As the coronavirus pandemic deepens in the U.S., even consumer staples stocks -- often seen as safe havens -- have dropped in value. Lockdown situations in the U.S. and internationally mean interruptions in manufacturing and delivery, among other challenges.
That said, there are two positives in this story: Demand for consumer staples remains as shoppers stock their pantries to prepare for expanded lockdowns. And the coronavirus crisis is likely to ease over weeks or months, with share declines offering investors an entry point to strong long-term stock bets.
Below are three stocks to stock your portfolio.
1. The Hershey Company
Shares of chocolate giant The Hershey Company (NYSE:HSY) slid 19% this year, and this month fell to their lowest price in nearly a year in relation to earnings. Hershey has surpassed analysts' earnings estimates for the past four quarters, and revenue has steadily climbed for the past three years.
An asset impairment loss related to the 2015 acquisition of meat-snacks brand Krave hurt profit last year, but for the 2020 full year, Hershey forecast a 2% to 4% increase in reported net sales and an 11% to 14% increase in reported diluted earnings per share. The forecast came before the coronavirus crisis ramped up in North America, where Hershey makes 89% of its revenue, so it's likely this year won't be as bright as expected. Wall Street's expectations for a 22% share upside may not be right around the corner. But acquisitions like One Brands, which grew at least 35% in the fourth quarter, will help the shares get there later. New products like Reese's White Thins, and Hershey's ability to raise prices, should help too.
Investors also can count on dividends. Hershey recently paid its 361st consecutive regular quarterly dividend on its common stock, and annual dividends have grown yearly since 2009.
Investors in Kellogg (NYSE:K) will have to be patient. The company divested four businesses in a single transaction last year, as part of its plan to increase growth and improve profit margins. Proceeds were used to pay down $1 billion of debt. Pressure from the divestiture will be felt this year, due to the absence of the businesses' sales and operating profit contributions in the year-on-year comparison.
But the move to sell cookie businesses and focus on snacks and cereals sets Kellogg up for the future. In 2019, the company met its biggest financial goal of returning to organic net sales growth, and it posted growth across regions and in most important brands.
As investors wait for improvement in the coming years, they can benefit from dividends now. Kellogg has raised its dividend annually since 2004, and last year paid investors $2.26 per share, a 2.7% increase from the previous year.
Kellogg shares have lost 20% this year, and the average analyst consensus indicates the same percent in upside from here.
The near-term news for Coca-Cola (NYSE:KO) isn't brilliant. In a filing on March 20, the company said it wouldn't meet its 2020 guidance due to the spread of COVID-19. For example, the cancellation of sporting events and drop-in restaurant dining mean fewer opportunities for consumers to buy Coca-Cola beverages. Since the situation is developing, Coca-Cola said it couldn't yet estimate impact, but said it could be "material." An update is planned for the first-quarter earnings presentation.
The soft-drink giant previously expected to increase non-GAAP (adjusted) organic revenue by 5%, and comparable earnings per share by 7% to $2.25. Though Coca-Cola's earnings aren't likely to drive share gains this year, the company's expansion beyond soft drinks through acquisitions -- for example, the purchase of Costa Coffee last year -- will boost future revenue.
Investors will also like the dividend growth. Coca-Cola last month announced the 58th consecutive increase to its annual dividend and said it had paid $6.8 billion in dividends to shareholders in 2019. Coca-Cola has declined 32% so far this year, and Wall Street predicts 55% upside from here.
The coronavirus outbreak represents a headwind for most companies. But in the cases of Hershey, Kellogg, and Coca-Cola, their future earnings, dividend growth, and current share prices make them interesting opportunities now for investors in consumer staples stocks -- not for a near-term gain, but for profit farther down the road.