Coca-Cola (KO (opens in new tab)) earnings topped Wall Street's third-quarter earnings estimates Tuesday, joining a parade of other consumer staples (opens in new tab) companies whose operations are holding up well despite a sluggish economy and inflationary pressures.
Rival PepsiCo (PEP (opens in new tab)) likewise beat analysts' projections earlier this earnings season and, like KO, raised its full-year forecast. Meanwhile, consumer products giants Nestle (NSRGY (opens in new tab)) and Procter & Gamble (PG (opens in new tab)) posted better-than-expected sales a week ago.
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Consumer staples stocks are supposed to offer downside protection when the market is selling off, and they have certainly been holding up their end of the defensive bargain so far in 2022. The consumer staples sector of the S&P 500 is off 9.1% for the year-to-date to beat the broader market by more than 10 percentage points. Only the energy and healthcare sectors have done better, and only the former has generated positive returns in 2022.
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Coca-Cola, a member of the Dow Jones Industrial Average, is benefitting from pricing power (opens in new tab). In other words, the fizzy drinks maker is able to pass rising input costs along to consumers in the form of higher prices.
Indeed, pricing power is a key reason that Coca-Cola is not only one of the top Dow stocks to buy now (opens in new tab), but also happens to be one of the best stocks to buy for a bear market (opens in new tab).
Pepsi, P&G and Nestle have also been able to lean on their customers' brand loyalty in order to prevent them from trading down to less expensive alternatives.
None of this is a secret, of course, and these well-known stocks' respective resilience is already reflected in analysts' recommendations. So we decided to go looking for consumer staples stocks that Wall Street likes better than the aforementioned names at current levels.
To that end, we screened the S&P 500 for industry analysts' top-rated consumer staples stocks, using data from S&P Global Market Intelligence.
A quick note on S&P Global Market Intelligence's ratings system: S&P surveys analysts' stock recommendations and scores them on a five-point scale, where 1.0 equals a Strong Buy and 5.0 is a Strong Sell. Any score equal to or below 2.5 means that analysts, on average, rate the stock at Buy. The closer a score gets to 1.0, the stronger the consensus Buy recommendation.
That led us to the following five S&P 500 consumer staples stocks, which we list below by strength of analysts consensus recommendations, from lowest to highest conviction. (Market data and analysts' ratings are as of Oct. 24.)
Estee Lauder (EL (opens in new tab)), Walmart (WMT (opens in new tab)), Costco Wholesale (COST (opens in new tab)), Constellation Brands (STZ (opens in new tab)) and Mondelez International (MDLZ (opens in new tab)) made the cut.
Have a look at Wall Street's favorite S&P 500 consumer staples stocks to buy now – with consensus recommendations and implied upside to price targets – below:
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