Consumer staples stocks are solid insurance policies in frothy markets ripe for corrections. But recently, the industry has failed to do its job as it shed 10.8% over the past six months. This performance was especially disheartening since the S&P 500 held its ground.
Given the low switching costs of basic goods like paper towels, many companies will continue generating poor results while only a handful will shine. Taking that into account, here are three consumer stocks that may face trouble.
Energizer (ENR)
Market Cap: $1.46 billion
Masterminds behind the viral Energizer Bunny mascot, Energizer (NYSE: ENR) is one of the world's largest manufacturers of batteries.
Why Do We Think Twice About ENR?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Anticipated sales growth of 1.3% for the next year implies demand will be shaky
- Free cash flow margin shrank by 4.6 percentage points over the last year, suggesting the company is consuming more capital to stay competitive
Energizer is trading at $20.35 per share, or 5.5x forward P/E. To fully understand why you should be careful with ENR, check out our full research report (it’s free).
B&G Foods (BGS)
Market Cap: $351.1 million
Started as a small grocery store in New York City, B&G Foods (NYSE: BGS) is an American packaged foods company with a diverse portfolio of more than 50 brands.
Why Is BGS Risky?
- Annual sales declines of 3.3% for the past three years show its products struggled to connect with the market
- Sales were less profitable over the last three years as its earnings per share fell by 30.8% annually, worse than its revenue declines
- High net-debt-to-EBITDA ratio of 7× could force the company to raise capital at unfavorable terms if market conditions deteriorate
B&G Foods’s stock price of $4.40 implies a valuation ratio of 6.3x forward P/E. Read our free research report to see why you should think twice about including BGS in your portfolio.
Anheuser-Busch (BUD)
Market Cap: $120.7 billion
Born out of a complicated web of mergers and acquisitions, Anheuser-Busch InBev (NYSE: BUD) boasts a powerhouse beer portfolio of Budweiser, Stella Artois, Corona, and local favorites around the world.
Why Are We Cautious About BUD?
- Sizable revenue base leads to growth challenges as its 2.1% annual revenue increases over the last three years fell short of other consumer staples companies
- Shrinking unit sales over the past two years suggest it might have to lower prices to stimulate growth
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
At $70 per share, Anheuser-Busch trades at 8.4x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why BUD doesn’t pass our bar.
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
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