According to the University of Michigan’s consumer sentiment index, sentiment among U.S. consumers rebounded in April, with the index climbing to 63.5 in April from 62.0 in March. Both current and short-term outlook improved as inflation continued to ease.
So, investors looking for quality consumer stocks can consider buying Colgate-Palmolive Company (CL), KOSÉ Corporation (KSRYY), and United-Guardian, Inc. (UG).
As per the latest US Consumer Pulse Survey by McKinsey, while consumers are worried about rising prices and job security, they are optimistic and still spending.
In addition, fast-moving consumer goods (FMCG) and consumer packaged goods (CPG) markets have experienced tremendous expansion due to technological developments and rising consumer awareness. The market is predicted to grow at a CAGR of 7.5% until 2030.
Investors’ interest in consumer goods stocks is evident from the iShares U.S. Consumer Goods ETF’s (IYK) 5.5% returns over the past six months.
Let’s delve deeper into the fundamentals of the stocks.
Colgate-Palmolive Company (CL)
CL manufactures and sells consumer products internationally. The company operates through two segments, Oral, Personal, and Home Care; and Pet Nutrition.
CL’s trailing-12-month ROCE of 1014.6% is significantly higher than the industry average of 10.57%. Its trailing-12-month ROTC of 23.5% is 265.8% higher than the industry average of 6.42%.
CL has paid dividends for 59 consecutive years. Over the last three years, CL’s dividend payouts have grown at a 3% CAGR. While CL’s four-year average dividend yield is 2.3%, the company’s annual dividend of $1.92 yields 2.4% at the current price level.
For the fiscal first quarter that ended March 31, 2023, CL’s net sales came in at $4.77 billion, up 8.4% year-over-year. The company’s gross profit increased 5.4% year-over-year to $2.71 billion during the same period. Its operating profit came in at $909 million, up 5.7% year-over-year.
Its total assets came in at $16.17 billion for the period that ended March 31, 2023, compared to $15.73 billion for the period that ended December 31, 2022.
Analysts expect CL’s revenue to increase 6.3% year-over-year to $19.11 billion in 2023. It’s EPS is expected to grow 5.9% to $3.15 in 2023. It surpassed EPS estimates in all four trailing quarters. CL’s shares have gained 10.1% over the past six months to close the last trading session at $80.59.
CL’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.
CL has a B grade for Stability and Quality. Within the Consumer Goods industry, it is ranked #15 out of 53 stocks. Click here for the additional POWR Ratings for Value, Sentiment, Growth, and Momentum for CL.
KOSÉ Corporation (KSRYY)
Headquartered in Tokyo, Japan, KSRYY, together with its subsidiaries, manufactures, markets, and sells cosmetics primarily in Asia, the United States, and internationally.
KSRYY’s trailing-12-month gross profit margin and net income margins of 71.08% and 6.49% are 125.3% and 8.7% higher than the industry averages of 31.55% and 3.20%, respectively.
KSRYY’s net sales came in at ¥289.14 billion ($2.14 billion) for the final year that ended March 30, 2023, up 28.5% year-over-year. Its operating profit increased 14.8% year-over-year to ¥22.12 billion ($16.39 million).
Its net income and non-GAAP net income per share came in at ¥18.77 billion ($139.10 million) and ¥329.03, up 40.7% and 40.7% year-over-year, respectively.
Street expects KSRYY’s revenue to increase 166.5% year-over-year to $2.32 billion in 2023. Over the past nine months, the stock has gained 31.2% to close the last trading session at $23.85.
It’s no surprise that KSRYY has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B for Quality. It is ranked #16 in the same industry.
Beyond what is stated above, we’ve also rated KSRYY for Growth, Value, Sentiment, Stability, and Momentum. Get all KSRYY 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 20.23% is 531.5% higher than the 3.20% industry average. Its trailing-12-month ROTA of 24.15% is 458% higher than the 4.33% industry average.
While UG’s four-year average dividend yield is 6.25%, the company’s annual dividend of $0.68 yields 7% at the current price level.
UG total current liabilities came in at $1.37 million for the period that ended December 31, 2022, compared to $2.34 million for the period that ended December 31, 2021. Also, its total liabilities and stockholders’ equity came in at $10.64 million, compared to $12.24 million for the same period.
Over the past month, the stock has gained marginally to close its last trading session at $9.71.
UG’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, translating to Buy in our proprietary rating system.
It also has an A grade for Quality and a B grade for Sentiment. It is ranked #7 within the same industry. Click here to see the additional ratings for UG (Momentum, Sentiment, Value, Stability, and Growth).
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CL shares were trading at $80.75 per share on Monday afternoon, up $0.16 (+0.20%). Year-to-date, CL has gained 3.79%, versus a 8.40% 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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