The consumer goods industry is poised for growth due to robust spending and a stable job market. Consumer goods companies adapt to changing consumer demands and utilize technology to bolster profitability. Moreover, amid lingering macroeconomic uncertainty, consumer goods stocks are excellent investment options as they enjoy stable demand for their products irrespective of the economic cycle.
Amid this backdrop, it could be wise to buy fundamentally strong consumer stocks The Swatch Group AG (SWGAY), Reckitt Benckiser Group plc (RBGLY), Kimberly-Clark Corporation (KMB), and ACCO Brands Corporation (ACCO).
Before delving deeper into their fundamentals, let’s take a closer look at why the consumer goods industry is worth looking at.
This year, inflation has considerably decreased from last year’s 9.1% peak in June. In July, the consumer price index (CPI) rose by 3.2% compared to a year ago, slightly below the forecasted 3.3% but higher than June's 3%. Despite a minor uptick in the headline number, the July report emphasized a continuing decline in underlying inflation.
Retail sales jumped 0.7% sequentially in July, coming in higher than estimates of a 0.4% increase. The higher-than-expected retail sales indicated strong consumer demand, marking the fourth consecutive rise. The National Retail Federation predicts retail sales to rise by 4% to 6% in 2023.
With lingering uncertainty over where the U.S. economy is headed, the consumer goods space could be a relatively safe place to look for your next investment, as companies from this sector usually enjoy consistent demand for their products, enabling them to generate substantial cash flows irrespective of the economic cycle.
The global consumer goods industry is projected to reach $224.33 billion by 2032, growing at a CAGR of 7.8%.
Let's take a closer look at the fundamentals of the featured stocks.
The Swatch Group AG (SWGAY)
Headquartered in Biel/Bienne, Switzerland, SWGAY designs, manufactures, and sells finished watches, jewelry, and watch movements and components worldwide. The company operates through Watches & Jewellery and Electronic Systems segments.
In terms of the trailing-12-month EBITDA margin, SWGAY’s 21.49% is 97.7% higher than the 10.87% industry average. Likewise, its 12.42% trailing-12-month net income margin is 196.3% higher than the 4.19% industry average. Furthermore, its 16.96% trailing-12-month EBIT margin is 131.5% higher than the 7.33% industry average.
SWGAY’s net sales for the fiscal six months ended June 30, 2023, increased 11.3% year-over-year to CHF 4.02 billion ($4.56 billion). The company’s operating result rose 36.4% year-over-year to CHF 686 million ($778.65 million). Its net result increased 55.6% year-over-year to CHF 498 million ($565.26 million).
Additionally, its registered EPS increased 55.8% year-over-year to CHF 1.87.
Analysts expect SWGAY’s revenue for the fiscal period ending December 31, 2023, to increase 14.5% year-over-year to $9.31 billion. Over the past year, the stock has gained 11.1% to close the last trading session at $13.90.
SWGAY’s POWR Ratings reflect strong prospects. It has an overall rating of B, translating 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 Growth and Stability. Within the Consumer Goods industry, it is ranked #9 out of 54 stocks. To see SWGAY’s Value, Momentum, Sentiment, and Quality ratings, click here.
Reckitt Benckiser Group plc (RBGLY)
Headquartered in Slough, the United Kingdom, Reckitt Benckiser Group plc manufactures and sells health, hygiene, and nutrition products worldwide.
In terms of the trailing-12-month EBIT margin, RBGLY’s 22.80% is 214.1% higher than the 7.26% industry average. Likewise, its 16.67% trailing-12-month levered FCF margin is 372.9% higher than the 3.53% industry average. Furthermore, the stock’s 14.82% trailing-12-month net income margin is 268.6% higher than the 4.02% industry average.
RBGLY’s net revenue for six months ended June 30, 2023, increased 8.1% year-over-year to £7.45 billion ($9.43 billion). Its adjusted operating profit increased marginally over the prior-year quarter to £1.77 billion ($2.24 billion).
