Thanks to solid household demand and the holiday season, the consumer goods industry is proficiently weathering the strong headwinds of sky-high inflation and the Fed’s aggressive interest rate hikes. The U.S. consumer spending increased 0.8% in October, while retail sales grew 1.3% month-over-month. This indicates that consumers haven’t been deterred from spending despite high commodity prices.
In addition, the global consumer products and retail market are expected to grow at a CAGR of 7.5% to $29.11 trillion by 2028. Increased emphasis on customer satisfaction and the rise of e-commerce will likely propel the industry’s growth.
On the other hand, the possibility of a recession has been dominating investors’ concerns amid the rising inflation and consecutive rate hikes. According to a survey, more than half of respondents expect a recession to occur in 2023. Moreover, 73% of respondents listed a recession as their top concern.
As consumer goods stocks tend to be good hedges against recession, The Procter & Gamble Company (PG) and Shiseido Company, Limited (SSDOY) might be worthy investments now, given their solid fundamentals.
The Procter & Gamble Company (PG)
PG offers branded consumer packaged goods to consumers across the world. It operates through Beauty, Grooming, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care segments.
For the fiscal 2023 first quarter ended September 30, 2022, PG’s healthcare sales grew 3% year-over-year to $2.76 billion, while its net sales increased 1% year-over-year to $20.61 billion. The company’s net earnings and EPS amounted to $3.96 billion and $1.57, respectively, for the same period.
As of September 30, 2022, the company’s current assets stood at $22.52 billion, compared to $21.65 billion as of June 30, 2022.
PG has raised its dividends for 66 consecutive years. It pays a $3.65 per share dividend annually, which translates to a 2.39% yield on the current price. Its four-year average dividend yield is 2.47%. Its dividend payments have grown at CAGRs of 6.9% and 5.7% over the past three and five years, respectively.
Analysts expect the company’s EPS and revenue for the fiscal year ending June 2024 to increase 7.3% and 3.6% year-over-year to $6.26 and $82.79 billion, respectively. Furthermore, PG has surpassed its consensus EPS in three of the four trailing quarters.
The stock has gained 14.2% over the past six months to close the last trading session at $152.84.
PG’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Stability and a B for Sentiment and Quality. It is ranked #9 out of 59 stocks in the Consumer Goods industry. Click here to see the other ratings of PG for Growth, Value, and Momentum.
Shiseido Company, Limited (SSDOY)
Headquartered in Tokyo, Japan, SSDOY is a company that manufactures and sells cosmetics, toiletries, personal care products, barber, and beauty products. The company offers fragrances, body and hair care products, as well as skincare products. It is also engaged in the restaurant, food, and retail businesses and operates beauty salons.
On September 28, 2022, Shiseido Europe S.A., a subsidiary of SSDOY, announced the acquisition of a London-based beauty brand, Gallinée Ltd, that focuses on microbiome skin care. This acquisition strengthens its skin beauty category by expanding into the emerging microbiome segment.
SSDOY’s net sales increased 4.7% year-over-year to ¥762.74 million ($5.64 billion) in the nine-month period ended September 30, 2022. Its core operating profit rose 21.9% from the prior-year value to ¥36.23 million ($267.89 million). Its total comprehensive income increased 42.9% year-over-year to ¥106.17 million ($784.90 million), while its earnings per share came in at ¥72.65.
SSDOY’s four-year average dividend yield is 0.74%, and its current dividend translates to a 0.73% yield. The company’s dividend payments have grown at a CAGR of 15.4% over the past five years.
For the fiscal year ending December 31, 2022, SSDOY’s revenue is expected to grow 222.9% year-over-year to $7.69 billion, while its EPS is expected to be $0.53. Shares of SSDOY have gained 36.1% over the past three months to close the last trading session at $47.92.
SSDOY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Growth and Quality. Within the same industry, it is ranked #4 of 59 stocks. Click here to see SSDOY’s additional POWR Ratings for Value, Momentum, Stability, and Sentiment.
PG shares were trading at $150.14 per share on Thursday afternoon, down $2.70 (-1.77%). Year-to-date, PG has declined -5.94%, versus a -17.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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