People purchase staples during economic booms and downturns, making consumer staples stocks reliable performers regardless of the broader economic conditions. Additionally, the market is facing huge growth owing to rising consumer spending habits and more disposable income.
Amid this backdrop, fundamentally robust stocks The Procter & Gamble Company (PG), Colgate-Palmolive Company (CL), and Kimberly-Clark Corporation (KMB) stand to benefit from the industry’s tailwinds. Before delving into the stocks, let’s examine the industry dynamics.
In July, U.S. consumer spending exceeded expectations, demonstrating resilience even as inflation pressures continued to ease. The Commerce Department reported a 1% increase in advanced retail sales compared to the previous month.
These figures, adjusted for seasonality but not inflation, signal a strong consumer response amid economic challenges. Economists surveyed by Dow Jones had anticipated a modest 0.3% increase.
The latest report, coinciding with data showing a slight easing in inflation for July, further underscores the strength of U.S. consumer spending.
Richard de Chazal, a macro analyst at William Blair, noted that the report provides evidence of the U.S. consumer's surprising resilience. He emphasized that this solid performance contradicts concerns that consumers are on the verge of a significant downturn, suggesting a more stable economic outlook.
Moreover, U.S. consumer spending rose to $15.73 trillion in the second quarter of 2024, up from $15.64 trillion in the first quarter. The growth marks a new all-time high, continuing a long-term trend that dates back to 1950, with spending averaging $6.77 trillion over that period.
In addition, consumer staples, which include essential items such as food, household goods, and personal care products, continue to offer stability during market fluctuations. Due to their inelastic demand, these products maintain steady sales despite price changes, making the consumer staples industry a potentially resilient investment choice.
Let’s look at three fundamentally robust Consumer Goods stocks, starting with #3.
Stock #3: The Procter & Gamble Company (PG)
PG sells branded consumer packaged goods in various segments, including Beauty, Grooming, Health Care, Fabric & Home Care, and Baby, Feminine, & Family Care. It operates in around 70 countries and offers products under various brands, including Head & Shoulders, Herbal Essences, Tide, and others.
On May 21, PG Professional launched an expanded laundry care range with Tide Professional Commercial Laundry Detergent and Downy Professional Fabric Softener. These products cater to the rising demand for effective, health-conscious cleaning solutions by offering reliable performance in a single wash.
Tide Professional enhances versatility with liquid, powder, and Power PODS options, meeting various business needs. Available through select retailers and distributors nationwide, these choices support businesses in achieving high cleanliness and efficiency standards.
PG’s gross profit for the fiscal 2024 fourth quarter that ended June 30, 2024, increased 2.4% year-over-year to $10.18 billion. As of June 30, 2024, PG’s cash and cash equivalents stood at $9.48 billion, compared to $8.25 billion on June 30, 2023. Plus, its total assets amounted to $122.37 billion, up from $120.83 billion as of June 30, 2023.
Analysts expect PG’s revenue for the fiscal 2025 first quarter (ending September 2024) to increase marginally year-over-year to $22.08 billion. Its EPS for the current quarter is expected to rise 4.1% from the prior year’s period to $1.90. The company has also surpassed the consensus EPS estimates in all four trailing quarters.
PG shares have gained 11.5% over the past nine months and 10.4% over the past year, closing the last trading session at $168.42.
PG’s POWR Ratings reflect its outlook. It has a B grade for Stability and Quality. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
PG is ranked #28 out of 53 stocks in the B-rated Consumer Goods industry. Click here for PG’s Growth, Sentiment, Value, and Momentum ratings.
Stock #2: Colgate-Palmolive Company (CL)
CL manufactures diverse products catering to personal and home care markets through two main segments: Oral, Personal, and Home Care; and Pet Nutrition. Recognizable brands include Colgate, Palmolive, Tom’s of Maine, and Hill’s, among others.
For the fiscal 2024 second quarter that ended June 30, 2024, CL’s net sales increased 4.9% year-over-year to $5.06 billion. Its non-GAAP operating profit grew 12.7% from the year-ago quarter to $1.12 billion. Also, non-GAAP net income attributable to CL came in at $753 million or $0.91 per share, up 16.9% and 18.2%, respectively, from the year-ago quarter.
As of June 30, 2204, CL’s cash and cash equivalents stood at $1.11 billion compared to $966 million on December 31, 2023.
Street expects CL’s revenue to increase 2.1% year-over-year to $5.02 billion, accompanied by a projected 2.8% year-over-year rise in EPS to $0.88 for the fiscal third quarter (ending September 2024). Moreover, the company has topped the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Shares of CL have gained 22% over the past six months and 36.6% over the past year to close the last trading session at $101.85.
CL’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
CL has an A grade for Quality and a B for Stability and Sentiment. It is ranked #14 out of 53 stocks in the Consumer Goods industry.
In addition to the POWR Ratings highlighted above, one can access CL’s Growth, Value, and Momentum ratings here.
Stock #1: Kimberly-Clark Corporation (KMB)
KMB specializes in manufacturing and marketing products crafted from natural or synthetic fibers using advanced technologies in fibers, nonwovens, and absorbency. The company operates through three segments: Personal Care; Consumer Tissue; and K-C Professional.
On June 26, KMB's Kimberly-Clark Professional™ unveiled the Kimtech™ Polaris™ Nitrile Exam Gloves, meeting the growing demand for advanced safety and comfort in laboratory settings. These gloves deliver top-notch protection and durability while offering ergonomic benefits that enhance user comfort and reduce injury risks.
Certified by U.S. Ergonomics, the Kimtech Polaris gloves are designed for diverse environments, including laboratories, industrial work, pharmaceutical manufacturing, medical device production, and biotechnology, showcasing KMB's dedication to healthier and more efficient work solutions.
On May 7, KMB’s Huggies launched the Skin Essentials diaper, featuring the innovative SkinProtect liner technology. The new design reduces mess by up to 5x compared to ordinary diapers and safeguards against the top two causes of rash.
Such advancements highlight KMB’s dedication to delivering superior, convenient products, likely boosting sales and supporting steady company growth.
For the fiscal 2024 second quarter that ended June 30, 2024, KMB’s non-GAAP gross profit grew 6.2% year-over-year to $1.86 billion. Its non-GAAP operating profit increased 16.2% from the year-ago value to $845 million.
In addition, non-GAAP net income attributable to KMB came in at $661 million and $1.96 per share, up 18.2% and 18.8% from the prior year’s quarter, respectively.
For the fourth quarter of fiscal 2024 ending in December, analysts expect KMB’s revenue to increase marginally year-over-year to $5 billion. Its EPS for the same quarter is expected to rise 6.2% from the prior year’s period to $1.60. Also, the company surpassed consensus EPS estimates in three of the trailing four quarters.
KMB’s stock has surged 6.8% over the past three months and 21.3% over the past six months to close the last trading session at $143.46.
KMB’s POWR Ratings reflect its robust prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
KMB has a B grade for Quality. The stock is ranked #11 among 53 stocks within the same industry.
Click here to access KMB’s other ratings for Value, Stability, Sentiment, Momentum, and Growth.
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PG shares were unchanged in premarket trading Tuesday. Year-to-date, PG has gained 17.10%, versus a 18.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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