A number of S&P 500 companies are lined up to report fourth-quarter earnings this week, including two Soaps and Cleaning Materials industry champions — Procter & Gamble Company (PG - Free Report) and Colgate-Palmolive Company (CL - Free Report) .
Thriving mostly on positive consumer environment, backed by favorable consumer spending and overall economic growth, the Zacks Soaps and Cleaning Materials industry comprises manufacturers and suppliers of personal care, and home care products. The industry enjoys inelastic demand for its products.
However, players in this space continue to grapple with escalated raw material and transportation costs, much like others in the broader Consumer Staples sector. These cost elevations along with trade war concerns between the United States and China, uncertain global markets, higher operating expenses due to advertising investments, and unfavorable currency rates are likely to weigh on revenues and margins of companies within this industry in the upcoming quarter. Furthermore, heightened competition from other players led to pricing pressure due to aggressive promotional activities, which should continue to hurt margins in fourth-quarter 2018.
Despite the odds, stocks in the Soaps and Cleaning Materials industry have shown resilience in the past three months. The industry has gained 2.5% in this period against the broader sector’s decline of 4.4% and the S&P 500 index’s decrease of 2.9%. Further, the industry is placed among at the top 33% of the 16 Zacks sectors.
Industry Vs. S&P 500 & Sector
This strength mainly comes from the industry players’ efforts to stay in business, with solid pricing initiatives; focus on product improvement and innovation; packaging and marketing initiatives; and restructuring actions — including acquisitions and divestitures. Additionally, notable progress on cost-containment and productivity enhancement initiatives by players makes this industry lucrative this earnings season.
The Soaps and Cleaning Materials industry, which is part of the Zacks Consumer Staples sector, seems poised for growth in the fourth quarter of 2018, owing to the aforementioned initiatives by players. According to the latest Earnings Preview, the Consumer Staples sector’s aggregate fourth-quarter EPS is expected to increase 0.4%, with revenues anticipated to witness 0.9% growth.
On that note, we bring to you three stocks from the Zacks Soaps and Cleaning Materials industry that may show promise based on their favorable Zacks Rank and a positive Earnings ESP. Our research shows that stocks, with a combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP, have as high as a 70% chance of delivering a positive earnings surprise. It makes sense to add these potential winners to your portfolio, ahead of their releases. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The Procter & Gamble Company, a branded consumer products company, which markets products in more than 180 countries, is a solid bet. The company delivered average positive earnings surprise of 3.2% in the trailing four quarters. The Zacks Consensus Estimate for earnings in the quarter under review is pegged at $1.21 per share, reflecting year-over-year growth of 1.7%. The company, which is scheduled to announce second-quarter fiscal 2019 results on Jan 23, has an Earnings ESP of +0.66% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
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