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4 Consumer Product Stocks to Keep an Eye On Amid Industry Woes
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Companies in the Zacks Consumer Products – Staples industry have been operating in a challenging economic landscape, with core inflation pinching consumers’ budgets, thereby affecting demand. Also, higher input costs have been a hurdle, though the trend has been moderating.
Certain players in the industry are contending with elevated SG&A costs. However, dedication to portfolio refinement and innovation, along with prudent saving measures, has been working favorably for Kimberly-Clark Corporation (KMB - Free Report) , Albertsons Companies, Inc. (ACI - Free Report) , Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) and Newell Brands Inc. (NWL - 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 industry participants also provide batteries and lighting products, whereas some offer pet food and treats, pet supplies, pet medications and pet services. Companies in the Consumer Products – Staples universe offer products to supermarkets, drug/grocery stores, department stores, warehouse clubs, mass merchandisers and other retail outlets. Some companies sell products to manufacturers of perfumes and cosmetics, hair and other personal care products. Products are also sold through other distributors and the fast-growing e-commerce channel.
3 Trends Shaping the Future of the Consumer Products - Staples Industry
A Tough Operating Landscape: The Consumer Products – Staples industry is battling a challenging economic environment marked by slower economic growth and consumer spending. Elevated levels of core inflation have led to muted demand for several products, thereby impacting companies’ volumes. Additionally, the slowdown in economic activity has been hampering companies’ ability to drive revenue growth through price hikes. Consequently, many industry players have been grappling with soft revenues.
Cost Challenges: Although showing signs of moderation, escalating input expenses have been weighing on the margins of companies operating within the Consumer Products – Staples space. Companies have been witnessing increased costs of raw materials, labor, packaging and transportation due to difficult market circumstances. Additionally, elevated SG&A costs, investments in digital advancements and increased marketing expenditures are impacting profit margins. Nevertheless, efforts centered on restructuring and saving strategies have been helping players mitigate some of these pressures.
Revenue Enhancement Endeavors: Within the consumer product space, entities are strategically focusing on optimizing their operations to maximize returns. This involves a greater emphasis on bolstering e-commerce and digital initiatives. Furthermore, innovations targeted at segments with increasing consumer demand have fortified the overall strength of companies. Industry participants are strategically refining their portfolios through impactful acquisitions and divestments, allowing them to concentrate more intensely on areas with greater potential for growth.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Consumer Products – Staples industry is housed within the broader Zacks Consumer Staples sector. It currently carries a Zacks Industry Rank #153, which places it in the bottom 39% 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 dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually becoming less confident about this group’s earnings growth potential. Since the beginning of October 2023, the industry’s earnings estimate for 2023 has declined 3.2%.
Let’s look at the industry’s performance and current valuation.
Industry vs. Broader Market
The Zacks Consumer Products – Staples industry has lagged the S&P 500 Index and the broader Zacks Consumer Staples sector over the past year.
The industry has declined 28% over this period against the S&P 500 Index’s growth of 20.2%. Meanwhile, the broader sector has declined 7.1%.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), commonly used for valuing consumer staple stocks, the industry is currently trading at 17.38X compared with the S&P 500’s 20.62X and the sector’s 17.31X.
Over the last five years, the industry has traded as high as 26.15X, as low as 16X and at the median of 20.18X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
4 Consumer Product Stocks to Watch
Newell Brands: This designer, manufacturer and distributor of consumer and commercial products has been benefiting from its actions to fuel productivity plans, driving automation and fully implementing Project Ovid. Newell Brands is also evaluating opportunities to optimize the category mix within each business unit. The increased focus on revenue growth management, aggressive efforts to reduce SKU and supply network optimization bode well for this Zacks Rank #1 (Strong Buy) company. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for NWL’s 2024 earnings per share (EPS) has risen by a penny to 77 cents over the past 30 days. This suggests growth of 3.5% from the figure reported in the year-ago period. Shares of Newell Brands have rallied 29.8% in the past three months.
