For immediate release
Chicago, IL – May 3, 2022 – Zacks.com announces the list of stocks featured in the analyst blog. Every day, Zacks Equity Research analysts discuss the latest news and events impacting stocks and financial markets. Stocks recently featured in the blog include: Archer-Daniels-Midland Co. ADM, The Chefs’ Warehouse Inc. CHEF, Pilgrim’s Pride Corp. PPC, McCormick & Company Inc. MKC and Sysco Corp. SYY.
Here are the highlights from Monday’s analyst blog:
5 picks for May from the best sectors of an unforgiving April
Wall Street had its worst April in more than five decades. Historically, April is considered a strong month on Wall Street. This month is generally known as the best month for the market‘s benchmark S&P 500 index. However, this year a plethora of headwinds, unique to the US and global economies, have decimated investor confidence in risky assets like stocks.
Market participants’ nightmare could continue in the short term, as most economists and financial experts expect a more than hawkish Fed at the FOMC meetings in May and June. At this point, it should be a good strategy to stick with defensive stocks with a favorable Zacks rating to counter high volatility. Here are five of them – Archer-Daniels-Midland Co., The Chef’s Warehouse Inc., Pilgrim’s Pride Corp., McCormick & Company Inc. and Sysco Corp.
Headwinds that hit April
Despite raising the benchmark interest rate by 25 basis points in March, for the first time in three years, several measures of inflation showed no signs of a downward trend and remained elevated at a peak in 40 years. Soaring inflation forced Fed Chairman Jerome Powell to say the central bank would not hesitate to take tougher action in 2022.
Market participants are largely expecting the Fed to hike the interest rate by 50 basis points at the May and June FOMCs and begin trimming the size of its $9 trillion balance sheet from of May.
A more than hawkish Fed, continued elevated inflationary pressure from ongoing global supply chain disruptions, the protracted war between Russia and Ukraine, and the resurgence of COVID-19 infections in China with lockdowns that followed raised serious questions about a near-term future. recession in the United States as well as the global economy.
To make matters worse, the IMF and World Bank cut their projections for the 2022 global economic growth rate in April. More importantly, US GDP in the first quarter of 2022 contracted 1.4% after climbing 6.9% in the fourth quarter of 2021. The consensus estimate was for an increase of 1%.
Finally, weak earnings results for the first quarter of 2022 from some large US companies, particularly those that benefited from the pandemic-induced shutdowns, and disappointing forecasts from several large companies have devastated the confidence of market participants.
As a result, in April, the three major indexes – the Dow Jones, S&P 500 and Nasdaq Composite – fell 4.9%, 8.8% and 13.3%, respectively. The Dow and S&P recorded the worst April since 1970 and the Nasdaq Composite recorded the worst April since 2000.
The Nasdaq Composite is in bearish territory, down 23.9% from its recent high. The S&P 500 and Dow are in the correction zone after falling 14.3% and 10.8% from their recent highs.
Why defensive actions
Markets are expected to remain volatile as investors await crucial back-to-back FOMC meetings in May and June. Defensive sectors like consumer staples, utilities and health care should provide stability to his portfolio. In April, of the 11 major sectors of the S&P 500 index, only the consumer staples sector Select Sector SPDR finished in the green with a gain of 2.1%.
The consumer staples sector is mature and fundamentally sound, as demand for these services is generally immune to changes in the business cycle. The consumer staples sector includes companies that provide daily necessities and products. This makes the sector defensive in nature. Therefore, it has always been a favorite place for investors, who want to play it safe during extreme market swings, regardless of internal or external disruptions.
Our top picks
We narrowed our search to five consumer staples stocks that show strong growth potential for the remainder of 2022. These stocks have seen positive earnings estimate revisions over the past 30 days. Each of our picks carries either a Zacks rank of #1 (strong buy) or 2 (buy). You can see the full list of today’s Zacks #1 Rank stocks here.
Archer-Daniels-Midland is benefiting from strong demand, improved productivity and product innovations. The continued growth of ADM’s Nutrition segment, driven by significant gains in the Human and Animal Nutrition units, remains the main driver of growth. Archer-Daniels-Midland expects Nutrition segment operating profit growth of 20% in 2022. The company has made significant progress on its three strategic pillars: Optimize, Drive and Grow.
The Zacks No. 1 Archer-Daniels-Midland has an expected profit growth rate of 7.7% for the current year. The Zacks consensus estimate for current-year earnings has improved 3.7% over the past 7 days.
The Chefs Warehouse iits distributor of specialty food products in the United States. CHEF is focused on meeting the specific needs of chefs who own or operate restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools and specialty food stores.
The Chefs’ Warehouse product portfolio includes artisan charcuterie, specialty cheeses, unique oils and vinegars, hormone-free proteins, truffles, caviar and chocolate. It also offers cooking oils, butter, eggs, milk and flour.
The Zacks Rank #2 The Chefs’ Warehouse has an expected earnings growth rate of over 100% for the current year. The Zacks consensus estimate for current year earnings has improved 5.4% over the past 7 days.
Pilgrim’s Pride is engaged in the production, processing, marketing and distribution of fresh, frozen and value-added chicken products in the United States, United Kingdom, Europe and Mexico. Overall domestic demand is expected to remain strong in 2022 in the US market.
PPC’s catering business also saw improvements thanks to a sustained recovery in the commercial and non-commercial segments. Other than that, Pilgrim’s Pride continues to prioritize capital expenditure plans in 2022 to optimize its product mix and solidify partnerships with key customers.
Zacks Rank #1 Pilgrim’s Pride has a projected profit growth rate of 21.9% for the current year. The Zacks consensus estimate for next year’s earnings has improved 1.8% over the past 30 days.
McCormick & Co. capitalized on healthy and tasty cooking, increased digital engagement and goal-oriented practices. The vigorous recovery in out-of-home demand bodes well. MKC has strategically increased its presence through acquisitions to grow its portfolio. McCormick & Co. is optimistic about its innovation pipeline for 2022.
The Zacks Rank #2 McCormick & Co. has an expected profit growth rate of 3.9% for the current year. The Zacks consensus estimate for next year’s earnings has improved 0.1% over the past 30 days.
Sysco is gaining on strong out-of-home dining trends and making good progress with its Recipe for Growth plan. SYY continued to record market share gains and strong out-of-home food sales.
Sysco has made various acquisitions over the years to expand its distribution network and customer base and drive long-term growth. In February 2022, SYY acquired The Coastal Companies, a well-known fresh produce distributor and value-added processor.
The Zacks Rank #2 Sysco has an expected earnings growth rate of over 100% for the current year. The Zacks consensus estimate for next year’s earnings has improved 4.3% over the past 30 days.
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