Consumer spending, which makes up more than two-thirds of the economy, increased 0.8% in October, following an unrevised 0.6% increase in September. Retail sales grew 1.3% month-over-month in October, driven by increased purchases of expensive everyday staples such as gasoline and food. This suggests that households are not cutting back on their spending despite growing worries about the recession.
Moreover, the economy grew at a 2.9% annual rate in the third quarter, and the fourth-quarter GDP estimates raised. The Atlanta Fed increased its fourth-quarter GDP growth estimate to a 4.4% annualized rate from 4%.
Moreover, the growing emphasis on customer experience should propel global consumer products and retail market growth. The global consumer products and retail market are expected to grow at a CAGR of 7.5% to $29.11 trillion by 2028.
Given this backdrop, adding fundamentally sound stocks The Procter & Gamble Company (PG), Colgate-Palmolive Company (CL), and Ennis, Inc. (EBF) to your portfolio could be wise.
The Procter & Gamble Company (PG)
PG is engaged in offering consumers worldwide branded consumer packaged goods. It operates through five segments, Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. The company primarily sells its goods through mass merchandisers, supermarkets, and other establishments in about 180 countries and territories.
On September 16, Downy®, a leading brand of fabric softener by PG, announced the launch of Downy Rinse & Refresh. It is a brand-new deep-cleaning fabric rinse that eliminates odor-causing residues 3X better than detergent alone. The new launch is expected to boost the company’s revenue stream.
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 organic sales rose 7% year-over-year, driven by a 9% increase from higher pricing and a 1% increase from a favorable product mix.
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 2.45% yield on the current price. Its four-year average dividend yield is 2.47%. Its dividend payments have grown at a CAGR of 6.9% over the past three years.
Analysts expect the company’s EPS and revenue for the fiscal year ending June 2024 to increase 7.5% and 3.7% year-over-year to $6.25 and $82.70 billion, respectively. Furthermore, PG has surpassed its consensus EPS in three of the four trailing quarters.
Shares of PG have gained 10.1% over the past month to close the last trading session at $149.28.
PG’s POWR Ratings reflect its strong outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Stability and a B for Quality and Sentiment. Within the Consumer Goods industry, it ranked #11 of 59 stocks.
To see additional POWR Ratings for Growth, Value, and Momentum for PG, click here.
Colgate-Palmolive Company (CL)
CL is a manufacturer of consumer and home goods. It operates through two segments: Oral, Personal, and Home Care; and Pet Nutrition. The company sells mainly through traditional and online shops, wholesalers, distributors, dentists, and skin care specialists.
On August 1, CL announced plans to purchase three dry pet food manufacturing plants in the United States from Red Collar Pet Foods for $700 million to boost the global growth of its Hill's Pet Nutrition division. The purchase agreement calls for the transfer of around 350 workers from the dry pet food operations.
CL intends to strengthen Hill's business in the long term by continuing to invest in expanding manufacturing capacity, improving skills through projects such as the new Small Paws Innovation Center, and better engaging pet parents, veterinarians, and Hill's retail partners.
For the fiscal 2022 third quarter ended September 30, 2022, CL’s sales in Latin America grew 17% from the year-ago value to $289 million, while net sales increased 1% year-over-year to $4.46 billion. Income before income taxes came in at $892 million, a 4.6% increase from the prior year.
As of September 30, 2022, the company's cash and cash equivalents stood at $938 million versus $832 million as of December 31, 2021. Likewise, total assets stood at $16.29 billion, compared to $15.04 billion as of December 31, 2021.
CL has increased its dividends for 59 consecutive years. It pays a $1.88 per share dividend annually, which translates to a 2.44% yield on the current price. CL’s dividend payments have grown at a CAGR of 3.2% over the past five years. Its four-year average dividend yield is 2.35%.
The consensus EPS estimate of $3.17 for the fiscal year ending December 2023 indicates a 6.7% year-over-year improvement. Likewise, the consensus revenue of $18.33 billion for the next year estimate indicates a rise of 2.4% from the previous year. Moreover, the company has an impressive earnings surprise since it topped the consensus EPS estimates in three of the trailing four quarters.
Shares of CL have gained 5.1% over the past month to close the last trading session at $77.21.
CL’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
The stock has an A grade for Quality and a B for Stability. Within the Consumer Goods industry, it is ranked #13 of 59 stocks.
Click here to see additional ratings of CL for Value, Growth, Momentum, and Sentiment.
Ennis, Inc. (EBF)
EBF manufactures, designs, and markets printed business items, primarily to distributors in the United States. In 20 states across the country, it runs about 55 production facilities. The company distributes business products and forms through independent distributors.
On November 30, EBF announced the acquisition of School Photo Marketing in Morganville, New Jersey. It specializes in helping photo laboratories, as well as school and sports photographers, by broadening their market and turning into a priceless resource for their company.
School Photo Marketing's employees and customers joining EBF will present many intriguing opportunities for EBF to strategically benefit from supplying this new channel with products produced by EBF's manufacturing divisions.
On August 17, EBF announced the acquisition of some assets from Gulf Business Forms in San Marcos, TX, including customer lists and intellectual property. This alliance would benefit EBF since Gulf is a strong rival and top brand across the country, with clients ranging from California in the southwest to Massachusetts in the northeast.
For the fiscal 2023 second quarter ended August 31, 2022, EBF’s revenues grew 10.7% from the previous year’s quarter to $111.23 million, while its gross profit margin increased 21.9% year-over-year to $35.22 million. Its operating income increased 59.9% from the year-ago value to $17.28 million. The company’s non-GAAP EBITDA came in at $21.26 million, up 38.8% year-over-year.
Furthermore, its net earnings came in at $12.19 million, a 63.5% increase from the year-ago value, while its EPS stood at $0.47, rising 62.1% year-over-year.
EBF pays a $1.00 per share dividend annually, which translates to a 4.36% yield on the current price. Its four-year average dividend yield is 4.81%. EBF’s dividend payments have grown at a CAGR of 5.9% over the past five years.
The consensus EPS estimate of $1.70 for the current fiscal year (ending February 2023) indicates a 49.1% year-over-year improvement. Likewise, the consensus revenue estimate of $431.80 million for the same year reflects a rise of 8% from the prior year.
The stock has gained 1.9% over the past month and 19.6% over the past year to close the last trading session at $23.24.
EBF’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Quality and a B for Stability and Sentiment. Within the Consumer Goods industry, it has topped among 59 stocks.
Beyond what we stated above, we also have EBF’s ratings for Value, Growth, and Momentum. Get all EBF ratings here.
PG shares were trading at $149.88 per share on Wednesday afternoon, up $0.60 (+0.40%). Year-to-date, PG has declined -6.10%, versus a -16.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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