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5 Well-Placed Stocks in a Prospering Soap & Cleaning Materials Industry
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Players in the Zacks Soap and Cleaning Materials industry continue to thrive on strong demand for consumer products and brands, cost-saving measures, and effective execution. Companies emphasizing operational transformation, growth in digital commerce, innovation and brand building have been succeeding despite macroeconomic challenges. Additionally, industry participants have benefited from strategic pricing actions, significantly boosting sales trends.
Nonetheless, companies in the industry continue to face challenges related to higher manufacturing and logistic costs, increased commodity prices, and reduced volumes. Additionally, elevated spending on advertising and sales promotions is expected to impact near-term margins. Some companies are implementing cost-cutting measures to support margins while introducing products and enhancing marketing efforts. Notable players like The Procter & Gamble Company (PG - Free Report) , Colgate-Palmolive (CL - Free Report) , Henkel AG & Co. (HENKY - Free Report) , Church & Dwight Co., Inc. (CHD - Free Report) and The Clorox Company (CLX - Free Report) are focusing on these strategies despite ongoing cost inflation.
About the Industry
Companies involved in the manufacturing and supply of fast-moving consumer goods, including personal care, household and specialty products, primarily make up the Zacks Soap and Cleaning Materials industry. The personal care segment comprises skin and hair care products, deodorants, and oral care items. The household category covers home care products, including laundry care, house cleaning agents, bleaching products, air care, dishwashing liquids and other cleaning items. Laundry detergent is one of the largest markets among the above-mentioned ones. A few players in this space also offer baby and feminine care items. Some companies offer pet care products. These companies market and sell products through supermarkets, mass merchandisers, grocery stores, distributors, wholesalers, department stores, drugstores, specialty stores, dollar stores and pet stores, and websites.
Major Trends Shaping the Future of the Soap & Cleaning Materials Industry
Product Innovation & Strategic Efforts: Investments in product development to suit consumers’ changing needs have aided companies in the soaps and cleaning products space. Investments in innovation, product portfolio and digital capabilities have been the key to driving sales of companies. Players have been undertaking pricing, packaging and marketing initiatives, and restructuring actions, including acquisitions and divestitures, to boost sales. Companies are also looking to expand into new markets and channels. Developing products with eco-friendly and natural ingredients is another area of focus among industry players, as consumers increasingly prefer environment-friendly ingredients in their daily-use items. The online availability of products has been another key sales driver across various markets due to convenience and ease of shopping. Consumer goods companies are undertaking productivity and cost-saving plans to boost margins.
Favorable Demand Trends & Pricing Actions: The soaps and cleaning materials industry has been experiencing strong demand trends across markets. Solid product and brand demand, owing to continued brand relevance and favorable price mix, have been boosting the industry participants’ performances. Players have also witnessed improved organic sales trends mainly on gains from robust pricing actions and revenue management initiatives. The companies have been adopting bold pricing initiatives across markets to combat rising costs due to the persistence of inflation, higher freight, and currency woes. Some companies have resorted to cost-based pricing actions, which have proved beneficial.
Elevated Costs: The soaps and cleaning materials industry’s players have been witnessing escalating raw material and logistic costs, particularly transportation, due to supply-chain issues and current industry dynamics. These have been hurting the industry participants’ margins. Elevated manufacturing and distribution costs, and increased advertising and sales promotion expenses are other factors impacting margins. The companies have been incurring higher SG&A expenses due to increased operational costs related to salaries and bonuses, and planned investments in digital capabilities and productivity enhancements. To overcome these shortcomings and improve margins, some players are focused on cost-containment initiatives, including streamlining the supply chain and minimizing overhead costs. Most companies are resorting to price increases to cushion their margins.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Soap and Cleaning Materials industry is housed within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #28, which places it in the top 11% 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 positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential.
We here present a few stocks that one can retain in one's portfolio, given their solid growth endeavors. But before that, it is worth looking at the industry’s performance and current valuation.
Industry Vs. Broader Market
The Zacks Soap and Cleaning Materials industry has outperformed the broader Zacks Consumer Staples sector in the past year. However, it has lagged the S&P 500 index in the same period.
The industry has risen 12.7% in the past year, whereas the broader sector has declined 5.3% and the S&P 500 has grown 26.9%.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing Consumer Staples stocks, the industry is currently trading at 22.75X compared with the S&P 500’s 21.91X and the sector’s 17.01X.
