Best Income Stocks to Buy for Dec. 26

Zacks highlights three Zacks Rank #1 names — J&J Snack Foods (JJSF), Expeditors International (EXPD) and Estée Lauder (EL) — noting recent upward revisions to current-year consensus EPS estimates over the past 60 days of +6.5%, +6.9% and +4.9%, respectively. Each stock also offers income characteristics (JJSF 3.5% yield, EXPD 1.0%, EL 1.3%), positioning them as buy-ranked, income-oriented plays driven by improving analyst estimates and company fundamentals.

Analysis

Market structure: JJSF, EXPD and EL each gain from divergent but complementary demand tails — JJSF from sticky snack/foodservice and retail shelf-share, EXPD from reaccelerating freight volumes and inventory restocking, EL from travel-retail/China luxury normalization. Direct losers are lower‑cost private-label food producers and regional/asset‑light 3PLs with weaker balance sheets; pricing power shifts toward branded food and high-quality global forwarders. Cross‑asset: stronger earnings for these names should slightly tighten credit spreads of BB-B rated peers, lift selective high‑yield credit and reduce tail volatility in related equity options; EL is FX sensitive (USD moves ±3% alters reported EPS by mid-single digits).

Risk assessment: Key tail risks are sudden commodity inflation (palm oil/cocoa up >10% YoY), China/Asia consumer relapse, or a shipping shock (Suez/strike) that spikes freight rates and disrupts EXPD margins; regulatory risks include food safety recalls or cosmetics ingredient bans. Immediate (days): stock reactions to any holiday trading volume and estimate revisions; short (weeks‑months): seasonal sales data, freight throughput and China retail metrics; long (quarters‑years): margin sustainability, buyback/dividend trajectories and market share shifts. Hidden dependencies include EL’s outsized exposure to travel retail and EXPD’s reliance on spot freight liquidity.

Trade implications: Tactical longs: JJSF (2–3% position) ahead of Q1 cadence given a 6.5% EPS upgrade, financed by selling 60‑day 6% OTM calls to harvest 3.5% yield; EXPD (1.5–2%) via 9–12 month LEAP 5–10% OTM calls to capture freight normalization, paired with 1% short of a weaker 3PL (e.g., XPO) to express relative strength. EL is a selective 1–2% buy on further China/tourism signals — prefer 3–6 month call spreads to limit premium outflow; trim positions if shares rally >15% pre‑earnings or if key KPIs miss by >3–5%.

Contrarian angles: Consensus may underprice downside if macro slows — EXPD and EL can derate quickly on a global goods demand pullback; JJSF’s 3.5% yield implies stagnation, so a fall in ingredient costs or renewed foodservice growth could re-rate it >20%. Historical parallel: 2016 post‑shipping rebound where forwarders initially outperformed then lagged as volumes normalized; watch inventory/sales ratios — a >10% sequential drop in retailer inventories would be an early warning to flip longs to neutral.

Key Decisions for Investors

• Establish a 2–3% long position in JJSF (shares) within 2 weeks, simultaneously sell 60‑day calls 6% OTM to collect income; set tactical stop‑loss at -12% and take-profit at +20% or on EPS guide‑ups.
• Initiate a 1.5–2% exposure to EXPD via 9–12 month LEAP calls (5–10% OTM) to capture freight normalization; hedge by shorting 1% in a weaker 3PL (e.g., XPO) and liquidate if freight volume indicators fall >10% MoM or revenue guide cut >3%.
• Open a 1–2% position in EL using a 3–6 month call spread (moderate debit) and add on confirmed China/travel‑retail recovery (ticket sales, tourism flows up >15% YoY); trim if USD strengthens >3% vs. basket or if EL misses revenue by >4%.
• Reduce 2–3% exposure to low‑margin regional logistics and commoditized cosmetics peers over the next month, reallocating proceeds into EXPD and JJSF; reassess if input commodity prices (palm oil, cocoa) rise >8% YoY which would compress margins materially.