Soap & Cleaning Materials Stocks Afloat Amid Coronavirus Crisis
Zacks Investment Research | Mar 20, 2020 08:30AM ET
Companies involved in the manufacturing and supply of fast-moving consumer goods (FMCG), including personal care, household and specialty products, mainly make up the Zacks 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 gaining confidence in this group’s earnings growth potential. In the past six months, the industry’s earnings estimates for the current year have moved up 0.5%.
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 Outperforms Shareholder Returns
The Zacks Soap and Cleaning Materials industry has outperformed both the S&P 500 and its own sector in the past year.
While stocks in this industry have collectively gained 2.7%, the Zacks S&P 500 composite has declined 16.8%. Meanwhile, the Zacks Consumer Staples sector has witnessed a decline of 17.7% over this period.
One-Year Price Performance
Soaps and Cleaning Materials Industry’s 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 20.57X compared with the S&P 500’s 14.12X and the sector’s 15.49X.
Over the last five years, the industry has traded as high as 23.53X, as low as 17.89X, and at the median of 21.01X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
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Bottom Line
The global COVID-19 crisis is a real test for the Soap and Cleaning Materials industry, as cleansing products might play a vital role in surviving this situation. The near-term prospects of the Soap and Cleaning Materials industry look buoyant as demand for cleaning agents and bleaches is bound to rise in the wake of the virus eruption. This makes the industry a defensive play, while the global markets continue to spiral down. However, the industry is grappling with increased cost burden, higher operating expenses due to increased advertising investments and unfavorable currency rates. Nevertheless, its efforts to fight back with increased investments in brands, e-commerce growth, focus on the naturals range, and effective execution of pricing and productivity initiatives should pay off.
While none of the stocks in the Zacks Soap and Cleaning Materials universe currently hold a Zacks Rank #1 (Strong Buy), we have mentioned one stock with a Zacks Rank #2 (Buy) and three more with a Zacks Rank #3 (Hold). You can see .
Let’s take a look at them.
The Clorox Company (NYSE:CLX) (CLX): The stock of this Oakland, CA-based company has rallied 21.7% in the past year. The Zacks Consensus Estimate for its current-year EPS has moved up 0.6% in the last seven days. The company currently has a Zacks Rank #2.
Price and Consensus: CLX
The Procter & Gamble Company (NYSE:PG) (PG): The Cincinnati, OH-based consumer goods giant’s consensus EPS estimate for the current fiscal year has been stable in the last seven days. This Zacks Rank #3 stock has risen 8.2% over the past year.
Price and Consensus: PG
Church & Dwight Co. Inc. (CHD): The stock of this Ewing, NJ-based company has moved up 1.4% in the past year. The Zacks Consensus Estimate for its current-year EPS has stayed stable in the past 30 days. The company currently has a Zacks Rank #3.
Price and Consensus: CHD
Colgate-Palmolive Company (NYSE:CL) (CL): The stock of this New York City-based company has moved 1.2% north in the past year. The Zacks Consensus Estimate for its current-year EPS has been stable in the past 30 days. The company currently has a Zacks Rank #3.
Price and Consensus: CL
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