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5 Consumer Products Stocks for 2021 Backed by Solid Industry Trends
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Players in the Zacks Consumer Products – Staples industry are rallying on rising demand amid the pandemic-led elevated at-home consumption and stock piling. The pandemic-induced social distancing has also boosted online shopping, which has been aiding players who have been strengthening their digital capacity. However, higher marketing costs, growth-related investments as well as pandemic-related expenses are squeezing margins to an extent.
Nonetheless, prudent saving and restructuring measures along with constant efforts to optimize portfolio have been working in favor of Newell Brands Inc. (NWL - Free Report) , Albertsons Companies, Inc. (ACI - Free Report) , Grocery Outlet Holding Corp. (GO - Free Report) , WD-40 Company (WDFC - Free Report) and Tupperware Brands Corporation (TUP - Free Report) .
About the Industry
The Zacks Consumer Products – Staples industry consists of companies involved in marketing, producing and distributing a wide range of consumer products. These include personal care items, cleaning equipment, stationery, bed and bath products and household goods like kitchen appliances, cutlery and food storage. Some of the industry participants also provide batteries and lighting products. Apart from this, the space includes food store retailers – operating superstores, convenience stores, supermarkets and drugstores.
3 Trends Shaping the Future of the Consumer Products – Staples Industry
Pandemic-Led Demand: Industry players have been benefiting from rising demand for staples or essential items, thanks to consumers’ increased stay at home and stock hoarding trends amid the coronavirus outbreak. Markedly, essentials like hand sanitizers, tissue paper, toilet paper, cleaning wipes, grocery, infant supplies and related staples have been witnessing a demand spike as Americans are spending more time at home and are undertaking extra measures for safety and sanitization. This makes the role of several consumer products companies such as Kimberly-Clark Corporation (KMB - Free Report) important. In fact, demand for most of the products provided by these industry participants is fairly stable. No wonder, consumer product players are focused on concerted revenue-boosting initiatives to squeeze out more from their operations. To this end, companies’ stringent focus on boosting e-commerce and digital operations have been a major driver, especially amid the pandemic, as increased social distancing has taken online shopping to another level.
Efforts to Boost Portfolio: Players in the space have been focused on optimizing portfolio through meaningful buyouts and divestitures, which enable them to increase focus on areas with higher growth potential. Also, innovation in areas that are witnessing increasing consumer interest, such as organic products, has been adding to portfolio strength. Companies are also adopting prudent pricing strategies to gain market traction and fight cost-related challenges.
Pressure on Margins: While efforts to enhance e-commerce capability have been a major tailwind, the related costs keep margins under pressure. Also, higher advertising and other growth-related investments are a threat to margins. Apart from this, some companies have been facing margin pressure from additional costs associated with operating amid the pandemic, such as increased pay, and elevated health and sanitization measures. Nevertheless, the companies’ solid cost-containment and restructuring plans should offer some respite.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Consumer Products – Staples industry is housed within the broader Zacks Consumer Staples sector. It currently carries a Zacks Industry Rank #118, which places it in the top 46% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually becoming more confident on this group’s earnings growth potential. Since the beginning of June, the industry’s earnings estimate for 2020 has improved 1.3%.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Versus Broader Market
The Zacks Consumer Products – Staples industry has lagged the S&P 500 index, while it has outperformed the broader Zacks Consumer Staples sector over the past year.
The industry has gained 5.6% over this period, compared with the S&P 500 index’s growth of 15.2%. Meanwhile, the broader sector has increased 1.3%.
One-Year Price Performance
Industry’s Current Valuation
On the basis of forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing consumer staples stocks, the industry is currently trading at 23.66X compared with the S&P 500’s 22.69X and the sector’s 20.73X.
Over the last five years, the industry has traded as high as 23.66X, as low as 13.32X, and at the median of 18.11X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
5 Consumer Products Stocks to Keep a Close Eye on
Newell Brands: The company’s Food, Commercial, Appliances & Cookware and Outdoor & Recreation categories have been gaining on increased consumer demand. Apart from this, Newell Brands is progressing well with its turnaround plans, such as SKU reduction efforts, Project FUEL and other cost-cutting actions. The Zacks Consensus Estimate for Newell Brands’ current fiscal-year earnings per share (“EPS”) has moved 32% north in the last 60 days. This Atlanta, GA-based company’s bottom line has beaten the consensus mark by 53.8%, on average, in the trailing four quarters. The Zacks Rank #1 (Strong Buy) company has an estimated long-term earnings growth rate of 2.9%. Further, shares of this designer, manufacturer and distributor of consumer and commercial products have rallied 31.6% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: NWL
Grocery Outlet Holding: The company has been gaining on increased coronavirus-led demand, stemming from rise in at-home consumption and stock piling of essential items. Apart from these, the company has been focusing on efficient marketing, to bolster sales and build dynamic relationships with customers. Markedly, the company is emphasizing on digital marketing. Such upsides along with a strong store footprint are likely to continue fueling growth. The Zacks Consensus Estimate for this California-based company’s current fiscal-year EPS has moved up by 25.4% in the last 60 days. The company has an estimated long-term earnings growth rate of 14.7%. The Zacks Rank #1 company has seen its shares rise as much as 12.1% in the past six months. Markedly, Grocery Outlet Holding’s bottom line has beaten the consensus mark by nearly 59%, on average, in the trailing four quarters.
