With inflation still running above the Fed’s 2% target and some officials openly talking about more rate hikes, rate sensitive stocks can feel like a moving target. Essential consumer goods can look relatively steady when borrowing costs rise and growth stories lose their shine. This article walks through three consumer staples stocks exposed to this backdrop, and explains how the same news can create both opportunity and risk for your portfolio.

The stocks below are just a sample, and the full screen surfaced 32 more defensive consumer staples companies with equally compelling stories that are not covered here. To identify and analyze the highest conviction ideas in this space, head straight to the Defensive Consumer Staples Stocks screener.

J&J Snack Foods (JJSF)

J&J Snack Foods is a US snack producer that sells soft pretzels, churros, frozen novelties, bakery items and frozen beverages into food service locations, entertainment venues and supermarkets across North America. Its products show up in places like stadiums, movie theatres, theme parks, restaurants and convenience stores, which helps spread revenue across many day to day eating occasions. The company is currently valued at about US$1.6b.

Investors looking for defensive exposure may find J&J Snack Foods interesting because it sits at the crossroads of everyday treats and long term cost efficiency work. Management is pushing Project Apollo to streamline plants and distribution, while also focusing on higher protein snacks, pet treats and frozen novelties that reflect changing tastes. At the same time, recent earnings softness, a P/E well above the estimated fair multiple and ongoing spending on marketing and automation mean that a return to stronger margins is uncertain. The combination of index shifts, buybacks, and a richer dividend yield makes this a story that may warrant closer attention for those interested in how a consumer staples stock behaves as rates remain elevated.

J&J Snack Foods sits at the intersection of everyday indulgence and long term efficiency work. Yet the real story may be how those plans line up against its valuation and earnings path in the DCF valuation analysis for J&J Snack Foods

Build your own consumer staples shortlist

J&J Snack Foods and the two other consumer staples stocks in this article all came from a single screener, but the real edge comes when you tailor it to your own rules. Use our flexible Screener to blend filters like valuation, growth potential, balance sheet strength, risks and dividends, or browse through our curated Investing Ideas.

A.G. BARR (LSE:BAG)

A.G. Barr is a long established UK soft drinks producer behind brands such as IRN BRU, Rubicon and MOMA, selling everything from energy and sports drinks to cocktail mixers and oat based beverages across the UK and abroad. Most of its revenue comes from Soft Drinks at about £382 million, with Cocktail Solutions contributing around £36 million and Other activities about £20 million. The company currently has a market value of roughly £677 million.

In a world where rate hikes remain on the table, A.G. Barr offers exposure to everyday drinks demand that tends to be relatively steady through economic cycles. Analysts expect both earnings and revenue to grow, yet the stock still trades on a P/E that sits below many European beverage peers. This can appeal to investors who care about paying a measured price for resilient cash generation. The flip side is that dividend payments are not fully backed by free cash flow and the balance sheet relies on external borrowing, so income focused investors may want to look closer before assuming this is a low risk bond proxy.

A.G. Barr’s steady drinks demand and lower P/E may signal something the market is overlooking. Read the full 5 key rewards and 1 important warning sign to understand what could shift this story next.

Estée Lauder Companies (EL)

The Estée Lauder Companies is a global beauty group that sells prestige skin care, makeup, fragrance and hair care through department stores, duty free, specialty retailers and its own stores and websites. Skin care is the core of the business at about $7.2b of revenue, followed by makeup at about $4.2b, fragrance at about $2.7b and hair care at about $600 million, with only a small contribution from other activities. The company’s current market value is about $31.5b.

Estée Lauder sits in the sweet spot of this screener because it sells everyday personal care products that tend to hold up when rate worries resurface. It is also a turnaround story that analysts and management are watching closely. The company is leaning heavily on prestige skin care, new fragrance launches like Glimmer and a growing digital and emerging markets footprint. At the same time, it is absorbing higher restructuring costs and softer demand in China and travel retail. Forecasts of faster earnings growth, a Simply Wall St DCF that points to upside and a sizeable debt load create a mix of quality brands, potential recovery and real risk that rewards a closer look at what is driving the current valuation and analyst expectations.

Estée Lauder’s recovery story hinges on whether prestige skin care and new fragrance launches can outpace restructuring costs and debt. Get the full context in the analysis report for Estée Lauder Companies

Seeking Alternatives Beyond Consumer Staples?

Fresh stock ideas do not stay under the radar for long. The fastest moves often happen before the crowd catches on. Scan these curated picks while it matters and consider them while they remain relevant.

• Target stable income streams before yields get compressed by renewed interest by using a curated set of income payers inside the 9 dividend fortresses.
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• Prepare for potential changes in commodity sentiment by reviewing producers featured in the 31 elite gold producer stocks.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.