Yahoo Finance 5 Soap & Cleaning Materials Stocks to Capitalize on Positive Industry Trends
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. Industry participants have benefited from strategic pricing actions, significantly boosting sales trends. The industry players are also benefiting from expansion into new markets and channels.
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 Unilever PLC UL, The Procter & Gamble Company PG, Colgate-Palmolive CL, Henkel AG & Co. HENKY and Church & Dwight Co., Inc. CHD 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 meet evolving consumer needs have supported growth in the soaps and cleaning products industry. Innovation, product portfolio expansion, and digital capabilities have been crucial in driving sales. Companies are implementing pricing, packaging, and marketing strategies and restructuring efforts like acquisitions and divestitures to boost revenues. The industry players are also expanding into new markets and channels. Focus on eco-friendly and natural ingredients is gaining importance, as consumers increasingly prefer sustainable products. Additionally, online availability has become a major sales driver due to its convenience. Consumer goods companies are also pursuing productivity and cost-saving initiatives to improve 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 products industry has been facing rising raw material and logistics costs, particularly in transportation, due to supply chain challenges and market conditions, which have pressured margins. Higher manufacturing, distribution, advertising, and sales promotion expenses are impacting profitability. Companies are seeing increased SG&A costs driven by higher salaries, bonuses, and investments in digital capabilities and productivity improvements. To offset these challenges and improve margins, many companies are implementing cost-control measures such as streamlining supply chains and reducing overhead. Most companies are raising prices to help protect 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 #23, which places it in the top 9% 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 outperform 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 21.6% in the past year compared with the broader sector and the S&P 500’s growth of 9.4% and 31.1%, respectively.
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 23.72X compared with the S&P 500’s 21.8X and the sector’s 18.2X.
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
Unilever: Unilever is a strong player in the fast-moving consumer goods company operating in Asia Pacific, Africa, the Americas, and Europe. The company’s diverse portfolio includes baby food, bottled water, breakfast cereals, dairy products, beauty products, cleaning agents, healthcare and hygiene products, instant coffee, ice cream, pet food, soft drinks, pharmaceuticals, toothpaste, and tea. Its business is divided into five segments: Beauty & Wellbeing, Personal Care, Home Care, Nutrition, and Ice Cream. Unilever is frequently more active in acquiring and divesting businesses. Its new "comprehensive productivity program" and the planned separation of the Ice Cream Division are designed to enhance its performance.
Unilever’s productivity program includes global layoffs of 7,500 office-based employees and targets cost savings of around 800 million euros over the next three years. The Zacks Consensus Estimate for Unilever’s 2024 sales and earnings suggests year-over-year growth of 4.2% and 8.2%, respectively. The consensus mark for earnings has moved up 2% in the past 30 days. UL shares have rallied 30.4% in the past year. The company sports a Zacks Rank #1 (Strong Buy) at present.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: UL
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 10.5%, respectively. The consensus mark for earnings has been unchanged in the past 30 days. Shares of the leading oral care company have risen 43% in the past year. The company currently has a Zacks Rank #2 (Buy).
Price and Consensus: CL
Henkel: The Germany-based consumer goods company operates globally in adhesive technologies, beauty care, and laundry & home care. It has gained from its purposeful growth strategy and the consolidation of its consumer businesses under Henkel Consumer Brands. By merging Laundry & Home Care with Beauty Care, Henkel aims to expand its customer base, enhance its portfolio, and drive higher growth while boosting profit margins. The company is also seeing strong organic sales growth across all business units and regions.
Henkel looks poised to gain from significant price increases, strict cost management and ongoing efficiency improvements, which are expected to counterbalance the impact of rising input costs. The Zacks Consensus Estimate for HENKY’s 2024 sales and earnings indicates year-over-year growth of 1.7% and 13.7%, respectively. The earnings estimate has moved up 6.4% in the past 30 days. Shares of the Zacks Rank #2 company have risen 29.2% in the past year.
Price and Consensus: HENKY
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 2.4% and 5.8%, respectively. The consensus mark for earnings has been unchanged in the past 30 days. Shares of the Zacks Rank #3 (Hold) company have risen 15.3% in the past year.
Price and Consensus: PG
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 #3 company have gained 10.3% in a year. The Zacks Consensus Estimate for Church & Dwight’s 2024 sales and earnings indicates year-over-year growth of 3.6% and 8.2%, respectively. The consensus mark for earnings has moved down by a penny in the past 30 days.
Price and Consensus: CHD
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Unilever PLC (UL) : Free Stock Analysis Report
Procter & Gamble Company (The) (PG) : Free Stock Analysis Report
Colgate-Palmolive Company (CL) : Free Stock Analysis Report
Church & Dwight Co., Inc. (CHD) : Free Stock Analysis Report
Henkel AG & Co. (HENKY) : Free Stock Analysis Report
