Consumer staples market is thriving owing to its nature supported by rising consumer spending, and disposable personal income. The market is also promulgated by the rapid technological advancements and changing consumer preferences.
Given the industry tailwinds, it could be wise to invest in fundamentally sound consumer staple stocks Walmart Inc. (WMT), Colgate-Palmolive Company (CL), and Kimberly-Clark Corporation (KMB) for long-term gains.
Consumer staples encompasses items of daily use or necessary commodities like food, household goods, and personal care products. Owing to their nature, investment in the industry could offer resilience amid market volatility, stable revenues and cash flows for consumer staples companies.
With inflation cooling down slightly, U.S. prices remained unchanged in May whereas the consumer spending rose moderately, a trend that could lead to Federal Reserve interest rates cuts this year. The personal consumption expenditures (PCE) price index last month followed an unrevised 0.3% gain in April, and up 2.6% on year-on-year basis.
Further, consumer spending in the US increased to reach an all-time high of $15.64 trillion in the first quarter of 2024 while disposable personal income reached $20.85 trillion as of April 2024.
Besides, the staple market is projected to grow $308.18 billion by 2032, exhibiting a CAGR of 4.3% driven by increased demand for essential consumer goods and industrial products.
Also, the retail market is poised to grow to $42.76 trillion by 2028, at a CAGR of 8.1%. During the forecast period, the market growth can be attributed to rapid technological advancements, impact of data analysis, and evolving consumer preferences.
Given the industry’s robust outlook, investing in quality consumer staple stocks such as WMT, CL, and KMB could be wise for future gains.
Walmart Inc. (WMT)
WMT engages in the operation of retail, wholesale, other units, and eCommerce worldwide. It operates through three segments: Walmart U.S.; Walmart International; and Sam's Club. The company operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, and discount stores under Walmart and Walmart Neighborhood Market brands
On June 24, WMT announced its largest savings event ever: “Walmart Deals,” starting from July 8 through July 11 where customers can shop thousands of deals on popular items from electronics, home, toys, travel and more – including must-have items heading into the back-to-school season.
On June 13, WMT announced private brand transformation of one of its largest and most well-known fashion brands, No Boundaries. The over $2 billion brand for young adults will bring customers a modern, relevant and youthful assortment with new fabrication, shapes and styles, all at the same great prices.
For the first quarter that ended April 30, 2024, WMT’s total revenues increased 6% year-over-year to $161.51 billion. Its adjusted operating income grew 13.7% from the year-ago value to $7.09 billion. The company’s consolidated net income attributable to Walmart came in at $5.10 billion and $0.63 per common share, up 205.1% and 200% year-over-year, respectively.
Street expects WMT’s EPS for the second quarter (ending July 2024) to increase 5% year-over-year to $0.64. For the same quarter, the company’s revenue is expected to grow 4.4% year-over-year to $167.26 billion. Also, the company surpassed the consensus revenue and EPS estimates in all four trailing quarters.
Over the past six months, WMT’s stock has gained 28.5% and 29.4% over the past year to close the last trading session at $68.24.
WMT’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
WMT has an A grade for Sentiment and Stability and a B for Momentum. It is ranked #13 out of 36 stocks in the A-rated Grocery/Big Box Retailers industry.
In addition to the POWR Ratings we’ve stated above, we also have other ratings of WMT for Growth, Value, and Quality. Get all WMT ratings here.
Colgate-Palmolive Company (CL)
CL manufactures and sells consumer products internationally. It operates in two segments: Oral, Personal, and Home Care; and Pet Nutrition. The company offers toothpaste, toothbrushes, mouthwash, bar and liquid hand soaps, shower gels, shampoos, conditioners, deodorants and antiperspirants.
On June 14, CL’s Board of Directors declared a quarterly cash dividend of $0.50 per common share, payable on August 15, 2024, to shareholders of record on July 19, 2024.
CL pays an annual dividend of $2.00 per share, which translates to a yield of 2.09% on the current share price. Its four-year average dividend yield is 2.33%. The company’s dividend payouts have grown at a CAGR of 3.1% over the past three years. CL has raised its dividends for 60 consecutive years.
CL’s trailing-12-month gross profit margin and EBIT margin of 59% and 20.83 are 67.1% and 124.4% higher than the industry average of 35.30% and 9.28%, respectively. Its trailing-12-month net income margin of 13.22% is significantly higher than the industry average of 5.24%.
CL’s net sales for the first quarter that ended March 31, 2024, increased 6.2% year-over-year to $5.07 billion. Its non-GAAP operating profit grew 15.3% from the year-ago quarter to $1.08 billion. Non-GAAP net income attributable to CL came in at $713 million and $0.86 per share, up 17.3% and 17.8% from the prior year’s quarter, respectively.
Analysts expect CL’s EPS for the second quarter (ended June 2024) to increase 12.5% year-over-year to $0.87, while its revenue for the same period is expected to grow 4% year-over-year to $5.01 billion. Furthermore, the company has topped the consensus EPS and revenue estimates in each of the trailing four quarters.
Shares of CL have surged 20% over the past six months and 24.3% over the past year to close the last trading session at $95.87.
CL’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Quality. It also has a B grade for Stability and Sentiment. Within the B-rated Consumer Goods industry, CL is ranked #8 out of 53 stocks.
Click here to access additional ratings of CL for Value, Momentum, Growth, and Stability.
Kimberly-Clark Corporation (KMB)
KMB manufactures and markets personal care and consumer tissue products. The company operates through three segments: Personal Care; Consumer Tissue; and K-C Professional.
On June 26, KMB’s Kimberly-Clark Professional™ announced availability of its new Kimtech™ Polaris™ Nitrile Exam Gloves for use in laboratory settings that allow users the highest level of protection, durability and comfort from any glove within the Kimtech portfolio in Canada.
Polaris™ is the latest innovation in nitrile exam gloves from the Kimtech™ portfolio offering superior barrier protection, strength and comfort to the users.
On May 7, KMB’s Huggies unveiled the Skin Essentials diaper, which features the new, proprietary SkinProtect liner technology, and leaves behind up to 5x less mess than ordinary diapers, and helps protect baby’s skin against the top two causes of rash.
The full Huggies® Skin Essentials™ collection includes: Huggies® Skin Essentials™ Diapers, Huggies® Skin Essentials™ Wipes, and Pull-Ups® Skin Essentials™ Training Pants.
For the first quarter that ended March 31, 2024, KMB reported net sales of $5.15 billion and its gross profit grew 10.7% year-over-year to $1.91 billion. Its total operating profit increased 8.4% from the year-ago value to $853 million. Net Income attributable to KMB came in at $647 million and $1.91 per share, up 14.3% and 14.4% from the prior year’s quarter, respectively.
Analysts expect KMB’s EPS for the second quarter (ended June 2024) to increase 2.9% year-over-year to $1.70 and the company’s revenue for the same quarter is expected to be $5.10 billion. Moreover, the company topped the consensus EPS estimates in three of the trailing four quarters.
KMB’s stock has surged 2.1% over the past month and 13% over the past six months to close the last trading session at $137.52.
KMB’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
KMB has a B grade for Sentiment and Quality. The stock is ranked #7 among 53 stocks in the B-rated Consumer Goods industry.
To access KMB’s other ratings for Value, Stability, Momentum and Growth, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
WMT shares were trading at $69.71 per share on Friday afternoon, up $1.47 (+2.15%). Year-to-date, WMT has gained 33.56%, versus a 17.38% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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