Price and Consensus: NWL
Ollie’s Bargain: This Zacks Rank #2 (Buy) company’s business operating model of buying cheap and selling cheap, cost-containment efforts, focus on store productivity and expansion of customer reward program, Ollie’s Army, reinforce its position in the industry. Growing trade-down trends and favorable responses to deals with product offerings appealing to a broader customer base have been contributing to Ollie’s Bargain’s performance.
The Zacks Consensus Estimate for Ollie’s Bargain’s fiscal 2024 EPS has increased by 2 cents to $3.23 over the past 30 days. This calls for growth of 14.1% year over year. OLLI, which is a value-centric retailer specializing in brand-name merchandise, has seen its shares decline 6.2% in the past three months.
Price and Consensus: OLLI
Kimberly-Clark: This Zacks Rank #3 (Hold) company has been gaining from its growth strategies focused on the enhancement of its core business in developed markets, accelerating growth in the Personal Care segment within developing and emerging markets and fortifying digital and e-commerce capabilities. The company, specializing in personal care and consumer tissue products, remains well-placed on innovation, pricing actions, solid revenue growth management capability and other commercial programs. Saving plans like Focus on Reducing Costs Everywhere or the FORCE Program have also been working well for Kimberly-Clark.
The Zacks Consensus Estimate for KMB’s 2024 bottom line has declined from $7.03 to $6.83 in the past 30 days. However, this suggests growth of nearly 4% from the year-ago period. Shares of Kimberly-Clark have risen 1.9% in the past three months.
Price and Consensus: KMB
Albertsons Companies: This food and drug store company, with a Zacks Rank #3, is benefiting from its commitment to providing efficient in-store services, advancing digital and omnichannel capabilities and driving productivity improvements. Albertsons Companies' continuous efforts to enhance product offerings contribute significantly to the overall improvement in the customer experience.
The Zacks Consensus Estimate for ACI’s fiscal 2024 EPS has declined 2.1% to $2.76 in the past 30 days. Shares of Albertsons Companies are up 0.4% in the past three months.
Price and Consensus: ACI
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4 Consumer Product Stocks to Keep an Eye On Amid Industry Woes
Companies in the Zacks Consumer Products – Staples industry have been operating in a challenging economic landscape, with core inflation pinching consumers’ budgets, thereby affecting demand. Also, higher input costs have been a hurdle, though the trend has been moderating.
Certain players in the industry are contending with elevated SG&A costs. However, dedication to portfolio refinement and innovation, along with prudent saving measures, has been working favorably for Kimberly-Clark Corporation (KMB - Free Report) , Albertsons Companies, Inc. (ACI - Free Report) , Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) and Newell Brands Inc. (NWL - 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 industry participants also provide batteries and lighting products, whereas some offer pet food and treats, pet supplies, pet medications and pet services. Companies in the Consumer Products – Staples universe offer products to supermarkets, drug/grocery stores, department stores, warehouse clubs, mass merchandisers and other retail outlets. Some companies sell products to manufacturers of perfumes and cosmetics, hair and other personal care products. Products are also sold through other distributors and the fast-growing e-commerce channel.
3 Trends Shaping the Future of the Consumer Products - Staples Industry
A Tough Operating Landscape: The Consumer Products – Staples industry is battling a challenging economic environment marked by slower economic growth and consumer spending. Elevated levels of core inflation have led to muted demand for several products, thereby impacting companies’ volumes. Additionally, the slowdown in economic activity has been hampering companies’ ability to drive revenue growth through price hikes. Consequently, many industry players have been grappling with soft revenues.
Cost Challenges: Although showing signs of moderation, escalating input expenses have been weighing on the margins of companies operating within the Consumer Products – Staples space. Companies have been witnessing increased costs of raw materials, labor, packaging and transportation due to difficult market circumstances. Additionally, elevated SG&A costs, investments in digital advancements and increased marketing expenditures are impacting profit margins. Nevertheless, efforts centered on restructuring and saving strategies have been helping players mitigate some of these pressures.
