The consumer staples sector has been performing really well in third-quarter 2016 despite macroeconomic headwinds. Though consumer confidence retreated in October after surging in September and August, experts believe that the overall sentiment of the economy is that it is gradually picking up steam.

Improving home sales, stepped-up economic activities, higher business and government spending, and a buildup in inventories have boosted U.S. economic growth. Decreasing commodity costs are also helping improve profit margins for certain staples companies.

However, many consumer staples stocks are still suffering from continued pressure in the face of foreign exchange headwinds, sluggish growth in the emerging markets, declining unit volumes and other global issues.

Further, several events like the debate between Donald Trump and Hillary Clinton for the U.S. Presidential election, along with a sudden surge in oil prices and uncertainties surrounding the Fed rate hike, are expected to spur market volatility and unnerve investors in the near term.

In such a scenario, investors are resorting to safe haven stocks, and the consumer staples sector – normally defensive in nature – appears quite reliable.

Efficient pricing, solid cost-reduction initiatives, lucrative acquisitions and efforts to enhance product portfolio cushion these companies from macroeconomic hurdles, consequently driving their bottom lines.

Here, we have identified five stocks, which not only have strong fundamentals but are also likely to report solid quarterly numbers. So it’s better to grab these consumer staples stocks now before they start touching new highs after their quarterly releases.

The Way to Pick the Right Stocks 

Since there are quite a number of companies in the consumer staples space, it may be difficult to pick the right stocks for your portfolio. One way to narrow down the list of choices is by looking at stocks with a favorable Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) – and a positive Earnings ESP.

Earnings ESP is our proprietary methodology to determine which stocks have the best chance to surprise in their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

5 Prominent Choices

You may bet on Hormel Foods Corp.(HRL - Free Report) , which produces and markets various meat and food products worldwide. The stock has a Zacks Rank #3 and an Earnings ESP of +6.67%. The Zacks Consensus Estimate for the fourth quarter of fiscal 2016 stands at 45 cents a share.
This Austin, MN-based company delivered an average positive earnings surprise of 9.05% over the trailing four quarters and has a long-term earnings growth rate of 9.58%. The company is slated to report results on Nov 22.

Investors can also count on Inter Parfums Inc. (IPAR - Free Report) , which is a worldwide provider of prestige perfumes and mass market perfumes and cosmetics. The stock has an Earnings ESP of +2.04% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company delivered an average negative earnings surprise of 2.24% over the trailing four quarters and has a long-term earnings growth rate of 15.00%. The Zacks Consensus Estimate for the third quarter of 2016 stands at 49 cents a share. The company is expected to report results on Nov 8.

We also suggest investing in Spectrum Brands Holdings, Inc. (SPB - Free Report) , which manufactures and sells consumer products worldwide. It operates under five segments: Global Batteries & Appliances, Global Pet Supplies, Home and Garden, Hardware & Home Improvement and Global Auto Care. The stock has a Zacks Rank #2 and an Earnings ESP of +3.88%. The Zacks Consensus Estimate for the fourth quarter of fiscal 2016 stands at $1.29 per share.

The company posted an average positive earnings surprise of 5.63% over the trailing four quarters and has a long-term earnings growth rate of 13.35%. It is expected to report results on Nov 17.

Laurel, MI-based Sanderson Farms, Inc. (SAFM - Free Report) can also be an attractive stock for investors. This poultry processing company has a Zacks Rank #1 and an Earnings ESP of +6.06%. The Zacks Consensus Estimate for the fourth quarter of fiscal 2016 stands at $2.64 a share. The company posted an average positive earnings surprise of 25.01% over the trailing four quarters and has a long-term earnings growth rate of 5.00%. It is expected to report results on Dec 15.

Another beverage company that can add value to your portfolio is Cott Corporation (COT - Free Report) . The company delivered an average positive earnings surprise of 105.51% over the trailing four quarters. Currently, it has a Zacks Rank #3 and an Earnings ESP of +16.67%. The Zacks Consensus Estimate for the third quarter of 2016 stands at 6 cents a share. The company is expected to report results on Nov 10.

Bottom Line

We believe that investing in these companies, which have an earnings beat potential, should yield strong returns for your portfolio in the short term.