Consumers have cut down on spending over the past year as rising commodity prices have been pinching their pockets. This has compelled them to spend mostly on daily necessities and do away with discretionary items. Consequently, the retail sector has suffered the most.
The Fed’s aggressive interest rate hike policy has further raised borrowing costs, affecting consumers. However, it’s impossible to cut down spending on basic necessities like daily-need items and groceries. This has seen grocery sales grow steadily amid inflationary pressures. Groceries belong to the consumer staples sector, and investing in such stocks is a safe bet during this time of economic uncertainty.
Grocery Sales Increasing
According to Coresight Research’s latest Market Navigator: U.S. Grocery Retailing report, the country’s grocery sales are projected to rise 5.6% to $1.5 trillion in 2023. Although growth will be slower this year compared to the 9.2% jump in 2022, the report paints a rosy picture for the grocery market this year.
The report mentions that inflation is less likely to be a factor in 2023 as food-at-home prices are already cooling.
According to Coresight, food-at-home inflation increased significantly over the first eight months of 2022, hitting a 43-year high of 13.5% in August 2022 before declining gradually to 8.4% in March 2023.
However, inflation has started showing signs of cooling, with the latest consumer prices index (CPI) report showing impressive figures. CPI rose a modest 0.2% in June on a month-over-month basis. Year over year, CPI increased 3% in June after rising 4% in May.
The producer price inflation also decreased considerably in June. The producer price index (PPI) increased just 0.1% in June on a month-over-month basis.
Inflation has been cooling for the past few months, which slowed further in June to its smallest annual increase since early 2021.
The Fed has so far hiked interest rates by 500 basis points since March 2022. The monetary tightening policy has seen inflation drop to 4.8% from 9.1% a year ago. This has raised optimism among investors that the Fed might finally end its monetary tightening policy soon.
Low borrowing costs will thus help investors spend more freely. Grocery, which is a necessity, will thus benefit from it, as this will help boost sales.
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.
Ingredion Incorporated INGR is an ingredients solutions provider specializing in nature-based sweeteners, starches and nutrition ingredients. INGR serves diverse sectors in food, beverage, brewing, pharmaceuticals and other industries.
Ingredion Incorporated’s expected earnings growth rate for the current year is 22.2%. The Zacks Consensus Estimate for the current-year earnings has improved 9.4% over the past 60 days. INGR presently carries a Zacks Rank #1.
McCormick & Company, Incorporated MKC 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 5.1%. The Zacks Consensus Estimate for the current-year earnings has improved 1.9% over the past 60 days. MKC currently has a Zacks Rank #2.
TreeHouse Foods, Inc. THS is a manufacturer of packaged foods and beverages with more than 50 manufacturing facilities across the United States, Canada and Italy servicing retail grocery, food away from home, and industrial and export customers. THS manufactures a variety of shelf-stable, refrigerated and fresh products.
TreeHouse Foods’ expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current-year earnings has improved 2.8% over the past 60 days. THS currently has a Zacks Rank #2.
SunOpta Inc. STKL is an operator of high-growth ethical businesses, focusing on integrated business models in the natural and organic food, supplements and health and beauty markets. STKL has three business units: the SunOpta Food Group, the Opta Minerals Group and the SunOpta BioProcess Group.
SunOpta’s expected earnings growth rate for the current year is more than 25%. The Zacks Consensus Estimate for the current-year earnings has improved 42.9% over the past 60 days. STKL presently carries a Zacks Rank #2.
SunOpta, Inc. (STKL): Free Stock Analysis Report
McCormick & Company, Incorporated (MKC): Free Stock Analysis Report
TreeHouse Foods, Inc. (THS): Free Stock Analysis Report
Ingredion Incorporated (INGR): Free Stock Analysis Report
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