Staples quant check ahead of Q3 earnings: Kroger, Philip Morris remain top-rated

[Trolley filled with groceries in wholesale store Landscape]
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With Q3 earnings around the corner, we will take a deeper dive into consumer staples sector performance and its constituent stocks, focusing on Seeking Alpha's quant rating system.

BEST QUANT-RATED DEFENSIVE STOCKS

The top quant-rated consumer staple stock in the Consumer Staples Select Sector SPDR Fund (NYSEARCA:XLP [https://seekingalpha.com/symbol/XLP]) was Kroger (KR [https://seekingalpha.com/symbol/KR]) with a quant rating of 4.08 [https://seekingalpha.com/symbol/KR/ratings/quant-ratings] and the highest factor grades given to profitability and revisions. The company's performance is closing the gap with its peers, but its valuation still remains attractive compared to Walmart (WMT [https://seekingalpha.com/symbol/WMT]), earning the grocery chain an upgrade to Buy from Neutral [https://seekingalpha.com/news/4495646-kroger-deserves-a-re-rating-considering-consistent-performance-vs-peers---roth-capital] at Roth Capital with a corresponding 14% hike to its price target. This is illustrated by Kroger’s identical store sales which improved from flat to up 3.4% (sixth straight quarter of growth) in Q2.

The second-best quant-rated staples stock is tobacco company Philip Morris (PM [https://seekingalpha.com/symbol/PM]) with a 4.07 [https://seekingalpha.com/symbol/PM/ratings/quant-ratings] score. An SA contributor gave a Strong Buy rating, citing [https://seekingalpha.com/article/4826514-philip-morris-recent-sell-off-is-an-excellent-buying-opportunity] a recent sell-off, with long-term growth prospects outweighing short-term concerns. He wrote, "Philip Morris International (NYSE:PM [https://seekingalpha.com/symbol/PM#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link]) struggled with currency headwinds, regulatory issues, and fierce competition for years. While the industry leader has established the company as a market leader with many of the tobacco producers' products across various segments, PM's growth was mediocre for years."

Next comes The Kraft Heinz Company (KHC [https://seekingalpha.com/symbol/KHC]) with a quant rating of 3.80 [https://seekingalpha.com/symbol/KHC/ratings/quant-ratings], a contributor recently wrote [https://seekingalpha.com/article/4828296-berkshire-hathaway-should-acquire-all-of-kraft-heinz-rating-upgrade], 'Kraft Heinz is deeply undervalued, with slowly improving fundamentals and a compelling free cash flow yield, making it a top defensive food selection.' Companies that follow are Dollar Tree (DLTR [https://seekingalpha.com/symbol/DLTR]) and Tyson Foods with ratings of 3.77 [https://seekingalpha.com/symbol/DLTR/ratings/quant-ratings] and 3.60 [https://seekingalpha.com/symbol/TSN/ratings/quant-ratings].

WORST QUANT-RATED DEFENSIVE STOCKS

The worst quant rating baggers were Clorox (CLX [https://seekingalpha.com/symbol/CLX]), Constellation Brands (STZ [https://seekingalpha.com/symbol/STZ]), and Hormel Foods (HRL [https://seekingalpha.com/symbol/HRL]) with scores of 1.48 [https://seekingalpha.com/symbol/CLX/ratings/quant-ratings], 1.6 [https://seekingalpha.com/symbol/STZ/ratings/quant-ratings]7, and 1.71 [https://seekingalpha.com/symbol/HRL/ratings/quant-ratings] respectively. The lowest factor grade common to all is growth.

Broadly, of the 37 stocks that are part of the XLP fund, 5 get a Buy rating, 2 get a Sell rating, and 1 gets a Strong Sell rating, while 29 bag a Hold rating. The overall health score of the fund constituents is 2.96, which is considered Neutral.

The consumer staples sector (NYSEARCA:XLP [https://seekingalpha.com/symbol/XLP]) fund gets a quant rating of Strong Sell and a score of 1.31 [https://seekingalpha.com/symbol/CLX/ratings/quant-ratings]. [https://seekingalpha.com/symbol/XLP/ratings/quant-ratings]Staples are known to be less susceptible to economic cycles and frequently lag in a risk-on market.

