Oil back at US$83, talk of possible rate hikes, and a cautious S&P 500 have put inflation worries back on your screen. That kind of backdrop often pushes investors toward sturdier, everyday consumer staples, looking for a steadier ride when costs are rising. This article unpacks three large consumer staples stocks from our Inflation Resistant screener that appear positively exposed to the latest news and explains what their recent setup could mean for your portfolio decisions.
The three stocks covered below are just a sample, and the full Inflation Resistant consumer staples screen surfaced 34 more large, established companies with equally compelling inflation narratives that are not discussed in this article. If you want to identify and analyze the highest conviction ideas for your own watchlist, head straight to the Inflation-Resistant Consumer Staples screener.
Elders (ASX:ELD)
Overview: Elders is an Australian agribusiness that supplies farmers and regional communities with essentials like seeds, fertiliser, animal health products and advisory services, while also running livestock and wool agency operations, rural and residential real estate, financial services and an online livestock auction platform.
Operations: Elders generates around A$3.6 billion of revenue from its Australian operations.
Market Cap: A$1.2 billion
Rising oil and rate worries have put inflation resilience back in focus, and Elders sits in the middle of that conversation as a diversified supplier to food producers and rural communities. The company recently reported A$1.77 billion in half year revenue with underlying EBIT of A$76.6 million and continues to pay fully franked dividends, although the current 6.47% yield is not well covered by earnings. Debt and funding risk are key watchpoints, with net debt of A$621.6 million and reliance on external borrowings, along with margin pressure and earnings volatility from one off items. For investors seeking exposure to essential food production and rural services, Elders presents a mix of income, potential upside and balance sheet risk that may warrant further research.
Elders sits at the crossroads of essential food supply, generous fully franked dividends and a stretched balance sheet, which makes the current setup easy to misread. To see how the income story lines up with funding pressure and dividend cover, go through the Elders financial health report
Build your own inflation resistant shortlist around Elders
Elders and the two other consumer staples stocks in this piece all came from a single screener, yet the real edge comes from tuning your own filters. Use our flexible Screener to combine factors like dividends, balance sheet and risk, or lean on the ready made themes in our Investing Ideas.
PZ Cussons (LSE:PZC)
Overview: PZ Cussons is a long established consumer goods company that sells everyday baby, beauty and hygiene brands such as Imperial Leather, Carex and Cussons Baby across the U.K., Europe, Africa, the Americas and Asia Pacific. Its portfolio spans soaps, shampoos, skin and hair care, dishwashing and laundry products, cooking oils and a range of other household essentials that tend to sit in the inflation resistant part of many shopping baskets.
Market Cap: £430.4 million
PZ Cussons is interesting right now because it sits at the intersection of essential daily-use brands and a clear push to simplify the portfolio and improve profitability, at a time when inflation and higher funding costs are back in focus. The company has moved from a loss to a £19.8 million net profit on £541.4 million of sales and is focusing on e-commerce, data driven marketing and a sharper emphasis on hygiene, beauty and baby products. At the same time, investors need to weigh dividend cover, reliance on external borrowing and exposure to fragile markets such as Nigeria, where currency and inflation pressures can quickly affect reported performance.
PZ Cussons is pushing hard on everyday essentials, e commerce and a sharper focus on hygiene, beauty and baby care brands. However, the real story lies in how those moves show up in the analyst forecasts for PZ Cussons
Select Harvests (ASX:SHV)
Overview: Select Harvests is an Australian almond grower and processor that runs a fully integrated business from orchards through to packaged almond products, supplying food and beverage companies across sectors like bakery, snacking, cereals and dairy, as well as export customers in Asia, Europe and the Middle East.
Operations: Select Harvests generates A$352.8 million of revenue from almond products, with all reported revenue currently coming from Australia.
Market Cap: A$591 million
Select Harvests sits in the middle of the inflation story as a producer of essential food ingredients, with global almond demand tied to health conscious eating and snacking. The company has invested heavily in projects such as Optimus and kernel recovery to process more volume through an existing cost base, while also returning capital through a buyback of up to about 10% of shares and maintaining dividends. At the same time, any investment thesis needs to factor in sensitivity to almond prices, weather and input costs such as water and electricity, along with mixed recent results and relatively low current returns. For investors willing to do the extra work, the gap between analyst targets, fair value estimates and today’s set up is an important area of focus.
Select Harvests has poured capital into projects like Optimus and kernel recovery while still funding a buyback and dividends. To see how that balance of reinvestment and returns really stacks up, review the analysis report for Select Harvests
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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