The consumer goods industry is expected to remain resilient due to increasing urbanization and rising disposable income in cities. Therefore, while I think consumer stocks Colgate-Palmolive Company (CL) and The Clorox Company (CLX) might be solid buys for growth, Peloton Interactive, Inc. (PTON) might be worth watching.
The Commerce Department’s advanced retail sales report showed a seasonally adjusted increase of 0.7% for July, better than the estimated 0.4%. Higher retail sales indicate increased consumer confidence in the economy, which can lead to more spending.
The rise in retail sales also means higher demand, revenue growth, potential for innovation, job opportunities, and increased investor confidence in the consumer sector.
Also, a growing emphasis on customer experience is expected to drive the growth of the global consumer products and retail market. Modern grocery retailing offers one-stop shopping with sanitary environments and high convenience. The global consumer products and retail market is expected to grow at a CAGR of 7.5% until 2028.
Stocks to Buy:
Colgate-Palmolive Company (CL)
CL manufactures and sells consumer products internationally. The company operates through two segments, Oral, Personal, and Home Care; and Pet Nutrition.
CL pays $1.92 annually as dividends. This translates to a yield of 2.62% at the current market price, higher than the four-year average dividend yield of 2.35%.
CL’s revenue grew at a CAGR of 5.4% over the past three years. In addition, its total assets grew at a CAGR of 5.1% over the past five years.
CL’s trailing-12-month EBITDA margin of 21.14% is 99.2% higher than the 10.61% industry average. Its trailing-12-month gross profit margin of 56.87% is 74.6% higher than the 32.57% industry average.
During the fiscal second quarter ended June 30, 2023, CL’s net sales increased 8% year-over-year to $4.82 billion. Gross profit increased 7.3% year-over-year to $5.50 billion whereas its operating profit increased 8% year-over-year to $1.88 billion.
CL’s revenue is expected to increase 8.3% year-over-year to $4.82 billion during the fiscal second quarter ending September 2023. Its EPS is expected to increase 8.1% year-over-year to $0.80 for the same quarter. Moreover, it has surpassed EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained marginally over the past six months to close the last trading session at $73.32.
CL’s POWR Ratings reflect this promising 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.
It also has a B grade in Quality and Stability. The stock is ranked #22 out of 54 stocks in the Consumer Goods industry.
Click here to see the POWR Ratings of CL (Growth, Value, Momentum, and Sentiment).
The Clorox Company (CLX)
CLX manufactures and markets consumer and professional products worldwide. It operates through four segments: Health and Wellness; Household; Lifestyle; and International.
On July 27, 2023, CLX declared a quarterly dividend of $1.20, payable on August 25.
CLX pays $4.80 annually as dividends. This translates to a yield of 3.11% at the current market price, compared to the 4-year average dividend yield of 2.70%.
CLX’s revenue grew at a CAGR of 3.8% over the past five years. In addition, its total assets grew at a CAGR of 3.3% over the past five years.
CLX’s trailing-12-month EBITDA margin of 14.24% is 34.2% higher than the 10.61% industry average. Its trailing-12-month gross profit margin of 39.50% is 21.3% higher than the 32.57% industry average.
CLX’s net sales increased 12% year-over-year to $2.02 billion during the fiscal fourth quarter that ended June 30, 2023. Adjusted EBIT increased 60.7% year-over-year to $294 million and net earnings increased 74% year-over-year to $181 million.
Analysts expect its revenue to increase 4.5% year-over-year to $1.82 billion during the fiscal first quarter ending September 2023. Its EPS is expected to increase 47.1% year-over-year to $1.37 for the same quarter. Moreover, it has surpassed EPS and revenue estimates in each of the trailing four quarters.
The stock has gained 10% year-to-date to close its last trading session at $154.37.
It’s no surprise that CLX has an overall rating of B, which translates to a Buy in our POWR Ratings system.
CLX also has a B grade for Growth and Quality. It is ranked #17 in the same industry.
For additional ratings for CLX for Value, Momentum, Stability, and Sentiment, click here.
Stock to Watch:
Peloton Interactive, Inc. (PTON)
PTON operates an interactive fitness platform in North America and internationally.
PTON’s revenue grew at a CAGR of 45.1% over the past five years. However, its total assets declined at a CAGR of 2.4% over the past three years.
PTON’s trailing-12-month gross profit ratio of 32.98% is 6.6% lower than the industry average of 35.32%.
During the fiscal year ended June 2023, PTON’s revenue declined 21.8% year-over-year to $2.80 billion, whereas its gross profit increased 32.3% year-over-year to $923.50 million. Loss per share declined 58.5% year-over-year to $3.64.
Analysts expect PTON’s revenue to decline 4.2% year-over-year in the fiscal first quarter (ending September 2023) to $590.88 million. Its EPS for the same quarter is expected to rise 51.1% year-over-year.
The stock has plunged 36.6% over the past month but gained 1.9% intra-day to close the last trading session at $5.52.
The stock has an overall C rating, equating to a Neutral in our proprietary rating system.
PTON also has a C grade for Value, Momentum, and Quality. It is ranked #41 in the same industry.
Beyond what is stated above, we’ve also rated PTON for Growth, Stability, and Sentiment. Get all PTON ratings here.
What To Do Next?
Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:
3 Stocks to DOUBLE This Year >
CL shares were trading at $73.88 per share on Friday afternoon, up $0.56 (+0.76%). Year-to-date, CL has declined -4.44%, versus a 15.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
2 Consumer Good Stocks to Buy Today, 1 Worth Watching for Growth StockNews.com
