the full year, the company expects adjusted EPS of $9 to $9.70.
Street expects TGT’s revenue and EPS for the third quarter (ending October 2024) to increase 2.2% and 9.4% year-over-year to $25.96 billion and $2.30, respectively. Moreover, the company surpassed the consensus EPS and revenue estimates in three of the trailing four quarters.
TGT’s stock has increased 37.8% over the past year to close the last trading session at $148.05.
TGT’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Value, Momentum, and Quality. Within the A-rated Grocery/Big Box Retailers industry, TGT is ranked #10 out of 37 stocks.
Click here to access additional TGT ratings for Sentiment, Growth, and Stability.
The Kroger Co. (KR)
KR operates as a food and drug retailer. The company operates combination food and drug stores, multi-department stores, marketplace stores, and price-impact warehouses. Its combination of food and drug stores offers natural food and organic sections, pharmacies, general merchandise, pet centers, fresh seafood, and organic produce.
In terms of forward non-GAAP P/E, KR is trading at 12.70x, 29.6% lower than the industry average of 18.04x. Likewise, the stock’s forward EV/EBITDA multiple of 7.43 is 33.5% lower than the industry average of 11.17. Also, its forward Price/Sales of 0.27x is 79.1% lower than the 1.31x industry average.
On October 8, KR announced that Boost by Kroger Plus will include Disney streaming options as part of its annual memberships. The company’s members can choose from Disney+ Basic (With Ads), Hulu (With Ads), or an ESPN+ subscription as part of an inclusion benefit.
Also, on October 4, KR closed the transaction to sell its specialty pharmacy business to Elevance Health. KR entered into a definitive agreement with Elevance Health for the sale on March 18, 2024. The specialty pharmacy, earlier owned by KR, serves patients with chronic illnesses that require complex care.
On July 31, KR expanded its “Our Brands” portfolio with the addition of Field & Vine™, a fresh produce line grown by U.S. farmers in California, Florida, Georgia, Michigan, New Jersey, North Carolina, Oregon, and Washington. The brand presently provides blueberries, blackberries, raspberries and strawberries.
The new brand offers an enhanced fresh experience and high-quality berries during peak U.S. growing seasons.
During the second quarter that ended August 17, 2024, KR’s sales rose marginally year-over-year to $33.91 billion. Its operating profit was $815 million for the quarter. Net earnings attributable to KR amounted to $466 million and $0.64 per common share for the quarter, respectively.
In addition, the company’s total assets came in at $51.44 billion as of August 17, 2024, compared to $50.20 billion as of August 12, 2023.
The company updated its guidance for the full year 2024, reaffirming adjusted FIFO operating profit of $4.60 billion – $4.80 billion and adjusted net earnings per share of $4.30 – $4.50. Also, the company continues to expect adjusted free cash flow between $2.50 and $2.70 billion.
Street expects KR’s EPS for the third quarter (ending October 2024) to increase 2.8% year-over-year to $0.98. For the same quarter, the company’s revenue is expected to grow 0.8% year-over-year to $34.22 billion. Also, the company surpassed the consensus EPS estimates in all four trailing quarters.
KR’s shares have gained 4.3% over the past month and 33% over the past year to close the last trading session at $57.62.
KR’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
KR has a B grade for Sentiment, Quality, and Value. It is ranked #20 out of 37 stocks in the A-rated Grocery/Big Box Retailers industry.
In addition to the POWR Ratings we’ve stated above, we also have other ratings of KR for Growth, Stability, and Momentum. Get all KR ratings here.
Tyson Foods, Inc. (TSN)
TSN operates as a food company worldwide. The company operates through four segments: Beef; Pork; Chicken; and Prepared Foods. It processes live-fed cattle and hogs and fabricates dressed beef and pork carcasses into primal and sub-primal meat cuts, case-ready beef and pork, and fully cooked meats.
TSN’s forward Price/Sales of 0.39x is 69.9% lower than the industry average of 1.31x. Also, the stock’s forward EV/Sales multiple of 0.55 is 67.6% lower than the industry average of 1.71. Similarly, its forward Price/Book of 1.15x is lower than the industry average of 2.91x.
On August 8, TSN’s Board of Directors declared a quarterly dividend of $0.49 per share on its Class A common stock and $0.441 per share on Class B common stock, payable on December 13, 2024, to shareholders of record at the close of business on November 29, 2024.
TSN pays an annual dividend of $1.96, which translates to a yield of 3.33% at the current share price. Its four-year average dividend yield is 2.85%. Moreover, the company’s dividend payouts have increased at a CAGR of 3.3% over the past three years. Tyson has raised its dividends for 12 consecutive years.
On July 9, TSN entered into an agreement to sell its Vienna, Georgia, poultry complex to House of Raeford Farms. The company’s decision to sell the complex was part of its continued efforts to optimize its plant network, and it will continue to service customer orders from other production locations.
During the third quarter, which ended June 29, 2024, TSN's sales increased 1.6% year-over-year to $13.35 billion. Its non-GAAP operating income increased 174.3% from the year-ago value to $491 million. Further, adjusted non-GAAP net income attributable to Tyson grew 483% and 480% year-over-year to $309 million and $0.87, respectively.
Street expects TSN’s revenue and EPS for the fourth quarter (ended September 2024) to increase 0.6% and 86.1% year-over-year to $13.43 billion and $0.69, respectively. Also, the company has topped the consensus EPS estimates in each of the trailing quarters.
Shares of TSN have surged 30.4% over the past year to close the last trading session at $58.88.
TSN’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
TSN has a B grade for Sentiment, Growth, and Value. It is ranked #21 out of 74 stocks in the B-rated Food Makers industry.
In addition to the POWR Ratings we’ve stated above, we also have TSN ratings for Quality, Momentum, and Stability. Get all TSN ratings here.
What To Do Next?
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TGT shares rose $0.06 (+0.04%) in after-hours trading Thursday. Year-to-date, TGT has gained 8.67%, versus a 23.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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