Defensive Plays: 3 Consumer Staples Giants Showing Strength

Key Points

• The consumer staples sector has contended with multiple challenges in recent quarters, ranging from inflation and tariff concerns to waning consumer sentiment and more.
• Nonetheless, a number of prominent names in this sector may attract investors thanks to their strong defensive traits: significant pricing power, brand loyalty, dividends, and other factors.
• Constellation, Estée Lauder, and Mondelez may fall into this category.

The consumer staples sector has faced some significant challenges in recent months. Cost pressures due to persistent inflation, high commodity prices, and tariffs have damaged profit margins, while real average wages have fallen and caused consumers to tighten belts.

Investor attention has also turned more toward high-growth industries like AI, leaving consumer staples names facing high valuations and limited upside.

However, with economic uncertainty continuing to loom and many investors increasingly taking defensive postures, some stocks in the sector may be growing more attractive.

Major consumer staples firms enjoy the benefits of significant brand loyalty, pricing power, a history of dividends, and rising international profiles. Below we explore three consumer staples giants that might be worth a closer look heading into the final months of the year.

Constellation's International Presence, Brand Loyalty Could Drive 33% in Upside Potential

Constellation Brands Inc. NYSE: STZ is a significant producer, importer, and seller of alcoholic beverages in the United States and abroad, with brands including Modelo, Corona, Robert Mondavi Winery, and many others. Buoyed this month by news that Warren Buffett recently more than doubled his position in STZ shares, the company's year-to-date (YTD) decline of nearly 29% makes it an attractive value play with a price/sales ratio of just 2.56.

Despite reports that alcohol consumption in the United States is faltering, the global alcohol market is forecast to reach about $3 trillion by 2030. Thanks to its strong international presence and exceptional customer loyalty, Constellation is poised to benefit, particularly among Hispanic- and Latino-identifying consumers.

Some of the company's most prominent brands—Modelo and Corona, for example—are gaining market share, while Constellation's portfolio of premium and craft beverages increasingly appeals to younger customers.

Although Constellation's dividend payout ratio is a troubling -170.7%, the company nonetheless has maintained years of dividend increases and a yield of 2.56%. Analysts do see earnings growing by about 7% in the coming year, which may help to allay concerns.

Further, Wall Street expects that STZ shares could have more than 33% in upside potential, as the stock has earned a collective Moderate Buy rating.

Estée Lauder Benefits From Cost-Cutting, Margin Improvements

The Estée Lauder Companies Inc. NYSE: EL is one of the most visible skin care, makeup, fragrance, and hair care products firms worldwide. The company is coming off of a mixed fourth quarter of its fiscal 2025, in which EPS and revenue both fell year-over-year (YOY) while the former ended up higher than analysts had predicted.

The firm's products are fairly heavily impacted by widespread dampening in consumer sentiment, which could continue to weigh down sales for the foreseeable future.

On the other hand, EL has been quite successful in managing its latest organizational transformation and is on track to save up to $1 billion annually through its right-sizing efforts. Gross margin expanded by 230 basis points to 74% in the latest quarter, and management has also forecast significant improvement in operating margin in the coming quarters.

These developments—combined with EL's leading positions in prestige beauty in multiple markets around the world—should help to carry the company through external and macro headwinds. Some of the company's value metrics, such as price/sales ratio, have recently been lower and thus more compelling than they have been in many years.

Mondelez Remains Steady Thanks to Market Share, Pricing Power, Loyalty

Snack food and beverage giant Mondelez International NASDAQ: MDLZ is diversified and hardy. Its substantial pricing power and brand loyalty allow it to hike prices to counter volume slippage and maintain organic growth.

For example, although EPS fell YOY in the latest quarter, Mondelez still beat analyst expectations; revenue, meanwhile, strong performances in emerging markets helped to boost revenue by about 8% YOY.

Mondelez enjoys one of the most substantial market shares of any food company. Its robust fundamentals and steady performance have allowed it to boost its dividend yield to 3.07%, one of the highest levels for this metric in many years.

With a sustainable dividend payout ratio and well over a decade of distribution increases, as well as strong free cash flow, which is likely to top $3 billion this year, Mondelez appears to be able to weather just about any storm while continuing to provide investors a solid recurring passive income stream. 

The firm remains a Moderate Buy with more than 17% in upside potential, per analysts.