Over the past five years, the industry has traded as high as 25.13X and as low as 20.08X, the median being 22.47X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
5 Stocks to Keep a Close Watch
Colgate: The company’s business strategies comprise efforts to increase its leadership in the key product categories through innovation in core businesses, tracking adjacent categories’ growth and expansion into new markets and channels. Due to the shift in consumer preference to organic and natural ingredients, the company has expanded its Naturals range, including Naturals toothpaste. Growth in volumes, higher pricing, and investments in premium innovation and digital transformation have been the key drivers in recent years.
Expanding the availability of products via enhanced distribution to newer markets and channels is one of Colgate’s priorities to improve organic sales. The company is aggressively expanding into faster-growth channels, while extending the geographic footprint of its brands. The Zacks Consensus Estimate for CL’s 2024 sales and earnings indicates year-over-year growth of 3.9% and 9.3%, respectively. The consensus mark for earnings has been unchanged in the past 30 days. Shares of the leading oral care company have risen 28.7% in the past year. The company currently has a Zacks Rank #2 (Buy).
Henkel: The Germany-based consumer goods company engages in adhesive technologies, beauty care, and laundry and home care businesses worldwide. It has been benefiting from the progress in implementing the purposeful growth agenda and merging the consumer businesses into Henkel Consumer Brands. By combining the Laundry & Home Care and Beauty Care consumer businesses into Henkel Consumer Brands, HENKY expects to broaden its customer base and optimize its portfolio to deliver higher growth, while improving its margin profile. The company has been witnessing robust organic sales growth, driven by strength across all business units and regions.
Henkel looks poised to gain from significant price increases, strict cost management and further efficiency improvements, which are likely to offset the effects of input cost inflation. The Zacks Consensus Estimate for HENKY’s 2024 earnings indicates year-over-year growth of 12.8%. The earnings estimate has moved up 3.9% in the past 30 days. Shares of the Zacks Rank #2 company have risen 14.3% in the past year.
Price and Consensus: HENKY
Church & Dwight: The well-known specialty products company has been gaining from its prudent buyouts, solid innovation and favorable consumption demand. Church & Dwight is optimistic about its 2024 performance on category growth and impressive brand performance. It is on track with pricing and productivity efforts to counter cost inflation. The Ewing, NJ-based company is focused on product innovation for growth.
CHD is focused on making capital investments to expand its factory and supplier network capacity, courtesy of the constant strength in consumer demand for its products. Its regular innovation helps improve brand positions and market share in the consumer categories. Shares of the Zacks Rank #2 company have gained 6.9% in a year. The Zacks Consensus Estimate for Church & Dwight’s 2024 sales and earnings indicates year-over-year growth of 4.6% and 9.2%, respectively. The consensus mark for earnings has been unchanged in the past 30 days.
Price and Consensus: CHD
Procter & Gamble: The Cincinnati, OH-based consumer goods giant has been benefiting from strength across all segments, coupled with robust volume, pricing and mix. Procter & Gamble’s products play a key role in meeting the daily health, hygiene and cleaning needs of consumers worldwide. Increased consumer demand for its hand soaps, detergents and surface cleaning products has been a key catalyst. The company has been witnessing strong growth in its largest markets, the United States and Greater China. The company’s e-commerce sales have been growing globally.
Procter & Gamble remains focused on productivity and cost-saving plans to boost margins. The company’s continued investment in its businesses, alongside efforts to offset macro cost headwinds and balance top and bottom-line growth, underscores its productivity efforts. The Zacks Consensus Estimate for PG’s fiscal 2024 sales and earnings indicates year-over-year increases of 2.8% and 11%, respectively. The consensus mark for earnings has been unchanged in the past 30 days. Shares of the Zacks Rank #3 (Hold) company have risen 11.8% in the past year.
Price and Consensus: PG
Clorox: Clorox is focused on creating a streamlined operating model to create a faster, simpler company through the Reimagine Work under its IGNITE strategy. These strategies are expected to help increase efficiencies and transform the company's operations in the areas of the supply chain, digital commerce, innovation and brand building in the long term. The company has undertaken some strategic initiatives, including pricing actions, cost-reduction efforts, increased focus on building supply-chain resiliency, and enhanced productivity to counter the ongoing cost headwinds. CLX is on track with its cost-saving and productivity initiatives.
Clorox has been undertaking digital investments to transition to a cloud-based platform. It earlier announced plans to invest $500 million in the next five years in transformative technologies and processes. The Zacks Consensus Estimate for Clorox’s fiscal 2024 earnings suggests year-over-year growth of 16.1%. The consensus mark for earnings has moved up by a penny in the past 30 days. CLX shares have lost 14.9% in the past year. The company has a Zacks Rank #3 at present.