The Consumer Staples Select Sector SPDR Fund (NYSEARCA:XLP [https://seekingalpha.com/symbol/XLP]) about 6% weighting on the S&P 500 (SP500 [https://seekingalpha.com/symbol/SP500]), saw a drop of 4.4% in Q3 2025. This compares to the broader SPDR S&P 500 ETF Trust (NYSEARCA:SPY [https://seekingalpha.com/symbol/SPY]) gain of 7.9%.

The Consumer Staples Fund (NYSEARCA:XLP [https://seekingalpha.com/symbol/XLP]) was the worst performer in Q3, while Technology (XLK [https://seekingalpha.com/symbol/XLK]) +12.3%, Communications (XLC [https://seekingalpha.com/symbol/XLC]) +9.8% and Consumer Discretionary (XLY [https://seekingalpha.com/symbol/XLY]) +9.8% led the gains.

The XLP Fund (NYSEARCA:XLP [https://seekingalpha.com/symbol/XLP]) has about $15.9B in AUM and saw a net outflow of ~$683M in Q3, versus SPY's (SPY [https://seekingalpha.com/symbol/SPY]) outflow of $13.1B.

Broadly, "Seven of the eleven sectors are projected to report year-over-year growth, led by the Information Technology, Utilities, Materials, and Financials sectors. On the other hand, four sectors are predicted to report a year-over-year decline in earnings, led by the Energy and Consumer Staples sectors," according to Factset data.

COMMENTS

SA contributor wrote [https://seekingalpha.com/article/4827092-xlp-why-investors-should-rotate-into-consumer-staples], "Consumer Staples Select Sector SPDR Fund stands out as a defensive play amid clear signs of a slowing U.S. economy and rising unemployment."The contributor explained, "While the broad equity market trades at historically rich valuations, staples trade at a steep discount and are well positioned to deliver relative outperformance."

Previously, an SA's Investing Group leader, mentioned [https://seekingalpha.com/article/4766251-xlp-i-like-consumer-staples-but-im-not-buying-this-etf], "Consumer staples stocks should be well-positioned as the overall economy slows down."

ETFs linking to consumer staples: (NYSEARCA:VDC [https://seekingalpha.com/symbol/VDC]), (NYSEARCA:FXG [https://seekingalpha.com/symbol/FXG]), (NYSEARCA:IYK [https://seekingalpha.com/symbol/IYK]), (NYSEARCA:KXI [https://seekingalpha.com/symbol/KXI]), (NYSEARCA:FSTA [https://seekingalpha.com/symbol/FSTA]), (NASDAQ:PSL [https://seekingalpha.com/symbol/PSL]).

MORE ON CONSUMER STAPLES

* XLP: Under Pressure, Why Investors Should Rotate Into Consumer Staples [https://seekingalpha.com/article/4827092-xlp-why-investors-should-rotate-into-consumer-staples]
* Safe But Sorry - The Case For Holding, Not Buying, KXI [https://seekingalpha.com/article/4819817-safe-but-sorry-the-case-for-holding-not-buying-kxi]
* VDC: Vanguard Tackles The Popular, Low-Volatility Consumer Staples Sector Via This ETF [https://seekingalpha.com/article/4819677-vdc-vanguard-tackles-popular-low-volatility-consumer-staples-sector-via-etf]
* Short interest gauge for consumer staples in September: Philip Morris and P&G stay least shorted [https://seekingalpha.com/news/4503513-short-interest-gauge-for-consumer-staples-in-september-philip-morris-and-pg-stay-least-shorted]
* Coca-Cola, McDonald's, and Philip Morris gain as investors turn defensive amid rising U.S.-China tension [https://seekingalpha.com/news/4503370-coca-cola-mcdonalds-and-philip-morris-gain-as-investors-turn-defensive-amid-rising-us-china-tension]