Despite macroeconomic challenges and rising fears about the economy weakening, retail sales rose 0.4% in April, while core sales rose 0.7%. Many economists believe consumer spending will support the economy despite the rising risks of a recession.
So, investors interested in investing in quality consumer stocks can consider buying The Procter & Gamble Company (PG), Edgewell Personal Care Company (EPC), and United-Guardian, Inc. (UG).
Oren Klachkin, lead US Economist at Oxford Economics, said, “The April retail sales report shows consumers remain inclined to spend though they are becoming more selective in their purchases.”
Demand for personal luxury items is propelling growth in the global specialty consumer products industry. The specialty consumer products market is expected to grow at 5.2% CAGR until 2027.
In addition, the global consumer packaged goods (CPG) market is expected to expand at a 3% CAGR, reaching $2.45 trillion by 2028.
Let’s delve deeper into the fundamentals of the stocks mentioned above.
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 EBIT margin of 22.86% is 242.9% higher than the industry average of 6.67%. Its trailing-12-month levered FCF margin of 14.10% is 380.4% higher than the industry average of 2.93%.
PG has paid dividends for 66 consecutive years. Over the last three years, PG’s dividend payouts have grown at 6.7% CAGR. While PG’s four-year average dividend yield is 2.42%. Its forward annual dividend of $3.76 translates to a 2.59% yield.
PG’s net sales increased 3.5% year-over-year to $20.07 billion in the the third quarter ended March 31, 2023. Its gross profit increased 6.7% year-over-year to $9.66 billion. Also, its net earnings attributable and EPS came in at $3.40 billion and $1.37, up marginally and 2.9% year-over-year, respectively.
The consensus revenue estimate of $85.16 billion for the year ending June 2024 represents a 4.5% increase year-over-year. Its EPS is expected to grow 8.6% to $6.38 for the same period. PG’s shares have gained 2.2% over the past nine months to close the last trading session at $145.50.
PG’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PG also has an A grade for Stability and a B for Quality. It is ranked #12 out of 51 stocks in the Consumer Goods industry. Click here for the additional POWR Ratings for Value, Sentiment, Momentum and Growth for PG.
Edgewell Personal Care Company (EPC)
EPC manufactures and markets personal care products worldwide. It operates through three segments: Wet Shave, Sun and Skin Care, and Feminine Care.
EPC’s trailing-12-month EBIT margin of 10.60% is 59% higher than the 6.67% industry average. Its trailing-12-month EBITDA margin of 14.47% is 45.8% higher than the 9.92% industry average.
EPC’s four-year average dividend yield is 0.80%. Its forward annual dividend of $0.60 translates to a 1.46% yield.
EPC’s non-GAAP operating income increased 33.8% year-over-year to $62.50 million for the fiscal second quarter that ended March 31, 2023. Its adjusted EBITDA increased 12.6% year-over-year to $83 million.
Also, its non-GAAP net earnings increased 7.4% year-over-year to $29 million. Its non-GAAP EPS came in at $0.56, representing a 12% increase over the prior-year quarter.
Analysts expect EPC’s revenue to increase 2.6% year-over-year to $2.31 billion in September 2024. Its EPS is expected to grow 15.4% to $2.83 in September 2024.It surpassed EPS estimates in all four trailing quarters. The stock has gained 12.7% over the past year to close its last trading session at $41.05.
It’s no surprise that EPC has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Growth and Value. It is ranked #14 in the same industry.
Beyond what is stated above, we’ve also rated EPC for Sentiment, Momentum, Stability, and Quality. Get all EPC ratings here.
United-Guardian, Inc. (UG)
UG manufactures and markets cosmetic ingredients, pharmaceuticals, medical lubricants, and proprietary specialty industrial products in the United States and internationally.
UG’s trailing-12-month net income margin of 21.22% is 572.6% higher than the 3.16% industry average. Its trailing-12-month levered FCF margin of 20.29% is 591.8% higher than the 2.93% industry average.
While UG’s four-year average dividend yield is 6.26%. Its forward annual dividend of $0.68 translates to a 6.97% yield.
For the first quarter that ended March 31, 2023, UG’s total costs and expenses decreased 27.2% year-over-year to $1.74 million. Its total current assets came in at $11.24 million for the period that ended March 31, 2023, compared to $9.97 million for the period that ended December 31, 2022.
Also, its total assets came in at $11.94 million, compared to $10.64 million for the same period.
UG’s shares have gained marginally over the past month to close the last trading session at $8.90.
UG’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 #7 in the same industry. It has an A grade for Quality and a B for Sentiment. To see additional UG’s rating for Growth, Stability, Value, and Momentum, click here.
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PG shares were trading at $145.40 per share on Monday afternoon, up $0.01 (+0.01%). Year-to-date, PG has declined -2.86%, versus a 10.25% 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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