With energy prices climbing on the back of the ongoing US Iran conflict and UK household budgets squeezed by higher fuel and food bills, dependable spending habits matter more than ever for investors. Rising living costs can reshape where money flows. This article walks through 3 consumer staples stocks exposed to this news backdrop, explaining how each could be helped or hurt so you can judge whether they fit your watchlist.
The stocks covered next are just a small sample, since the full screen surfaced 35 more companies with similarly compelling consumer staples stories that are not included here. If you want to go straight to the source, use the Consumer Staples (Defensive Food & Household Products) screener to identify, filter and analyze the defensive food and household stocks that best fit your own criteria.
Cranswick (LSE:CWK)
Cranswick is a Hessle based food producer that supplies UK supermarkets, food service operators and other manufacturers with a wide range of meat, poultry, Mediterranean foods and pet products. Its business is heavily focused on food, which delivers about £2.93b of its roughly £2.98b revenue, with a very small contribution from other activities. On the stock market, Cranswick is a mid sized company with a market value of around £2.79b.
Cranswick sits at the heart of the weekly UK food shop, with pork, poultry and prepared products that households keep buying even as energy costs climb. That puts the company in a stronger position than many discretionary retailers when the cost of living bites, although higher fuel, feed and packaging costs still squeeze margins. Recent results showed rising revenue and earnings, backed by a steady dividend and investment in automation. Management is still active on acquisitions. Set this against elevated funding risk and recent insider selling and you have a stock that looks interesting for its resilience, but not without questions that careful investors will want answered.
Cranswick’s rising revenue and steady dividend hint at a story that the market may not fully be pricing in yet. Get the full picture on its resilience, funding risks and insider moves with the 4 key rewards and 1 important warning sign
Build your own resilient consumer staples shortlist
Cranswick and the two other stocks in this article all surfaced from a single Simply Wall St screener, which you can easily tailor to your own style. Use our flexible Screener to mix filters for valuation, growth, balance sheet strength, risks and dividends, or jump straight into our curated Investing Ideas for ready made shortlists based on different themes.
Bega Cheese (ASX:BGA)
Bega Cheese is an Australian food company that turns raw milk into branded everyday products such as cheese, yoghurt, spreads, milk drinks and juices sold through supermarkets, petrol stations and foodservice channels, as well as exported overseas. Most of its A$3.63b revenue comes from the higher margin Branded segment at about A$3.12b, with around A$1.09b from Bulk dairy ingredients and nutritional products after inter segment eliminations. On the market, Bega Cheese is a mid sized stock with a value of roughly A$1.87b.
For investors looking at resilient food staples while energy costs climb, Bega Cheese offers a wide stable of grocery brands and a mix of value added dairy products. Simply Wall St currently views the company as trading at a large discount to its estimated cash flow value. The stock sits at an important point of transition. Management is focusing on cost savings and price discipline, but current margins are thin and recent one off losses and higher funding risk leave little room for error if input costs rise again. If earnings move in line with analyst expectations, the combination of brand strength and today’s valuation could appear very different to anyone only skimming the headlines.
Bega Cheese looks like a classic staples stock, yet its current pricing and thin margins hint at something investors might be missing. Unpack how those risks and potential rewards really stack up with the 2 key rewards and 2 important warning signs
GrainCorp (ASX:GNC)
GrainCorp is an Australian agribusiness that runs an integrated grain storage, handling and export network, while also supplying edible oils, animal nutrition products and renewable fuel feedstocks to food manufacturers, farmers and fuel producers worldwide. Most of its roughly A$7.49b revenue comes from Agribusiness at about A$5.48b, with around A$2b from the Nutrition & Energy segment after eliminations. On the market, GrainCorp is a mid sized stock with a value of about A$1.2b.
GrainCorp sits at the crossroads of global food and fuel supply, which is why higher energy prices and ongoing conflict in the Middle East matter to you as a potential investor. The company is a key supplier of grains and edible oils that remain in demand even as households cut back elsewhere. However, it also faces thinner margins, forecast revenue declines and a dividend that recent earnings and free cash flow have struggled to fully support. Management highlights solid operations, record animal nutrition volumes and a balance sheet positioned for cycles, but profitability has been inconsistent and interest costs are sensitive to market rates. If you are weighing a defensive staples stock with exposure to both food security and agri energy, GrainCorp’s mix of value signals, income and execution risks deserves a closer look.
GrainCorp’s mix of food security, energy exposure and income potential is often reduced to a simple dividend story, yet the real balance of opportunity and risk looks very different in the 3 key rewards and 2 important warning signs (2 are major!)
Seeking Fresh Alternatives Before Others
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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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