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Buy These 3 Consumer Product Stocks on Robust Industry Patterns
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Companies in the Zacks Consumer Products – Staples industry have been benefiting from stable product demand as consumers manage to save for essentials, even during tough economic phases. Efforts to boost revenues through innovation, product launches and expansion into new channels, such as e-commerce, have proven successful.
Furthermore, effective cost-saving measures and restructuring initiatives enable industry participants to navigate rising cost pressures. These advantages position companies like Kimberly-Clark Corporation (KMB - Free Report) , Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) and Energizer Holdings, Inc. (ENR - Free Report) for growth.
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
Strategic Revenue Optimization: Within the consumer product space, companies are strategically optimizing their operations to maximize returns. This includes a strong focus on enhancing e-commerce and digital initiatives. Additionally, companies in the consumer products staples industry are continually innovating to meet changing consumer preferences. This includes developing healthier food options, environmentally friendly packaging and leveraging technology for enhanced convenience. Innovation drives growth and helps companies stay competitive. Industry participants are also refining their portfolios through strategic acquisitions and divestments, allowing them to concentrate more intensively on areas with greater growth potential.
Stable Demand: As the industry participants mainly provide essentials used in daily life, demand for most of the products remains fairly stable. Regardless of economic cycles, these necessities ensure a steady revenue stream for companies within the sector. Demand for many staples has actually increased compared to pre-pandemic levels, driven by elevated at-home consumption. This trend is likely to persist as many Americans have adopted new habits of working and dining at home. Additionally, ongoing macroeconomic challenges, such as high interest rates and inflation, have led consumers to cut back on discretionary spending and dining out, favoring meal preparation at home. These factors contribute to the robust demand for staple products.
Inflation and Cost Pressures: The industry faces significant cost pressures due to high raw material prices, labor costs and transportation expenses. This inflationary environment can erode profit margins if companies are unable to pass on the increased costs to consumers through higher prices. Additionally, elevated SG&A costs, investments in digital advancements and increased marketing expenditures have been impacting profit margins. Nevertheless, efforts centered on restructuring and saving strategies have been helping players mitigate some of these pressures.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Consumer Products – Staples industry is housed within the broader Zacks Consumer Staples sector. It currently carries a Zacks Industry Rank #97, which places it in the top 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 robust 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.
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 12.4% over this period against the S&P 500 Index’s growth of 23%. Meanwhile, the broader sector has declined 4.3%.
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 17.14X compared with the S&P 500’s 21.95X and the sector’s 17.11X.
Over the last five years, the industry has traded as high as 21.58X, as low as 14.27X and at the median of 17.49X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
3 Consumer Product Stocks to Keep a Close Eye On
Ollie’s Bargain: This Zacks Rank #1 (Strong Buy) company specializes in providing a diverse array of brand-name merchandise across various categories at remarkably discounted prices. The company’s business operating model of buying cheap and selling cheap, cost-containment efforts, focus on store productivity and expansion of the customer reward program, Ollie’s Army, reinforce its position in the industry. Growing trade-down trends and a favorable closeout market have been contributing to Ollie’s Bargain’s performance. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Ollie’s Bargain’s current fiscal year earnings per share (EPS) has increased by 2.2% to $3.26 over the past 60 days. This calls for growth of around 12% year over year. OLLI has seen its shares soar 43.8% in the past three months.
Price and Consensus: OLLI
Kimberly-Clark: This Zacks Rank #2 (Buy) company’s focus on innovation, consumer-centric approach and strategic investments in product development have been leading to successful launches and market expansion. Kimberly-Clark is focused on long-term growth opportunities, including leveraging its brand investments, enhancing its product mix and driving volume growth through consumer-focused strategies. The company has been committed to its three key strategic growth pillars, which include a focus on improving its core business in the developed markets, speeding up growth in the Personal Care segment in developing and emerging markets, and enhancing digital and e-commerce capacities.
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 risen by a penny to $7.07 in the past 30 days. This suggests growth of 7.6% from the year-ago period. Shares of Kimberly-Clark have risen 13.4% in the past three months.
Price and Consensus: KMB
Energizer Holdings: This Zacks Rank #2 company is actively pursuing strategic initiatives aimed at fostering sustainable growth and profitability. These initiatives encompass investments in consumer engagement strategies designed to enhance brand loyalty and market share without compromising margin improvement. Additionally, Energizer Holdings is implementing targeted pricing and promotion strategies to bolster category health and drive brand growth while maintaining a disciplined approach.
The Project Momentum initiative is pivotal to the company, enhancing operational efficiencies and contributing to margins. The Zacks Consensus Estimate for ENR’s current fiscal year EPS has remained unchanged at $3.22 in the past 30 days. However, this suggests growth of 4.2% from the year-ago period. Shares of Energizer Holdings have rallied 8.4% in the past three months.
