Despite the macroeconomic challenges, consumers’ spending habits continue to be resilient. As market sentiments improve, investors interested in investing in quality consumer stocks can consider buying The Procter & Gamble Company (PG), The Swatch Group AG (SWGAY) and Unilever PLC (UL).
Consumer spending held well in August, with retail sales rising 0.6% month-on-month. This increase in retail sales indicates that customers remain optimistic about the economy and are willing to spend their money. The robust August performance is encouraging for businesses and may imply a sustained recovery in consumer spending.
According to Deloitte, holiday retail sales will rise 3.5% to 4.6% in 2023. Sales of e-commerce are predicted to increase by 10.3% to 12.8%, hitting $278 billion to $284 billion.
Moreover, the global consumer goods industry is expected to grow to $224.33 billion by 2032 at a CAGR of 7.8% as markets adapt to shifting trends driven by digital innovation, the pandemic, and the focus on sustainable living.
In addition, according to Market Research Future, the consumer packaged products market is expected to grow from $5.48 trillion in 2023 to $6.98 trillion by 2030 at a CAGR of 3.5%.
The consumer goods industry has undergone a significant transformation thanks to AI. Chatbots and AI-powered algorithms have improved supply chain management, inventory optimization, demand prediction, marketing campaigns, and customer service, streamlining operations and delivering better goods and services.
With these favorable trends in mind, let’s delve into the fundamentals of the three best Consumer Goods stocks, beginning with number 3.
Stock #3: The Procter & Gamble Company (PG)
PG provides branded consumer packaged goods worldwide. It operates through five segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care.
PG’s trailing-12-month levered FCF margin of 15.54% is 352.7% higher than the industry average of 3.43%. Its trailing-12-month net income margin of 17.87% is 329.8% higher than the industry average of 4.16%.
PG’s net sales for the fourth quarter ended June 30, 2023, increased 5.3% year-over-year to $20.55 billion. The company’s gross profit increased 14.1% year-over-year to $9.94 billion. Its net income increased 10.9% year-over-year to $3.38 billion. Additionally, its EPS came in at $1.37, representing a 13.2% increase over the prior-year quarter.
The consensus revenue estimate of $85.57 billion for the year ending June 2024 represents a 4.4% increase year-over-year. Its EPS is expected to grow 8.4% year-over-year to $6.40 for the same period. It surpassed EPS estimates in three of four trailing quarters. PG’s shares have gained 8.1% over the past six months to close the last trading session at $144.44.
PG’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PG has an A grade for Stability and a B for Quality. It is ranked #17 out of 53 stocks in the Consumer Goods industry. Click here for the additional POWR Ratings for Growth, Value, Momentum, and Sentiment for PG.
Stock #2: The Swatch Group AG (SWGAY)
Headquartered in Biel/Bienne, Switzerland, SWGAY designs, manufactures, and sells finished watches, jewellery, and watch movements and components worldwide. The company operates through Watches & Jewellery and Electronic Systems segments.
SWGAY’s trailing-12-month net income margin of 12.42% is 182.6% higher than the 4.40% industry average. Its trailing-12-month EBIT margin of 16.96% is 130.5% higher than the 7.36% industry average.
SWGAY’s net sales for the fiscal six months ended June 30, 2023, increased 11.3% year-over-year to CHF 4.02 billion ($4.56 billion). The company’s operating result rose 36.4% year-over-year to CHF 686 million ($778.65 million). Its net result increased 55.6% year-over-year to CHF 498 million ($565.26 million). Additionally, its registered EPS increased 55.8% year-over-year to CHF 1.87.
Street expects SWGAY’s revenue for the fiscal period ending December 31, 2023, to increase 10.2% year-over-year to $8.96 billion. Over the past year, the stock has gained 13.9% to close the last trading session at $12.71.
SWGAY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #15 in the same industry. It has a B grade for Growth and Stability. To see additional SWGAY’s ratings for Momentum, Sentiment, Momentum and Quality, click here.
Stock #1: Unilever PLC (UL)
Headquartered in London, the United Kingdom, UL operates as a fast-moving consumer goods company. It operates through five segments: Beauty & Wellbeing; Personal Care; Home Care; Nutrition; and Ice Cream.
UL’s trailing-12-month levered FCF margin of 12.56% is 266% higher than the 3.43% industry average. Its trailing-12-month ROCE of 42.06% is 260.1% higher than the 11.68% industry average.
UL’s turnover for the fiscal first half increased 2.7% year-over-year to €30.43 billion ($16.18 billion). The company’s net profit increased 20.7% year-over-year to €3.88 billion ($4.12 billion). Its underlying operating profit increased 3.3% year-over-year to €5.53 billion ($6.01 billion). Moreover, its underlying EPS came in at €1.46, representing a 9% increase over the prior-year quarter.
Analysts expect UL’s revenue to increase 2.9% year-over-year to $65.53 million for the year ending December 2024. Its EPS is expected to grow at 5.4% year-over-year to $3.05 for the same period. Over the past year the stock has gained 12.2% to close the last trading session at $48.50.
It’s no surprise that UL has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Value and Stability. It is ranked #11 in the same industry.
Beyond what is stated above, we’ve also rated UL for Growth, Momentum, Sentiment and Quality. Get all UL ratings here.
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PG shares were trading at $142.96 per share on Wednesday afternoon, down $1.82 (-1.26%). Year-to-date, PG has declined -3.89%, versus a 14.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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