People buy staples in both economic booms and downturns, making staple stocks reliable performers regardless of the overall economic situation. They are often viewed as safe havens in times of weak or uncertain economic conditions.
Given the current market and economic uncertainties, investors may consider buying fundamentally solid shares in the consumer staples sector Walmart Inc. (WMT), Colgate-Palmolive Company (CL) and Primo Water Corporation (PRMW) for stable returns.
The unemployment rate in the USA has increased to 4.3%beating expectations. Many economists are forecasting a soft landing for the U.S. economy in 2024, with slower GDP growth but no recession. However, there remains the possibility that Federal Reserve policies could slow the economy.
Stocks of consumer goods manufacturers are non-cyclical companies because they produce or sell goods or services that are always in demand. With steady but modest growth, the consumer goods sector offers investors a safe haven during times of economic weakness. These stocks are attractive to those looking for steady growth, reliable dividends and low volatility.
Let’s take a look at the fundamentals of the three best consumer staples stocks.
Walmart Inc. (WMT)
WMT operates retail, wholesale, other business and e-commerce operations worldwide. The company operates in three segments: Walmart US, Walmart International and Sam’s Club. The company operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash-and-carry stores and discount stores under the Walmart and Walmart Neighborhood Market brands.
On June 13, WMT announced the transformation of one of its largest and most recognized fashion brands, No Boundaries, into a private label. The $2 billion+ young adult brand will offer customers a modern, relevant and youthful assortment with new finishes, shapes and styles – all at the same great prices.
WMTs last 12 months ROCE of 24.65% is 128.4% higher than the industry average of 10.79%. Also, the ROTC and ROTA for the last 12 months of 11.49% and 7.46% are 65.4% and 68.5% higher than the industry averages of 6.95% and 4.43%, respectively.
For the first fiscal quarter ended April 30, 2024, WMT’s total revenue increased 6% year-over-year to $161.51 billion. Adjusted Operating result increased 13.7% year-over-year to $7.09 billion. The company’s consolidated net income attributable to Walmart was $5.10 billion and $0.63 per common share, representing increases of 205.1% and 200% year-over-year, respectively.
Analysts expect WMT’s revenue to rise 4.7% year over year to $672.59 billion in the fiscal year ending January 2025. For the same period, Street expects earnings per share to rise 9.8% to $2.43. The company has beaten its revenue and earnings estimates in each of the last four quarters, which is promising.
WMT stock has risen 10.4% over the past three months, closing the last trading session at $66.91.
WMTs POWR Reviews reflect an impressive outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. POWR Ratings are calculated by taking into account 118 different factors, with each factor being given optimal weighting.
The stock has an A rating for sentiment and stability and a B rating for momentum. It ranks 13th out of 37 A-rated stocks Food/Wholesale Retailers Industry.
In addition, we also rated WMT on growth and value. View all WMT ratings Here.
Colgate-Palmolive Company (CL)
CL manufactures and distributes consumer products worldwide. The company operates in two segments: Oral, Personal and Home Care and Pet Food. The company offers toothpaste, toothbrushes, mouthwash, solid and liquid hand soaps, shower gels, shampoos, conditioners, deodorants and antiperspirants.
CL’s trailing 12-month net profit margin of 14.25% is 143.5% above the industry average of 5.85%. Its trailing 12-month EBIT margin of 21.20% is 133.7% above the industry average of 9.07%. Also, its trailing 12-month EBITDA margin of 24.17% is 90.4% above the industry average of 12.69%.
CL’s net sales increased 5% year-over-year to $5.06 billion for the second quarter ended June 30, 2024. Non-GAAP operating income increased 13% year-over-year to $1.12 billion. Non-GAAP net income attributable to CL was $0.91 per share, an increase of 18.2% year-over-year.
Analysts expect CL’s revenue to increase 2.1% year-over-year to $5.02 billion, accompanied by a forecast 2.8% year-over-year increase in earnings per share to $0.88 for the fiscal quarter ending September 2024. In addition, the company has beaten consensus estimates for revenue and earnings per share in each of the last four quarters, which is impressive.
CL shares have gained 36.2% over the past month, closing the last trading session at $102.43.
CL’s POWR Ratings reflect a strong outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. CL has an A rating for quality and a B rating for stability and sentiment. It ranks 13th out of 51 stocks in the B rating Consumer goods Industry.
In addition to the POWR ratings highlighted above, one can access CL’s ratings for growth, value, and momentum. Here.
Primo Water Corporation (PRMW)
PRMW provides pure water solutions for residential and commercial customers. The range includes bottled water, water dispensers, purified bottled water, self-fill drinking water, mineral water, sparkling and flavored water, filtration systems and coffee.
On June 17, 2024, PRMW and an affiliate of BlueTriton Brands, Inc. (BlueTriton) announced that they had entered into a definitive agreement to create a leading North American healthy hydration company in an all-stock transaction unanimously approved by their respective boards of directors.
The transaction provides a compelling strategic rationale and combines the complementary strengths of Primo Water and BlueTriton, creating a North American leader in healthy hydration with a diversified offering across products, formats, channels and consumer occasions.
PRMW’s gross profit margin over the last 12 months of 64.56% is 82.1% above the industry average of 35.45%. The stock’s EBIT margin over the last 12 months of 9.85% is also 8.7% above the industry average of 9.07%.
For the first quarter ended March 30, 2024, PRMW’s net revenue was $452 million, up 9.6% year over year. Adjusted EBITDA increased 24.2% year over year to $93.90 million. In addition, adjusted net income and earnings per share increased 172.3% and 171.4% year over year to $30.50 million and $0.19, respectively.
For the quarter ending June 30, 2024, PRMW’s earnings per share are expected to increase 2.1% year-over-year to $0.25. Revenue for the same quarter is expected to be $477.40 million.
Over the past three months, the stock has gained 8.3% and closed the last trading session at $21.80.
PRMW’s strong fundamentals are reflected in its POWR Ratings. The overall rating is B, which equates to Buy in our proprietary rating system. PRMW has a B rating for growth, sentiment and quality. It ranks 11th out of 33 stocks in the B-rated beverages Industry.
Click here to access the additional PRMW ratings (Value, Momentum and Stability).
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WMT shares were trading at $66.99 per share on Thursday morning, up $0.08 (+0.12%). Year-to-date, WMT has gained 28.35%, while the benchmark S&P 500 index has risen 10.87% over the same period.
About the author: Nidhi Agarwal
Nidhi has a passion for capital market and asset management, which led her to pursue a career as an investment analyst. She holds a bachelor’s degree in finance and marketing and is currently pursuing the CFA program. Her fundamental approach to equity analysis helps investors identify the best investment opportunities. More…
