Three Consumer Stocks Set To Rip In 2020

Follow The Money To Profits

The consumer is the driving force of the U.S. economy. Statistics from the Bureau of Economic Analysis show Consumer Spending is nearly 70% of the nation’s total GDP. That’s why consumer stocks are such a big deal. They command the largest share of U.S. business and, let’s face it if you want to make money you need to go where the money is.

The problem with consumer stocks is they can be so hit or miss. There are cyclical and non-cyclical trends to consider and that’s not even taking the consumer into consideration. Consumers are fickle, their tastes change without warning, today’s big name-brand can easily become tomorrow’s loser.

Coming back to the money. One way of finding great investments is by following the money. Consumer companies that are making money, expected to make money, and raising their guidance are a good place to start.

Conagra's Restructuring Pays Off In Spades

Conagra (CAG) is a food manufacturer operating in several segments. The company has been working hard over the past several years to reshape itself into a company that can compete in today’s changing market. The plan consists mostly of divesting older, under-performing and lower-quality brands in favor of building a portfolio of potential growth-drivers. The plan is working.

Conagra reported earnings for the 3Q this morning and blew past the expectations. The company reported an 18.5% YOY increase in revenue that was aided by expansion within all operating segments. The GAAP EPS fell slightly shy of estimates but that’s not much of a worry. The adjusted-EPS was well above consensus and the outlook for next year is market-moving.

Conagra’s guidance for next year was lowered from the previous range but not as much as expected. The 12.4% to 12.9% revenue growth is above the 12.3% consensus and comes with mitigating factors. The guidance was lowered due to the divestiture/exiting of two businesses that had been included before.

In addition, the company says it is achieving the expected cost-synergies from the Pinnacle Foods acquisition at a faster rate than expected. The total savings to-date is just over $112 or the $285 first expected. Conagra now expects to achieve another $20 million by the end of the calendar 2020. The best part is the money is already slated for reinvestment into other profit drivers so we can expect growth to continue into 2021. Shares of CAG are up about 12% just after the session open.

Rite Aid, A Reversal Is Underway

Rite Aid (RAD) has been in a long, protracted, and steady downtrend for over two years. The bad times started when the merger with Walgreen’s Boots Alliance failed and just got worse, and worse, and worse. Until now that is. Now it looks like Rite Aid is on track to reverse years of a downtrend and deliver double-digit returns to traders in 2020.

Rite Aid reported earnings this morning and also delivered consensus-beating results. The drugstore chain says revenue grew 0.2% over the last year but that’s not what got investor attention. Non-GAAP EPS beat consensus by nearly 220% as profitability improves. Guidance for the coming year was updated due to the results. The revenue outlook is unchanged but EPS guidance is much improved and above expectations. Shares of Rite Aid surged more than 40% after the open to break out to a new 8-month high.

Chicken Sandwiches Are Driving Poultry Prices Higher

Sanderson Farms (SAFM), a national level poultry-producer, reported earnings this morning as well and also delivered good results. The company says a counter-cyclical trend in consumer tastes is driving strength in poultry pricing. These trends led the company to beat 4Q estimates and up the outlook for next year. According to them, the recent success of well-publicized chicken sandwich specials is helping to support demand. Pricing is also supported by swine flu in China and other macro-global stories that will continue to support pricing through 2020. Shares of Sanderson Farms surged more than 6.5% to break out to a new all-time high following the report.