Zacks Investment Ideas feature highlights: The Consumer Staples Sector SPDR ETF and Coca-Cola FEMSA
For Immediate Release
Chicago, IL – August 22, 2022 – Today, Zacks Investment Ideas feature highlights The Consumer Staples Sector SPDR ETF XLP and Coca-Cola FEMSA KOF.
This Soft Beverage Bottler Is Trouncing the S&P 500
The bulls have certainly enjoyed the recent rally, as technology and growth stocks have led the way higher following the June bottom. As we draw nearer to the historically weak month of September, investors may be wondering if the momentum can continue at its current pace. From the June 16th bottom, the Nasdaq has risen nearly 22%, while the S&P has rallied nearly 17%. The reversal in the stock market has been fast and furious, leaving many investors frustrated by this year's whipsaw action.
While the growth sectors of information technology and consumer discretionary have been the largest beneficiaries off the lows, earlier in the year witnessed strength in more defensive areas such as consumer staples. After lagging for the better part of 2021, the consumer staples sector has held up extremely well this year and is nearing a level where it may resume its outperformance.
The Consumer Staples Sector SPDR ETF is showing resilience recently and is up nearly 10% in the past year, while the S&P 500 is down nearly 3% over this timeframe. XLP is nearing a price level where its relative strength may find support.
While this year's trajectory is a positive for the Consumer Staples Sector SPDR ETF, it's important to state that defensive sectors leading can be a warning sign. Most investors are expecting the growth names that have rallied recently to continue doing so, but as we know the crowd is usually wrong. When defensive ETFs such as XLP come into favor, history has shown that increased volatility may be in store in the coming months. Prior non-recessionary periods in which the S&P 500 experienced negative returns have tended to coincide with defensive sector outperformance, as we saw earlier in the year.
The Zacks Consumer Staples sector has held up well this year, down just 1% versus a more than 10% loss for the S&P 500. Within this sector, the Zacks Beverages – Soft Drinks industry group is ranked in the top 35% out of approximately 250 industry groups. This group has returned 6% this year, widely outperforming the S&P. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform the market over the next 3 to 6 months.
Historical research studies have shown that roughly half of a stock's price appreciation can be attributed to its industry group. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
Let's dive deeper into a highly rated stock is not only a component within this powerful sector and industry combination, but has weathered the volatility this year and is making new 52-week highs.
Coca-Cola FEMSA
Coca-Cola FEMSA is a franchise bottler that produces, markets, and sells Coca-Cola trademark beverages. A subsidiary of Fomento Economico Mexicano and based out of Mexico City, the company offers sparkling beverages, juice drinks, coffee, teas, sports and energy drinks, and plant-based items. KOF provides its products through supermarkets, discount and convenience stores, restaurants, bars, and stadiums. The company also distributes and sells Heineken beer products in Brazil.
A Zacks Rank #1 (Strong Buy) stock, KOF has surpassed earnings estimates in each of the last four quarters, with an average positive surprise of 26% in the past year. Coca-Cola FEMSA most recently reported Q2 EPS of $1.10/share back in July, a +48.65% surprise over the $0.74 consensus estimate. KOF shares have climbed 17% over the past year and are currently hitting 52-week highs.
Analysts have been raising earnings estimates for the full-year outlook. The 2022 EPS has increased 14.98% to $3.53/share. Sales are expected to climb 12.12% to $10.72 billion.
Make sure to keep an eye on KOF as we move further into the third quarter.
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Coca Cola Femsa S.A.B. de C.V. (KOF) : Free Stock Analysis Report
Consumer Staples Select Sector SPDR ETF (XLP): ETF Research Reports
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