Price and Consensus: GO
Tupperware Brands: The company has been focused on solidifying its core business across geographies. Further, it has been gaining on its efforts to augment its sales force’s dependence on digital methods as well as divide its sales force via segmentation in order to better address customer needs.Apart from this, the company’s cost-saving initiatives have been yielding favorable results. The Zacks Consensus Estimate for this Zacks Rank #1 company’s current fiscal-year EPS has surged 60.4% in the past 60 days. The provider of design-centric preparation, storage, and serving solutions for home and kitchen, along with cookware, microwave products, microfiber textiles and water-filtration related items, among others, has seen its shares soar 588.4% in the past six months.
Price and Consensus: TUP
Albertsons Companies: The food and drug store company has been gaining on its efforts to improve store as well as e-commerce operations. With regard to fueling e-commerce operations, the company is making notable progress across pickup and delivery. Additionally, focus on enhancing efficiency, and expanding product assortment and mix is noteworthy. Apart from this, the company has been committed toward curtailing costs. The Zacks Consensus Estimate for this Zacks Rank #2 (Buy) company’s current fiscal-year EPS has surged 25.3% in the past 60 days. Shares of the company have gained 1.1% in the past six months. Encouragingly, Albertsons has an estimated long-term earnings growth rate of 10.9%.
Price and Consensus: ACI
WD-40 Company: The company’s homecare and cleaning products have been benefiting from burgeoning demand due to the coronavirus pandemic. Apart from this, the company has been focused on core strategies like expanding the WD-40 Specialist line; widening product base; attracting, developing and retaining outstanding tribe members, and achieving operational excellence, among others. Apart from this, WD-40 Company’s increased focus on digital and e-commerce operations has been a driver. The Zacks Consensus Estimate for this Zacks Rank #2 company’s current fiscal-year EPS has risen almost 3% in the past 60 days. Shares of this provider of homecare and cleaning products as well as maintenance products have gained 37.9% in the past six months.
Price and Consensus: WDFC
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5 Consumer Products Stocks for 2021 Backed by Solid Industry Trends
Players in the Zacks Consumer Products – Staples industry are rallying on rising demand amid the pandemic-led elevated at-home consumption and stock piling. The pandemic-induced social distancing has also boosted online shopping, which has been aiding players who have been strengthening their digital capacity. However, higher marketing costs, growth-related investments as well as pandemic-related expenses are squeezing margins to an extent.
Nonetheless, prudent saving and restructuring measures along with constant efforts to optimize portfolio have been working in favor of Newell Brands Inc. (NWL - Free Report) , Albertsons Companies, Inc. (ACI - Free Report) , Grocery Outlet Holding Corp. (GO - Free Report) , WD-40 Company (WDFC - Free Report) and Tupperware Brands Corporation (TUP - Free Report) .
About the Industry
The Zacks Consumer Products – Staples industry consists of companies involved in marketing, producing and distributing a wide range of consumer products. These include personal care items, cleaning equipment, stationery, bed and bath products and household goods like kitchen appliances, cutlery and food storage. Some of the industry participants also provide batteries and lighting products. Apart from this, the space includes food store retailers – operating superstores, convenience stores, supermarkets and drugstores.
3 Trends Shaping the Future of the Consumer Products – Staples Industry
Pandemic-Led Demand: Industry players have been benefiting from rising demand for staples or essential items, thanks to consumers’ increased stay at home and stock hoarding trends amid the coronavirus outbreak. Markedly, essentials like hand sanitizers, tissue paper, toilet paper, cleaning wipes, grocery, infant supplies and related staples have been witnessing a demand spike as Americans are spending more time at home and are undertaking extra measures for safety and sanitization. This makes the role of several consumer products companies such as Kimberly-Clark Corporation (KMB - Free Report) important. In fact, demand for most of the products provided by these industry participants is fairly stable. No wonder, consumer product players are focused on concerted revenue-boosting initiatives to squeeze out more from their operations. To this end, companies’ stringent focus on boosting e-commerce and digital operations have been a major driver, especially amid the pandemic, as increased social distancing has taken online shopping to another level.
Efforts to Boost Portfolio: Players in the space have been focused on optimizing portfolio through meaningful buyouts and divestitures, which enable them to increase focus on areas with higher growth potential. Also, innovation in areas that are witnessing increasing consumer interest, such as organic products, has been adding to portfolio strength. Companies are also adopting prudent pricing strategies to gain market traction and fight cost-related challenges.
