Despite soaring prices, overall retail sales surpassed estimates in August 2022. Moreover, U.S. consumer sentiment improved last month.
Improving consumer confidence should bode well for the consumer goods industry. According to Coherent Market Insights, the global consumer products and retail market is projected to grow at a CAGR of 7.5% from 2021 to 2028.
Given this backdrop, investors looking to invest in consumer stocks can invest in The Procter & Gamble Company (PG) and Colgate-Palmolive Company (CL) which pay handsome dividends. However, fundamentally weak stocks, Vinco Ventures, Inc. (BBIG) and Peloton Interactive, Inc. (PTON), might not be safe investments now.
Stocks to Buy:
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.
On July 20, 2022, PG and Shopee, the leading e-commerce platform in Southeast Asia and Taiwan, launched their enhanced virtual home shopping experience venture. This collaboration aims to offer shoppers a one-stop online shopping solution and might improve PG's e-sales.
PG has paid dividends for 65 consecutive years. Over the last three years, PG’s dividend payouts have grown at a 6.8% CAGR. While PG’s four-year average dividend yield is 2.50%, its current dividend translates to a 2.69% yield.
PG's net sales came in at $19.52 billion for the fourth quarter ended June 30, 2022, up 3% year-over-year. Moreover, the company's net earnings came in at $3.1 billion, up 5% year-over-year. Also, its EPS came at $1.21, up 7.1% year-over-year.
Street expects PG's revenue to increase marginally year-over-year to $81.31 billion in 2023. Its EPS is expected to increase 2.1% year-over-year to $5.93 in 2023. Over the past three months, the stock has gained 3.7% to close the last trading session at $135.71. It has a beta of 0.34.
PG's strong fundamentals are reflected in its POWR Ratings. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PG has a B grade for Quality and Stability. Within the Consumer Goods industry, it is ranked #21 out of 59 stocks. Beyond what is stated above, we've also rated PG for Value, Sentiment, Momentum, and Growth. Get all PG ratings here.
Colgate-Palmolive Company (CL)
CL and its subsidiaries manufacture and sell consumer products worldwide. The company operates through two segments, Oral, Personal, and Home Care; and Pet Nutrition.
On August 1, 2022, CL declared its plans to purchase three dry pet food manufacturing plants in the U.S. from Red Collar Pet Foods for $700 million to expand the global growth of its Hill's Pet Nutrition business.
Noel Wallace, CL's Chairman, President, and CEO, said, "This investment will help further strengthen the Hill's business today and for the long term."
CL has paid dividends for 58 consecutive years. Over the last three years, CL’s dividend payouts have grown at a 2.7% CAGR. While CL’s four-year average dividend yield is 2.36%, its current dividend translates to a 2.51% yield.
CL's net sales came in at $4.84 billion for the second quarter that ended June 30, 2022, up 5.3% year-over-year. Moreover, the company's pet nutrition sales came in at $909 million, up 14.5% year-over-year. Also, its total Oral, Personal, and Home Care sales came in at $3.58 billion, up 3.1% year-over-year.
CL's revenue is expected to increase 3% year-over-year to $18.49 billion in 2023. Its EPS is expected to increase 9.3% year-over-year to $3.30 in 2023. Over the past six months, the stock has gained marginally to close the last trading session at $74.90. It has a beta of 0.47.
CL has an A grade for Quality and a B for Stability. The stock is ranked #19 in the same industry. We've also rated CL for Value, Sentiment, Momentum, and Growth. Get all CL ratings here.
Stocks to Sell:
Vinco Ventures, Inc. (BBIG)
BBIG develops and commercializes end-to-end consumer products in North America. It sells kitchenware, small appliances, toys, pet care, baby items, health and beauty aids, entertainment venue merchandise, housewares to stores, mass-market retailers, e-commerce sites, and personal protection equipment.
Last month, BBIG received a notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC advising the company that it was not in compliance with Nasdaq's continued listing requirements as a result of its failure to file its quarterly report on Form 10-Q for the quarter ended June 30, 2022, in a timely manner.
BBIG's gross profit came in at $601.16 million for the first quarter ended March 31, 2022, down 34.1% year-over-year. The company's total selling, general, and administrative costs came in at $26.80 million, up 129.8% year-over-year.
Over the past year, the stock has lost 80.4% to close the last trading session at $0.90. It has a 24-month beta of 1.72.
BBIG's overall F rating equates to a Strong Sell in our POWR Ratings system. It has an F grade for Value, Stability, and Quality and a D for Growth, Momentum, and Sentiment.
The stock is ranked last in the Consumer Goods industry. Get all BBIG ratings here.
Peloton Interactive, Inc. (PTON)
PTON operates an interactive fitness platform in North America and internationally. The company offers connected fitness products with a touchscreen that streams live and on-demand classes under the Peloton Bike, Peloton Bike+, Peloton Tread, and Peloton Tread+ names.
On August 26, 2022, Roth Capital analyst George Kelly lowered the price target on PTON.
PTON's total revenue came in at $678.70 million for the fourth quarter ended June 30, 2022, down 27.6% year-over-year. Its net loss came in at $1.24 billion, up 297.3% year-over-year. In addition, its loss per share came in at $3.68, up 250.5% year-over-year.
Analysts expect PTON's revenue to decrease 14.6% year-over-year to $3.06 billion in 2023. Also, it missed EPS estimates in all four trailing quarters. Its EPS is expected to fall 76.5% per annum for the next five years. Over the past year, the stock has lost 91% to close the last trading session at $9.05. It has a beta of 1.35.
PTON's POWR Ratings are consistent with this bleak outlook. The stock's overall F rating equates to a Strong Sell in our proprietary rating system. It also has an F grade for Sentiment and Quality and a D for Value and Stability.
PTON is ranked #57 in the same industry. Click here to access the additional ratings for PTON (Growth and Momentum).
PG shares were trading at $136.80 per share on Thursday afternoon, up $1.07 (+0.79%). Year-to-date, PG has declined -14.90%, versus a -19.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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