Can These 8 S&P Consumer Staples Stocks Make a Comeback?

Companies and Brands

Published: July 30, 2020 7:50 am

The COVID-19 pandemic has affected the stocks that comprise the S&P 500 consumer staples sectors differently. About two-thirds are performing well, with positive share price growth over the past 52 weeks. Yet, a dozen or so are not doing so well.

Food, cleaning supplies and some consumer products stocks are strong performers. As a whole, the index’s consumer staples sector is trading at around 20 times estimated 2021 earnings.

Winners imply losers, however, and we’ve identified eight stocks in the sector that have currently lost at least 10% of their share price value over the past 52 weeks. Among these stocks are a cosmetics firm, a brewer and two Dow stocks.

What do analysts expect from these eight based on 2020 price targets and multiples of estimated 2021 earnings? Can they turn around through their own efforts, or will they have to wait until the coronavirus spread is conquered? Is there value here, or could some of these be value traps?

Coca-Cola Co. (NYSE: KO) has dropped about 11% of its value over the past 52 weeks. When the company reported second-quarter earnings last week, it noted a 25% decline in away-from-home sales during April. That decline has been shaved to 10%, but until restaurants reopen, away-from-home sales will continue to be soft.

The stock trades about 20% below its 52-week high of $60.13 and closed at $48.02 on Wednesday. The price target on the stock is $53.45, which implies a potential upside of just over 11%, and the shares trade at a multiple of more than 29 times expected 2021 earnings. Coke pays a dividend yield of 3.42%.

Philip Morris International Inc. (NYSE: PM) has dumped just over 10% of its value over the past year. The distributor of Marlboro and other cigarette brands outside the United States said it is difficult to quantify the impact of the pandemic on sales, but cigarette shipment volumes were 11.4% lower year over year in the second quarter and overall shipments (including its heated tobacco unit sales) were lower by 8.2%.

Shares trade around 14% below the 52-week high of $90.17 and closed Wednesday at $78.39. With a price target of $86.80, the potential upside on the stock is about 11%. The stock trades at nearly 16 times expected 2021 earnings. The dividend yield on the stock is 5.97%.

Altria Group Inc. (NYSE: MO) has seen its shares drop more than 17% of their value over the past 52 weeks. The U.S. counterpart to Philip Morris raised investors’ spirits this week when it reported better-than-expected earnings but light revenues. A two-cent increase in the quarterly dividend also helped. The company recently received FDA approval to sell its heat-not-burn IQOS system, licensed from Philip Morris, in the United States.

Altria’s stock trades about 21% below its 52-week high, and at Wednesday’s closing price of $41.63 the stock carries a potential gain of about 17.6% and trades at a multiple of nearly 11 times expected 2021 earnings. The dividend yield for the stock is 8.09%.

Sysco Corp. (NYSE: SYY) has lost nearly 23% of its value over the course of the past year. The food distributor was hit hard by stay-home orders that shut down local restaurants and when the U.S. Centers for Disease Control and Prevention (CDC) published national guidelines on social distancing. Sysco is expected to post a second-quarter loss per share of $0.30 when it reports results next month. Revenues are forecast to be down by 38.5% year over year.