Price and Consensus: CLX
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5 Well-Placed Stocks in a Prospering Soap & Cleaning Materials Industry
Players in the Zacks Soap and Cleaning Materials industry continue to thrive on strong demand for consumer products and brands, cost-saving measures, and effective execution. Companies emphasizing operational transformation, growth in digital commerce, innovation and brand building have been succeeding despite macroeconomic challenges. Additionally, industry participants have benefited from strategic pricing actions, significantly boosting sales trends.
Nonetheless, companies in the industry continue to face challenges related to higher manufacturing and logistic costs, increased commodity prices, and reduced volumes. Additionally, elevated spending on advertising and sales promotions is expected to impact near-term margins. Some companies are implementing cost-cutting measures to support margins while introducing products and enhancing marketing efforts. Notable players like The Procter & Gamble Company (PG - Free Report) , Colgate-Palmolive (CL - Free Report) , Henkel AG & Co. (HENKY - Free Report) , Church & Dwight Co., Inc. (CHD - Free Report) and The Clorox Company (CLX - Free Report) are focusing on these strategies despite ongoing cost inflation.
About the Industry
Companies involved in the manufacturing and supply of fast-moving consumer goods, including personal care, household and specialty products, primarily make up the Zacks Soap and Cleaning Materials industry. The personal care segment comprises skin and hair care products, deodorants, and oral care items. The household category covers home care products, including laundry care, house cleaning agents, bleaching products, air care, dishwashing liquids and other cleaning items. Laundry detergent is one of the largest markets among the above-mentioned ones. A few players in this space also offer baby and feminine care items. Some companies offer pet care products. These companies market and sell products through supermarkets, mass merchandisers, grocery stores, distributors, wholesalers, department stores, drugstores, specialty stores, dollar stores and pet stores, and websites.
Major Trends Shaping the Future of the Soap & Cleaning Materials Industry
Product Innovation & Strategic Efforts: Investments in product development to suit consumers’ changing needs have aided companies in the soaps and cleaning products space. Investments in innovation, product portfolio and digital capabilities have been the key to driving sales of companies. Players have been undertaking pricing, packaging and marketing initiatives, and restructuring actions, including acquisitions and divestitures, to boost sales. Companies are also looking to expand into new markets and channels. Developing products with eco-friendly and natural ingredients is another area of focus among industry players, as consumers increasingly prefer environment-friendly ingredients in their daily-use items. The online availability of products has been another key sales driver across various markets due to convenience and ease of shopping. Consumer goods companies are undertaking productivity and cost-saving plans to boost margins.
Favorable Demand Trends & Pricing Actions: The soaps and cleaning materials industry has been experiencing strong demand trends across markets. Solid product and brand demand, owing to continued brand relevance and favorable price mix, have been boosting the industry participants’ performances. Players have also witnessed improved organic sales trends mainly on gains from robust pricing actions and revenue management initiatives. The companies have been adopting bold pricing initiatives across markets to combat rising costs due to the persistence of inflation, higher freight, and currency woes. Some companies have resorted to cost-based pricing actions, which have proved beneficial.
Elevated Costs: The soaps and cleaning materials industry’s players have been witnessing escalating raw material and logistic costs, particularly transportation, due to supply-chain issues and current industry dynamics. These have been hurting the industry participants’ margins. Elevated manufacturing and distribution costs, and increased advertising and sales promotion expenses are other factors impacting margins. The companies have been incurring higher SG&A expenses due to increased operational costs related to salaries and bonuses, and planned investments in digital capabilities and productivity enhancements. To overcome these shortcomings and improve margins, some players are focused on cost-containment initiatives, including streamlining the supply chain and minimizing overhead costs. Most companies are resorting to price increases to cushion their margins.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Soap and Cleaning Materials industry is housed within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #28, which places it in the top 11% 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 positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential.
We here present a few stocks that one can retain in one's portfolio, given their solid growth endeavors. But before that, it is worth looking at the industry’s performance and current valuation.
Industry Vs. Broader Market
The Zacks Soap and Cleaning Materials industry has outperformed the broader Zacks Consumer Staples sector in the past year. However, it has lagged the S&P 500 index in the same period.
The industry has risen 12.7% in the past year, whereas the broader sector has declined 5.3% and the S&P 500 has grown 26.9%.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing Consumer Staples stocks, the industry is currently trading at 22.75X compared with the S&P 500’s 21.91X and the sector’s 17.01X.
