3 Defensive Stocks Analysts Are Bullish on to Kick Off the Year

Key Points

• Defensive stocks can offer a portfolio ballast when the market takes a turn.
• Additionally, ones with significant upside potential can benefit when times are good. Analysts on Wall Street are signaling that possibility for these stocks.
• These three stocks include some of the most prominent American firms, historically and today.

Defensive stocks are a key part of the market that can provide significant portfolio benefits. Although they often are not thought of as market outperformers, that certainly is not always the case. Defensive stocks tend to outperform in bear markets and economic downturns. In the case of consumer staples stocks, the essential nature of their products adds stability to their revenues when times are tough. Below, I’ll detail three important consumer staples stocks that Wall Street analysts are upgrading as 2025 gets into full swing. All return and implied upside figures are as of the Jan. 14 close.

Walmart: America’s Retail King Upgraded Again

A quintessentially American defensive stock starting the new year with upgrades is Walmart NYSE: WMT, as analysts at Wells Fargo and Barclays reiterated overweight ratings and increased their price targets. Wells Fargo increased its target from $96 to $100, while Barclays' target increased to $98 from $90. The average of these two targets implies approximately 9% upside in shares of Walmart.

Despite this moderate amount of upside, it's important to note that Walmart was among the most upgraded stocks of 2024. Targets on the company rose throughout the year, largely moving in tandem with the company’s rising share price. Over the past year, Walmart stock has appreciated nearly 71%. Despite the company’s dividend yield being nothing special at just 0.9%, data suggests the stock could provide significant benefits in a downturn. Walmart’s five-year monthly beta is 0.52. This indicates that when the overall market moves up or down by 10% in one month, Walmart moves 5.2% that month, on average.

Overall, Walmart impressed throughout 2024 as it released its financial results. The company slightly beat estimates on sales every quarter. Particularly impressive were its substantial beats on adjusted earnings per share (EPS) each quarter. The company beat estimates massively in the three months ended Apr. 30 by over 14%. The company’s e-commerce business has been a significant source of growth. Comparable U.S. e-commerce sales grew by 22% last quarter and accounted for 55% of the company’s overall U.S. comparable sales growth. The e-commerce business still has significant room to grow, as it is still a fraction of the size of Amazon.com NASDAQ: AMZN.

Coca-Cola: Price Targets Show Bubbling Upside

Another one of the most well-known brands in the United States, Coca-Cola NYSE: KO, is among the defensive stocks analysts are upgrading to kick off 2025. Analysts at TD Cowen upgraded the stock from a Hold to Buy, placing a $75 price target on it.

Notably, Wells Fargo and Piper Sandler also issued ratings. Wells Fargo did lower its price target; however, it maintained its overweight rating on the stock. Piper Sandler initiated coverage on the name, setting a $74 price target and giving it an overweight rating.

The average of these targets comes in at $73 per share. Based on this, the consumer staples stock has an implied upside of nearly 18%. That’s not too bad for an extremely mature firm that also offers a solid dividend and stability during a potential downturn. The company’s dividend yield is 3.1%, significantly above that of the S&P 500 Index, which has around a 1.2% dividend yield. The company also maintains a low five-year monthly beta of 0.62.

McCormick: TD Cowen Heats Up Its Rating

The last stock lacks the name recognition of the other two, but those who use their spice drawer frequently likely know it well. McCormick & Company, Incorporated NYSE: MKC received a rating upgrade and price target increase from TD Cowen. The firm issued a buy rating on the stock and increased its price target from $86 to $90. The target implies shares of the company could rise over 25%.

The company offers a solid dividend yield of 2.5%, finding itself in the middle of the other two firms. The company’s five-year monthly beta is notably higher than the other two at 0.76. Although this means the stock may decline more in a downturn, it also means it could rise more in an overall market bull run.

Shares of the spice maker have appreciated moderately over the past year, providing a total return of 11%. The company beat its adjusted EPS estimates solidly in every 2024 quarter, contributing to its rise. McCormick sees hot sauce and spicy seasonings as strong growth drivers. It refers to these as “heat” products and projects that they will grow three times faster than “non-heat" products.