With earnings season in full swing, ASX investors may be wondering whether to buy Coles Group Ltd (ASX: COL) or Woolworths Ltd (ASX: WOW) shares ahead of their results.
As Australia's two major supermarkets, Coles and Woolworths receive a lot of attention.
With Australians visiting them regularly for grocery shopping, they are at the forefront of investors' minds.
However, according to at least one expert, there is currently a better opportunity elsewhere in the consumer staples sector.
With a market capitalisation of around $1.6 billion, this company is much smaller than Coles and Woolworths shares.
Can you guess what it is?
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Macquarie's consumer staples sector top pick
In a recent report, Australian Consumer, Macquarie Group Ltd (ASX: MQG) named Bega Cheese Ltd (ASX: BGA) as the consumer staples company with the most upside in its coverage universe.
The broker also named Bega Cheese in its SMID Best Buys July 2025 report, as a top pick in the small and mid-capitalisation space.
The company produces and sells a variety of dairy and food products, including household names such as Vegemite, Farmer's Union, and Dare.
The broker said:
Bega has momentum in its cost-out initiatives as well as key top-line growth opportunities. Despite Bega's interest in M&A, we highlight that its FY28 Strategy is not contingent on inorganic growth, and therefore execution on this provides upside risk.
It should be noted that while Macquarie has placed 'outperform' ratings on all three companies – Coles, Woolworths, and Bega Cheese – its price targets suggest investors will achieve the most upside from here by investing in Bega Cheese.
Macquarie has a price target of $24.10 on Coles Shares and $33.40 on Woolworths shares. This suggests a 20% and 10% upside, respectively, over the next 12 months, including capital growth and dividends.
Meanwhile, its price target on Bega Cheese shares is $6.40. Given that shares closed on Friday at $5.17, this suggests around 27% upside from here, including capital growth and dividends.
Bega's upcoming result
Bega Cheese will release its FY25 results on 21 August.
Management recently reiterated its EBITDA guidance of between $190 million and $200 million, and suggested the result would likely come in at the top end of this range.
Macquarie is expecting no major deviation from this, forecasting EBITDA of $199 million.
The broker is also expecting earnings per share (EPS) growth of 88% from the prior corresponding period, supported by a positive contribution from the Bulk business.
As for the future, Macquarie is expecting an EPS compound annual growth rate (CAGR) of 33% between FY24 and FY28.
Foolish Takeaway
Consumer staples companies are known to be stable and defensive businesses. Investors rarely expect significant upside from investing in this sector. However, Bega Cheese's share price has been on a strong upward trajectory since October 2023, doubling over that period. The better news for investors is that Macquarie believes the stock has further to run from here.
