Coronavirus Bumps Up Grocery Stores Stocks: 3 Best Bets
Zacks Investment Research | Mar 23, 2020 12:33AM ET
Homebound Americans are fueling strong demand for groceries as they avoid stepping outdoors over fears of contracting the novel coronavirus. In addition, the majority of companies in the country advised their employees to work remotely, compelling the corporate crowd to stay put and opt for online food delivery services rather than visit restaurants and bars.
This increased demand has led to shares of companies operating in the said arena to edge higher over the past month, despite the broader markets being hit hard. One could take a look at these stocks from an investment perspective, as shifting consumer preference toward new trends could support these equities.
Supermarkets Surge Amid a Market Gone Berserk
In just a month, the three major indexes of the country have shed more than 25% each, slipping into recession. The Dow Jones industrial Average declined 33.9%, the broader S&P 500 lost 27.8% and the tech-laden Nasdaq Composite shed 25.3% since Feb 23.
After all, smooth operations of businesses and supply chains are disrupted, given the government’s attempts to contain the virus by imposing lockdowns. Amid the shutdown of educational institutions and companies, such as Alphabet Inc. (NASDAQ:GOOGL) asking about 100,000 of its staff across the United States and Canada to work from home earlier in March, major automakers too now joined the club.
Last week, Detroit’s Big Three automakers, namely Ford Motor Co. (NYSE:F) , Fiat Chrysler Automobiles N.V. (NYSE:F) and General Motors Co. (NYSE:GM) announced that they temporarily planned to close all factories across North America from Mar 19 through Mar 30, per a CNBC report . In addition, restaurants and bars across at least 19 states stalled their operations as more “social-distancing” measures are in place.
In a situation like this, homebound Americans are only stepping out to nearby supermarkets for stashing their pantries. A growing number of consumers have now resorted to ordering their groceries and meal kits online as well. The online grocery shopping space exploded in recent weeks with downloads of Instacart, Walmart (NYSE:WMT)'s grocery app and Shipt rising 218%, 160%, and 124%, respectively, on Mar 15 from the registered 2019-level, as CNN cited.
In fact, shares of supermarkets and food delivery services, such as The Kroger Co. (NYSE:KR) , Ingles Markets, Inc. (NASDAQ:IMKTA) and Blue Apron Holdings, Inc. (NYSE:APRN) have moved north in the past month given the uptick in demand for the food products they offer. This development is in clear contrast to the broader markets’ performance in the same time frame.
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Since there is no definitive idea regarding the duration of the quarantine, one could very well deem the trends to last long.
3 Stocks to Consider
We rounded up three stocks that offer food items and groceries, all carrying a Zacks Rank #2 (Buy) or 3 (Hold). You can see .
Blue Apron offers ready-to-cook meal kits, which have witnessed strong demand in recent weeks as more Americans are homebound. The Zacks Consensus Estimate for Blue Apron’s next-year earnings has moved 5% north in the past 60 days. The Zacks Food - Miscellaneous industry company’s expected earnings growth rate for the current year is 4.3%. Blue Apron carries a Zacks Rank #2. Shares of the company gained 227.4% in the past one month.
Kroger operates supermarkets and marketplace store that offer combination food, natural and organic food etc. The Zacks Consensus Estimate for Kroger’s next-year earnings has moved 2.1% north in the past 60 days. The Zacks Retail - Supermarkets industry company’s expected earnings growth rate for the current year is 7.3%. Kroger carries a Zacks Rank #3. Shares of the company gained 6.7% in the past one month.
Ingles Markets is the operator of a chain of supermarkets. Ingles Markets offers a wide range of food products, produce, frozen foods, dairy and meat etc. The Zacks Retail - Supermarkets industry company’s expected earnings growth rate for the current year is 6.7%. Ingles Markets carries a Zacks Rank #3. Shares of the company gained 6% in the past one month.
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