Over the past five years, the industry has traded as high as 25.13X and as low as 20.08X, the median being 22.47X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
5 Stocks to Keep a Close Watch
Colgate: The company’s business strategies comprise efforts to increase its leadership in the key product categories through innovation in core businesses, tracking adjacent categories’ growth and expansion into new markets and channels. Due to the shift in consumer preference to organic and natural ingredients, the company has expanded its Naturals range, including Naturals toothpaste. Growth in volumes, higher pricing, and investments in premium innovation and digital transformation have been the key drivers in recent years.
Expanding the availability of products via enhanced distribution to newer markets and channels is one of Colgate’s priorities to improve organic sales. The company is aggressively expanding into faster-growth channels, while extending the geographic footprint of its brands. The Zacks Consensus Estimate for CL’s 2024 sales and earnings indicates year-over-year growth of 3.9% and 9.3%, respectively. The consensus mark for earnings has been unchanged in the past 30 days. Shares of the leading oral care company have risen 28.7% in the past year. The company currently has a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: CL
Henkel: The Germany-based consumer goods company engages in adhesive technologies, beauty care, and laundry and home care businesses worldwide. It has been benefiting from the progress in implementing the purposeful growth agenda and merging the consumer businesses into Henkel Consumer Brands. By combining the Laundry & Home Care and Beauty Care consumer businesses into Henkel Consumer Brands, HENKY expects to broaden its customer base and optimize its portfolio to deliver higher growth, while improving its margin profile. The company has been witnessing robust organic sales growth, driven by strength across all business units and regions.
Henkel looks poised to gain from significant price increases, strict cost management and further efficiency improvements, which are likely to offset the effects of input cost inflation. The Zacks Consensus Estimate for HENKY’s 2024 earnings indicates year-over-year growth of 12.8%. The earnings estimate has moved up 3.9% in the past 30 days. Shares of the Zacks Rank #2 company have risen 14.3% in the past year.
Price and Consensus: HENKY
Church & Dwight: The well-known specialty products company has been gaining from its prudent buyouts, solid innovation and favorable consumption demand. Church & Dwight is optimistic about its 2024 performance on category growth and impressive brand performance. It is on track with pricing and productivity efforts to counter cost inflation. The Ewing, NJ-based company is focused on product innovation for growth.
CHD is focused on making capital investments to expand its factory and supplier network capacity, courtesy of the constant strength in consumer demand for its products. Its regular innovation helps improve brand positions and market share in the consumer categories. Shares of the Zacks Rank #2 company have gained 6.9% in a year. The Zacks Consensus Estimate for Church & Dwight’s 2024 sales and earnings indicates year-over-year growth of 4.6% and 9.2%, respectively. The consensus mark for earnings has been unchanged in the past 30 days.
Price and Consensus: CHD
Procter & Gamble: The Cincinnati, OH-based consumer goods giant has been benefiting from strength across all segments, coupled with robust volume, pricing and mix. Procter & Gamble’s products play a key role in meeting the daily health, hygiene and cleaning needs of consumers worldwide. Increased consumer demand for its hand soaps, detergents and surface cleaning products has been a key catalyst. The company has been witnessing strong growth in its largest markets, the United States and Greater China. The company’s e-commerce sales have been growing globally.
Procter & Gamble remains focused on productivity and cost-saving plans to boost margins. The company’s continued investment in its businesses, alongside efforts to offset macro cost headwinds and balance top and bottom-line growth, underscores its productivity efforts. The Zacks Consensus Estimate for PG’s fiscal 2024 sales and earnings indicates year-over-year increases of 2.8% and 11%, respectively. The consensus mark for earnings has been unchanged in the past 30 days. Shares of the Zacks Rank #3 (Hold) company have risen 11.8% in the past year.
Price and Consensus: PG
Clorox: Clorox is focused on creating a streamlined operating model to create a faster, simpler company through the Reimagine Work under its IGNITE strategy. These strategies are expected to help increase efficiencies and transform the company's operations in the areas of the supply chain, digital commerce, innovation and brand building in the long term. The company has undertaken some strategic initiatives, including pricing actions, cost-reduction efforts, increased focus on building supply-chain resiliency, and enhanced productivity to counter the ongoing cost headwinds. CLX is on track with its cost-saving and productivity initiatives.
Clorox has been undertaking digital investments to transition to a cloud-based platform. It earlier announced plans to invest $500 million in the next five years in transformative technologies and processes. The Zacks Consensus Estimate for Clorox’s fiscal 2024 earnings suggests year-over-year growth of 16.1%. The consensus mark for earnings has moved up by a penny in the past 30 days. CLX shares have lost 14.9% in the past year. The company has a Zacks Rank #3 at present.
Price and Consensus: CLX