Price and Consensus: ENR
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Buy These 3 Consumer Product Stocks on Robust Industry Patterns
Companies in the Zacks Consumer Products – Staples industry have been benefiting from stable product demand as consumers manage to save for essentials, even during tough economic phases. Efforts to boost revenues through innovation, product launches and expansion into new channels, such as e-commerce, have proven successful.
Furthermore, effective cost-saving measures and restructuring initiatives enable industry participants to navigate rising cost pressures. These advantages position companies like Kimberly-Clark Corporation (KMB - Free Report) , Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) and Energizer Holdings, Inc. (ENR - Free Report) for growth.
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
Strategic Revenue Optimization: Within the consumer product space, companies are strategically optimizing their operations to maximize returns. This includes a strong focus on enhancing e-commerce and digital initiatives. Additionally, companies in the consumer products staples industry are continually innovating to meet changing consumer preferences. This includes developing healthier food options, environmentally friendly packaging and leveraging technology for enhanced convenience. Innovation drives growth and helps companies stay competitive. Industry participants are also refining their portfolios through strategic acquisitions and divestments, allowing them to concentrate more intensively on areas with greater growth potential.
Stable Demand: As the industry participants mainly provide essentials used in daily life, demand for most of the products remains fairly stable. Regardless of economic cycles, these necessities ensure a steady revenue stream for companies within the sector. Demand for many staples has actually increased compared to pre-pandemic levels, driven by elevated at-home consumption. This trend is likely to persist as many Americans have adopted new habits of working and dining at home. Additionally, ongoing macroeconomic challenges, such as high interest rates and inflation, have led consumers to cut back on discretionary spending and dining out, favoring meal preparation at home. These factors contribute to the robust demand for staple products.
Inflation and Cost Pressures: The industry faces significant cost pressures due to high raw material prices, labor costs and transportation expenses. This inflationary environment can erode profit margins if companies are unable to pass on the increased costs to consumers through higher prices. Additionally, elevated SG&A costs, investments in digital advancements and increased marketing expenditures have been impacting profit margins. Nevertheless, efforts centered on restructuring and saving strategies have been helping players mitigate some of these pressures.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Consumer Products – Staples industry is housed within the broader Zacks Consumer Staples sector. It currently carries a Zacks Industry Rank #97, which places it in the top 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 robust 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.
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 12.4% over this period against the S&P 500 Index’s growth of 23%. Meanwhile, the broader sector has declined 4.3%.
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 17.14X compared with the S&P 500’s 21.95X and the sector’s 17.11X.
Over the last five years, the industry has traded as high as 21.58X, as low as 14.27X and at the median of 17.49X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
.jpg)
3 Consumer Product Stocks to Keep a Close Eye On
Ollie’s Bargain: This Zacks Rank #1 (Strong Buy) company specializes in providing a diverse array of brand-name merchandise across various categories at remarkably discounted prices. The company’s business operating model of buying cheap and selling cheap, cost-containment efforts, focus on store productivity and expansion of the customer reward program, Ollie’s Army, reinforce its position in the industry. Growing trade-down trends and a favorable closeout market have been contributing to Ollie’s Bargain’s performance. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Ollie’s Bargain’s current fiscal year earnings per share (EPS) has increased by 2.2% to $3.26 over the past 60 days. This calls for growth of around 12% year over year. OLLI has seen its shares soar 43.8% in the past three months.
Price and Consensus: OLLI
Kimberly-Clark: This Zacks Rank #2 (Buy) company’s focus on innovation, consumer-centric approach and strategic investments in product development have been leading to successful launches and market expansion. Kimberly-Clark is focused on long-term growth opportunities, including leveraging its brand investments, enhancing its product mix and driving volume growth through consumer-focused strategies. The company has been committed to its three key strategic growth pillars, which include a focus on improving its core business in the developed markets, speeding up growth in the Personal Care segment in developing and emerging markets, and enhancing digital and e-commerce capacities.
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 risen by a penny to $7.07 in the past 30 days. This suggests growth of 7.6% from the year-ago period. Shares of Kimberly-Clark have risen 13.4% in the past three months.
Price and Consensus: KMB
Energizer Holdings: This Zacks Rank #2 company is actively pursuing strategic initiatives aimed at fostering sustainable growth and profitability. These initiatives encompass investments in consumer engagement strategies designed to enhance brand loyalty and market share without compromising margin improvement. Additionally, Energizer Holdings is implementing targeted pricing and promotion strategies to bolster category health and drive brand growth while maintaining a disciplined approach.
The Project Momentum initiative is pivotal to the company, enhancing operational efficiencies and contributing to margins. The Zacks Consensus Estimate for ENR’s current fiscal year EPS has remained unchanged at $3.22 in the past 30 days. However, this suggests growth of 4.2% from the year-ago period. Shares of Energizer Holdings have rallied 8.4% in the past three months.
Price and Consensus: ENR
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