Its net cash generated from operating activities increased 11.7% over the prior-year quarter to £935 million ($1.18 billion). The company’s adjusted total net income for the year attributable to owners of the parent came in at £1.24 billion ($1.58 billion). In addition, its adjusted earnings per share came in at £173p. Also, its free cash flow rose 4.3% year-over-year to £758 million ($959.74 million).
Street expects RBGLY’s revenue for the quarter ending September 30, 2023, to increase 5.9% year-over-year to $4.60 billion. The stock has gained 1.2% year-to-date to close the last trading session at $14.26.
RBGLY’s solid prospects are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It is ranked #12 in the same industry. It has a B grade for Stability. In addition to the POWR Ratings grades I’ve just highlighted, you can see RBGLY’s ratings for Growth, Value, Momentum, Sentiment, and Quality here.
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 June, KMB announced the completion of the sale of its tissue assets to Suzano. consolidating its leadership in Brazil’s toilet tissue market within six years of entry. With this sale, KMB will focus on accelerating the pace of growth of its Huggies, Intimus, and Plenitud personal care brands in Brazil.
In terms of the trailing-12-month net income margin, KMB’s 8.07% is 100.7% higher than the 4.02% industry average. Likewise, its 10.60% trailing-12-month levered FCF margin is 200.6% higher than the 3.53% industry average. Furthermore, the stock’s 300.46% trailing-12-month Return on Common Equity is significantly higher than the 11.24% industry average.
KMB’s net sales for the second quarter ended June 30, 2023, rose 1.4% year-over-year to $5.13 billion. Its gross profit rose 13.2% year-over-year to $1.73 billion. The company’s non-GAAP net income attributable to KMB increased 22.9% year-over-year to $559 million. Also, its non-GAAP EPS came in at $1.65, representing an increase of 23.1% year-over-year.
For the quarter ending September 30, 2023, KMB’s EPS and revenue are expected to increase 12.4% and 2.4% year-over-year to $1.57 and $5.18 billion, respectively. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past six months, the stock has gained 1.9% to close the last trading session at $128.54.
KMB’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, translating to a Buy in our proprietary rating system.
It has a B grade for Stability and Quality. It is ranked #11 in the Consumer Goods industry. In total, we rate KMB on eight different levels. Beyond what we stated above, we also have given KMB grades for Growth, Value, Momentum, and Sentiment. Get all the KMB’s ratings here.
ACCO Brands Corporation (ACCO)
ACCO 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 February 15, 2023, ACCO launched its Vertical InvisaMount glass dry-erase boards, which are great for smaller workspaces. They have a sleek, frameless design, invisible mounting, and come in different sizes. These boards are eco-friendly, tough against scratches, and come with accessories, with a 20-year warranty.
In terms of the trailing-12-month levered FCF margin, ACCO’s 8.06% is 47.3% higher than the 5.47% industry average.
For the fiscal second quarter ended June 30, 2023, ACCO’s net sales came in at $493.60 million. Its adjusted operating income increased 13.9% year-over-year, $66.20 million. The company’s adjusted net income rose 1.4% year-over-year to $36.50 million.
Its adjusted EPS came in at $0.38, representing an increase of 2.7% year-over-year. In addition, its adjusted EBITDA rose 8.7% year-over-year to $77.60 million.
ACCO’s EPS and revenue for the quarter ending December 31, 2023, are expected to increase 25% and 6.6% year-over-year to $0.40 and $532.22 million, respectively. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past three months, the stock declined 5.1% to close the last trading session at $4.87.
It’s no surprise that ACCO has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Growth, Value, and Sentiment. It is ranked #8 in the same industry. Click here to see the additional POWR ratings for ACCO (Momentum, Stability, and Quality).
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SWGAY shares were trading at $13.81 per share on Friday afternoon, down $0.09 (-0.68%). Year-to-date, SWGAY has declined -1.53%, versus a 15.47% 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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