Despite economic uncertainty and the possibility of a recession, the consumer goods industry will likely remain steady amid technological advancements and increased consumer awareness. So, quality consumer goods stocks Unilever PLC (UL), Kimberly-Clark Corporation (KMB), and Henkel AG & Co. KGaA (HENKY) could be wise additions to your portfolio.
Consumer spending is resilient in the face of still-high inflation and rising borrowing costs. Retail sales rose 0.3% in May from the prior month. According to the National Retail Federation, retail sales will increase between 4% and 6% in 2023.
Moreover, the global consumer goods industry is expected to grow to $224.33 billion by 2032 at a CAGR of 7.8%, as the markets are adapting to changing trends, pushed by digital innovation, the pandemic, and a focus on sustainable living.
In addition, the Fast Moving Consumer Goods (FMCG) and Consumer Packaged Goods (CPG) market is expected to grow between 2023 and 2030 at a CAGR of 7.5%.
Investors’ interest in consumer goods stocks is evident from the iShares U.S. Consumer Goods ETF’s (IYK) 10.2% returns over the past nine months.
Take a detailed look at the stocks mentioned above:
Unilever PLC (UL)
Headquartered in London, the United Kingdom, UL operates as a fast-moving consumer goods company. It operates through Beauty & well-being, Personal Care, Home Care, Nutrition, and Ice Cream segments.
UL’s trailing-12-month ROCE of 42.31% is 315.9% higher than the industry average of 10.17%. Its trailing-12-month levered FCF margin of 12.44% is 317.4% higher than the industry average of 2.98%.
UL has paid dividends for 12 consecutive years. Over the last five years, UL’s dividend payouts have grown at a 0.26% CAGR. While UL’s four-year average dividend yield is 3.50%, the company’s annual dividend of $1.88 yields 3.68% at the current price level.
UL’s turnover for the first quarter ended March 31, 2023, increased 7% year-over-year to €14.75 billion ($16.04 billion). Its underlying sales growth came in at 10.5%. Its Beauty & Wellbeing turnover increased 13.3% year-over-year to €3.09 billion ($3.36 billion). Also, its Home Care turnover increased 8.6% year-over-year to €3.35 billion ($3.30 billion).
The consensus revenue estimate of $65.38 billion for the year ending December 2023 represents a marginally increase year-over-year. Its EPS is expected to grow 5.1% year-over-year to $2.90 for the same period. UL’s shares have gained 18.3% over the past nine months to close the last trading session at $51.15.
UL’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.
UL has a B grade for Stability, and Value. It is ranked #11 out of 54 stocks in the Consumer Goods industry. Click here for the additional POWR Ratings for Growth, Sentiment, Momentum, and Quality for UL.
Kimberly-Clark Corporation (KMB)
KMB manufactures and markets personal care and consumer tissue products worldwide. It operates through three segments, Personal Care, Consumer Tissue, and K-C Professional.
KMB’s trailing-12-month levered FCF margin of 9.78% is 228% higher than the 2.98% industry average, while its trailing-12-month ROCE of 277.67% is significantly higher than the industry average of 10.17%.
KMB has paid dividends for 50 consecutive years. Over the last five years, KMB’s dividend payouts have grown at a 3.5% CAGR. While KMB’s four-year average dividend yield is 3.27%, the company’s annual dividend of $4.72 yields 3.49% at the current price level.
For the fiscal first quarter ended March 31, 2023, KMB’s net sales increased 2% year-over-year to $5.20 billion. Its cash provided by operations increased 200.5% year-over-year to $613 million. The company’s net income attributable to KMB’s increased 8.2% over the prior-year quarter to $566 million. Also, its EPS came in at $1.67, representing an increase of 7.7% year-over-year.
Street expects KMB’s revenue to increase 2.4% year-over-year to $20.66 billion for the year ending December 2023. Its EPS is expected to grow 11.2% year-over-year to $6.26 for the same period. It surpassed EPS estimates in three of four trailing quarters. Over the past nine months, the stock has gained 22.7% to close the last trading session at $135.18.
It’s no surprise that KMB has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Value, Stability, and Quality. It is ranked #9 in the same industry.
Beyond what is stated above, we’ve also rated KMB for Growth, Sentiment, and Momentum. Get all KMB ratings here.
Henkel AG & Co. KGaA (HENKY)
Headquartered in Düsseldorf, Germany, HENKY, together with its subsidiaries, engages in the adhesive technologies, beauty care, and laundry and home care businesses worldwide.
HENKY’s trailing-12-month net income margin of 5.62% is 78.2% higher than the industry average of 3.16%. Its trailing-12-month gross profit margin of 42.30% is 34.9% higher than the industry average of 31.36%.
HENKY has paid dividends for ten consecutive years. Over the last five years, HENKY’s dividend payouts have grown at a 3.5% CAGR. While HENKY’s four-year average dividend yield is 2.58%, the company’s annual dividend of $0.50 yields 2.96% at the current price level.
HENKY’s sales increased 11.6% year-over-year to €22.40 billion ($24.14 billion) in the year ended December 31, 2022. Its gross profit increased 4.4% year-over-year to €9.37 billion ($10.09 billion).
Also, its total current assets came in at €10.43 billion ($11.23 billion) for the period that ended December 31, 2022, compared to €10.41 billion ($11.22 billion) for the period that ended December 31 2021. Also, its current liabilities came in at €9.15 billion ($9.86 billion), compared to €9.27 billion ($9.99 billion) for the same period.
Analysts expect HENKY’s revenue to increase marginally year-over-year to $24.11 billion for the year ending December 2024. The stock has gained 20.6% over the past nine months to close the last trading session at $17.11.
HENKY’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 Stability and a B for Growth. To see additional HENKY ratings for Momentum, Sentiment, Value, and Quality, click here.
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UL shares were trading at $51.17 per share on Tuesday morning, up $0.02 (+0.04%). Year-to-date, UL has gained 3.42%, versus a 16.09% 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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