Pressure on Margins: While efforts to enhance e-commerce capability have been a major tailwind, the related costs keep margins under pressure. Also, higher advertising and other growth-related investments are a threat to margins. Apart from this, some companies have been facing margin pressure from additional costs associated with operating amid the pandemic, such as increased pay, and elevated health and sanitization measures. Nevertheless, the companies’ solid cost-containment and restructuring plans should offer some respite.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Consumer Products – Staples industry is housed within the broader Zacks Consumer Staples sector. It currently carries a Zacks Industry Rank #118, which places it in the top 46% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually becoming more confident on this group’s earnings growth potential. Since the beginning of June, the industry’s earnings estimate for 2020 has improved 1.3%.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Versus Broader Market
The Zacks Consumer Products – Staples industry has lagged the S&P 500 index, while it has outperformed the broader Zacks Consumer Staples sector over the past year.
The industry has gained 5.6% over this period, compared with the S&P 500 index’s growth of 15.2%. Meanwhile, the broader sector has increased 1.3%.
One-Year Price Performance
Industry’s Current Valuation
On the basis of forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing consumer staples stocks, the industry is currently trading at 23.66X compared with the S&P 500’s 22.69X and the sector’s 20.73X.
Over the last five years, the industry has traded as high as 23.66X, as low as 13.32X, and at the median of 18.11X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
5 Consumer Products Stocks to Keep a Close Eye on
Newell Brands: The company’s Food, Commercial, Appliances & Cookware and Outdoor & Recreation categories have been gaining on increased consumer demand. Apart from this, Newell Brands is progressing well with its turnaround plans, such as SKU reduction efforts, Project FUEL and other cost-cutting actions. The Zacks Consensus Estimate for Newell Brands’ current fiscal-year earnings per share (“EPS”) has moved 32% north in the last 60 days. This Atlanta, GA-based company’s bottom line has beaten the consensus mark by 53.8%, on average, in the trailing four quarters. The Zacks Rank #1 (Strong Buy) company has an estimated long-term earnings growth rate of 2.9%. Further, shares of this designer, manufacturer and distributor of consumer and commercial products have rallied 31.6% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: NWL
Grocery Outlet Holding: The company has been gaining on increased coronavirus-led demand, stemming from rise in at-home consumption and stock piling of essential items. Apart from these, the company has been focusing on efficient marketing, to bolster sales and build dynamic relationships with customers. Markedly, the company is emphasizing on digital marketing. Such upsides along with a strong store footprint are likely to continue fueling growth. The Zacks Consensus Estimate for this California-based company’s current fiscal-year EPS has moved up by 25.4% in the last 60 days. The company has an estimated long-term earnings growth rate of 14.7%. The Zacks Rank #1 company has seen its shares rise as much as 12.1% in the past six months. Markedly, Grocery Outlet Holding’s bottom line has beaten the consensus mark by nearly 59%, on average, in the trailing four quarters.
Price and Consensus: GO
Tupperware Brands: The company has been focused on solidifying its core business across geographies. Further, it has been gaining on its efforts to augment its sales force’s dependence on digital methods as well as divide its sales force via segmentation in order to better address customer needs.Apart from this, the company’s cost-saving initiatives have been yielding favorable results. The Zacks Consensus Estimate for this Zacks Rank #1 company’s current fiscal-year EPS has surged 60.4% in the past 60 days. The provider of design-centric preparation, storage, and serving solutions for home and kitchen, along with cookware, microwave products, microfiber textiles and water-filtration related items, among others, has seen its shares soar 588.4% in the past six months.
Price and Consensus: TUP
Albertsons Companies: The food and drug store company has been gaining on its efforts to improve store as well as e-commerce operations. With regard to fueling e-commerce operations, the company is making notable progress across pickup and delivery. Additionally, focus on enhancing efficiency, and expanding product assortment and mix is noteworthy. Apart from this, the company has been committed toward curtailing costs. The Zacks Consensus Estimate for this Zacks Rank #2 (Buy) company’s current fiscal-year EPS has surged 25.3% in the past 60 days. Shares of the company have gained 1.1% in the past six months. Encouragingly, Albertsons has an estimated long-term earnings growth rate of 10.9%.
Price and Consensus: ACI
WD-40 Company: The company’s homecare and cleaning products have been benefiting from burgeoning demand due to the coronavirus pandemic. Apart from this, the company has been focused on core strategies like expanding the WD-40 Specialist line; widening product base; attracting, developing and retaining outstanding tribe members, and achieving operational excellence, among others. Apart from this, WD-40 Company’s increased focus on digital and e-commerce operations has been a driver. The Zacks Consensus Estimate for this Zacks Rank #2 company’s current fiscal-year EPS has risen almost 3% in the past 60 days. Shares of this provider of homecare and cleaning products as well as maintenance products have gained 37.9% in the past six months.
Price and Consensus: WDFC
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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