Consumer resilience is on the rise, with confidence and spending power rebounding since early 2024. This shift is benefiting the consumer goods sector, as spending moves from cautious to intentional, with a focus on essential and value-driven purchases.
In this favorable landscape, frugal investors might consider fundamentally strong consumer goods stocks like Kimberly-Clark Corporation (KMB), ACCO Brands Corporation (ACCO), and Ennis, Inc. (EBF).
This December, the U.S. Federal Reserve is expected to cut interest rates by 25 basis points, potentially boosting the stock market by lowering borrowing costs and encouraging equity investments. This rate cut could foster a favorable environment for consumer goods firms, making it an opportune time to consider investments in this sector as demand rises.
Meanwhile, consumer sentiment reached a six-month high in November, rising to 73 from 70.5 in October, signaling increased confidence and potential for higher spending. With inflation expectations easing, the consumer goods market could see a boost from this renewed optimism and stronger product demand.
Furthermore, according to Statista, the consumer goods market is projected to reach $2.80 trillion in 2024, with an expected CAGR of 1.19% from 2024 to 2029. This sector could offer a stable investment choice, as companies in consumer goods generally experience consistent product demand, helping them sustain margins even in varying economic conditions.
Considering these conducive trends, let’s analyze the fundamental aspects of the three Consumer Goods picks, beginning with the third choice.
Stock #3: Kimberly-Clark Corporation (KMB)
KMB and its subsidiaries manufacture and market personal care and consumer tissue products worldwide. It operates through three segments: Personal Care, Consumer Tissue, and K-C Professional.
In terms of forward GAAP P/E, KMB’s 17.31x is 11.8% lower than the 19.62x industry average.
In the third quarter that ended September 30, 2024, KMB’s total net sales were $4.95 billion. The company’s operating profit came in at $1.15 billion, up 49.1% year-over-year. Furthermore, its adjusted net income attributable to KMB and adjusted EPS rose 5.1% and 5.2% from the prior year’s quarter to $617 million and $1.83, respectively.
Analysts expect KMB’s EPS for the quarter ending March 31, 2025, to increase 2% year-over-year to $2.05. Its revenue for fiscal 2025 is expected to grow marginally year-over-year to $20.08 billion. It surpassed the consensus EPS estimates in three of the trailing four quarters. KMB’s stock has gained 11.3% over the past nine months to close the last trading session at $131.98.
KMB’s robust outlook is reflected in its POWR Ratings. It 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.
It has a B grade for Value and Quality. Within the Consumer Goods industry, it is ranked #13 out of 55 stocks. To access KMB’s grades for Growth, Momentum, Stability, and Sentiment, click here.
Stock #2: ACCO Brands Corporation (ACCO)
ACCO designs, manufactures, and markets consumer, school, technology, and office products. It operates through three segments: ACCO Brands North America, ACCO Brands EMEA, and ACCO Brands International.
On November 14, 2024, ACCO announced Swingline’s new collaboration with artist Leah Bisch, unveiling two stylish metal stapler designs, Wildflowers and Tan Tiles. These staplers combine functionality with Bisch's vibrant floral artistry, now available on Amazon, Swingline.com, and soon on Staples.com.
In terms of forward EV/EBITDA, ACCO’s 6.41x is 48.6% lower than the 12.48x industry average. Likewise, its 6x forward non-GAAP P/E is 71.7% lower than the 21.19x industry average. Also, its 7.69x forward EV/EBIT is 56.7% lower than the 17.76x industry average.
ACCO’s net sales for the third quarter ending September 30, 2024, were $420.90 million. The company’s non-GAAP operating income was $44.70 million, and its non-GAAP net income was $22.50 million. Additionally, its non-GAAP earnings per share were $0.23.
For the quarter ending December 31, 2024, ACCO’s EPS is expected to grow 5.1% year-over-year to $0.41. Its revenue for the quarter ending March 31, 2025, is expected to rise 1.1% year-over-year to $362.80 million. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 28.8% to close the last trading session at $6.09.
ACCO’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has a B grade for Growth, Value, and Sentiment. It is ranked #2 in the same industry. To see ACCO’s Momentum, Stability, and Quality ratings, click here.
Stock #1: Ennis, Inc. (EBF)
EBF manufactures and sells business forms and other business products in the United States. The company offers snap sets, continuous forms, laser-cut sheets, tags, labels, envelopes, integrated products, jumbo rolls, and pressure-sensitive products.
In terms of forward EV/Sales, EBF’s 1.14x is 44.4% lower than the 2.04x industry average. Its 8.55x forward EV/EBIT is 51.8% lower than the 17.76x industry average. Likewise, its 13.92x forward non-GAAP P/E is 34.3% lower than the 21.19x industry average.
During the second quarter ending on August 31, 2024, EBF reported net sales of $99.04 million, with a gross profit of $29.78 million. The company’s net earnings were $10.31 million, or $0.40 per share, for the quarter. Furthermore, the company’s total assets stood at $406.81 million as of August 31, 2024, compared to $399.19 million as of February 29, 2024.
EBF’s stock has gained 8.4% over the past nine months to close the last trading session at $21.45.
EBF’s solid prospects are reflected in its POWR Ratings. It has an overall rating of B, translating to a Buy in our proprietary rating system.
It has an A grade for Quality. It is ranked #3 in the Consumer Goods industry. Beyond what we stated above, we also have given EBF grades for Growth, Value, Momentum, Stability, and Sentiment. Get all the EBF’s ratings here.
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KMB shares were trading at $131.68 per share on Thursday afternoon, down $0.51 (-0.39%). Year-to-date, KMB has gained 11.34%, versus a 26.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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