Revenue Enhancement Endeavors: Within the consumer product space, entities are strategically focusing on optimizing their operations to maximize returns. This involves a greater emphasis on bolstering e-commerce and digital initiatives. Furthermore, innovations targeted at segments with increasing consumer demand have fortified the overall strength of companies. Industry participants are strategically refining their portfolios through impactful acquisitions and divestments, allowing them to concentrate more intensely on areas with greater potential for growth.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Consumer Products – Staples industry is housed within the broader Zacks Consumer Staples sector. It currently carries a Zacks Industry Rank #153, which places it in the bottom 39% 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 dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually becoming less confident about this group’s earnings growth potential. Since the beginning of October 2023, the industry’s earnings estimate for 2023 has declined 3.2%.
Let’s look at the industry’s performance and current valuation.
Industry vs. Broader Market
The Zacks Consumer Products – Staples industry has lagged the S&P 500 Index and the broader Zacks Consumer Staples sector over the past year.
The industry has declined 28% over this period against the S&P 500 Index’s growth of 20.2%. Meanwhile, the broader sector has declined 7.1%.
One-Year Price Performance
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Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), commonly used for valuing consumer staple stocks, the industry is currently trading at 17.38X compared with the S&P 500’s 20.62X and the sector’s 17.31X.
Over the last five years, the industry has traded as high as 26.15X, as low as 16X and at the median of 20.18X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
4 Consumer Product Stocks to Watch
Newell Brands: This designer, manufacturer and distributor of consumer and commercial products has been benefiting from its actions to fuel productivity plans, driving automation and fully implementing Project Ovid. Newell Brands is also evaluating opportunities to optimize the category mix within each business unit. The increased focus on revenue growth management, aggressive efforts to reduce SKU and supply network optimization bode well for this Zacks Rank #1 (Strong Buy) company. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for NWL’s 2024 earnings per share (EPS) has risen by a penny to 77 cents over the past 30 days. This suggests growth of 3.5% from the figure reported in the year-ago period. Shares of Newell Brands have rallied 29.8% in the past three months.
Price and Consensus: NWL
Ollie’s Bargain: This Zacks Rank #2 (Buy) company’s business operating model of buying cheap and selling cheap, cost-containment efforts, focus on store productivity and expansion of customer reward program, Ollie’s Army, reinforce its position in the industry. Growing trade-down trends and favorable responses to deals with product offerings appealing to a broader customer base have been contributing to Ollie’s Bargain’s performance.
The Zacks Consensus Estimate for Ollie’s Bargain’s fiscal 2024 EPS has increased by 2 cents to $3.23 over the past 30 days. This calls for growth of 14.1% year over year. OLLI, which is a value-centric retailer specializing in brand-name merchandise, has seen its shares decline 6.2% in the past three months.
Price and Consensus: OLLI
Kimberly-Clark: This Zacks Rank #3 (Hold) company has been gaining from its growth strategies focused on the enhancement of its core business in developed markets, accelerating growth in the Personal Care segment within developing and emerging markets and fortifying digital and e-commerce capabilities. The company, specializing in personal care and consumer tissue products, remains well-placed on innovation, pricing actions, solid revenue growth management capability and other commercial programs. Saving plans like Focus on Reducing Costs Everywhere or the FORCE Program have also been working well for Kimberly-Clark.
The Zacks Consensus Estimate for KMB’s 2024 bottom line has declined from $7.03 to $6.83 in the past 30 days. However, this suggests growth of nearly 4% from the year-ago period. Shares of Kimberly-Clark have risen 1.9% in the past three months.
Price and Consensus: KMB
Albertsons Companies: This food and drug store company, with a Zacks Rank #3, is benefiting from its commitment to providing efficient in-store services, advancing digital and omnichannel capabilities and driving productivity improvements. Albertsons Companies' continuous efforts to enhance product offerings contribute significantly to the overall improvement in the customer experience.
The Zacks Consensus Estimate for ACI’s fiscal 2024 EPS has declined 2.1% to $2.76 in the past 30 days. Shares of Albertsons Companies are up 0.4% in the past three months.
Price and Consensus: ACI
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