Are you fearful the broad market might sell off this summer, making good on the old "sell in May" adage? There's certainly no denying stocks are showing some vulnerabilities lately in the shadow of an enormous run-up since March of last year.
Not every name is uncomfortably vulnerable here, though, since not every stock has soared over the course of the past 14 months. Indeed, the consumer staples stocks that have lagged in the past year could actually benefit from marketwide weakness, as investors seek out safer names. Here's a closer look at three consumer goods stocks to consider buying sooner rather than later.
1. The Boston Beer Company
The COVID-19 pandemic was problematic for most industries, but it was a boon for booze. With plenty of new anxieties to ease -- and little else to do while sheltering at home -- alcohol consumption in the U.S. alone grew by double-digit percentages in 2020.
The Boston Beer Company (NYSE:SAM) captured more than its fair share of that growth, reporting sales growth of nearly 40% for the year ending in December. Last year's growth is just the beginning, though. Now regrouped from the initial disruption of the pandemic, analysts are collectively calling for nearly 50% sales growth this year, and more than 20% top-line growth in 2022. The brewer's most recent earnings guidance calls for per-share earnings of between $22 and $26 this year, well up from last year's figure of $15.53. Analysts agree with that earnings growth outlook.
The company's core beer brands like Sam Adams and Dogfish aren't driving the bulk of this growth, however. Boston Beer is knocking it out of the park within the relatively new alcoholic beverage category of hard seltzers -- malt beverages found in a variety of flavors. The company estimates its Truly brand of hard seltzers now accounts for 28% of the seltzer market, but the seltzer market itself only makes up a fraction of the national and global booze business. CEO David Burwick suggested Boston Beer's hard seltzer sales could expand 70% to 100% in the foreseeable future, boosted by the recent launches of Truly iced tea seltzer and Truly Extra.
The Boston Beer Company shares won't come cheap, priced at more than 40 times this year's projected profits. It's a name worth the premium, though, given its incredible growth pace.
2. Tyson Foods
Tyson Foods (NYSE:TSN) may never be the sort of growth machine Boston Beer is. What it lacks in raw firepower, however, it makes up for in consistency. Not every single quarter produces year-over-year revenue growth, but more do than not. Ditto for net income. Indeed, with the world inching back toward normalcy, Tyson just reported fiscal Q2 earnings of $1.30 per share on sales of $11.3 billion. That's up from a per-share profit of $1.03 and revenue of $10.9 billion for the same quarter a year earlier. Year-to-date sales and profits are up comparably, and the company's top-line guidance of between $44 billion to $46 billion for the current fiscal year is up from last year's $43.2 billion.
Except, isn't Tyson the same company that was forced to fire several managers at one of its processing facilities for betting on how many employees would contract the coronavirus? Also, isn't the company dealing with the fallout from yet another chicken shortage, and at the same time contending with inflationary pressures? For that matter, aren't consumers starting to steer clear of actual meat in favor of plant-based meat substitutes?
The answer to all of these questions is yes. The thing is, Tyson Foods has a long history of withstanding what typically end up being temporary problems. There's little the company is dealing with now it hasn't faced and overcome before.
3. Reynolds Consumer Products
If you're thinking this is the company that makes Reynolds Wrap aluminum foil, you're right. It's not just an aluminum foil brand, though. Reynolds is also the name behind Hefty trash bags, Presto food storage bags, and a handful of other consumables you'll often find in a kitchen.
But wasn't Reynolds taken private years ago? Yes, it was. The company was taken public again early last year, though -- news that was largely buried by then-growing coronavirus concerns that only became more overwhelming as the year wore on. That's too bad too, as the underlying story is a good one. Reynolds sells the sort of consumables people buy over and over again, usually without a second thought. To this end, last quarter's sales were up 4% year over year, with EBITDA improving by the same degree. That's a slowdown from last year's swell of business linked to more at-home cooking, but it's still respectable given the nature of its business. Analysts are looking for growth comparable to the first quarter's to continue for the rest of this year, and next.
But that's not the chief reason an investor might want to own this particular name. Reynolds Consumer Products boasts an above-average dividend yield of 3%, making steady cash payments it can easily afford to dish out. The upcoming payment of $0.23 per share is only about two-thirds of last quarter's operating income of $0.36 per share, and that quarter's bottom line was below average. Reynolds produced $1.97 worth of per-share profits in 2020, and analysts are modeling earnings of $1.91 per share this year to be followed by 2022 profits of $2.09 per share.