The consumer staples industry performs relatively well during market downturns due to the inelastic demand for its products. Therefore, with various challenges lurking around the economy, quality consumer stocks Unilever PLC (UL), Yue Yuen Industrial (Holdings) Limited (YUEIY), and Ennis, Inc. (EBF) could make solid investments for significant returns. Let’s explore why.
The Labor Department reported that the Consumer Price Index (CPI) rose 0.4% month-on-month and 6% year-over-year in February. Despite the turmoil in the banking sector, the recent quarter-percentage-point interest rate hike and the possibility of another later this year demonstrate the Federal Reserve’s ongoing effort to curb stubborn inflation.
Furthermore, several OPEC+ members’ decision to cut 1.16 million barrels per day of production is expected to add more trouble to the macro environment. This development will likely exacerbate the pre-existing high inflation and economic instability, putting more strain on the government to address these challenges.
However, consumer goods companies tend to stay resilient amid economic turmoil on the backs of stable demand for their products. On top of it, the National Retail Federation (NRF) expects retail sales to grow between 4% and 6% in 2023 to reach between $5.13 trillion and $5.23 trillion on the backs of resilient consumer spending.
Furthermore, the global Consumer Packaged Goods (CPG) market is projected to reach $2.38 trillion by 2027, growing at a CAGR of 3%. The Global X Millennials Consumer ETF’s (MILN) impressive 13.4% returns over the last three months indicate investors’ growing interest in consumer stocks.
Let’s discuss what makes the featured stocks worthy of investment.
Unilever PLC (UL)
Headquartered in London, the United Kingdom, UL is a fast-moving consumer goods company. Its segments include Beauty & Wellbeing; Personal Care; Home Care; Nutrition; and Ice Cream. The company’s products include hair care, skin care, fabric care, nutrition, and ice cream, marketed under various brands such as Dove, Knorr, and Magnum.
Yesterday, it was reported that UL, Accenture (ACN), and Microsoft (MSFT), completed a massive cloud migration project for UL's 400+ consumer brands. The transformation would enable UL to become a cloud-only enterprise, boosting product launches, customer service, and operational efficiency through Azure’s cloud platform.
On March 23, UL announced that it collaborated with Zappar and RNIB to develop Accessible QR codes (AQR) for Persil, one of its brands. The codes would be added to a range of packs, providing 2 million blind and partially sighted people in the United Kingdom with access to product information and a more inclusive shopping experience.
This move should allow the company to increase brand loyalty and attract a more diverse customer base while demonstrating its social responsibility and commitment to inclusivity.
UL’s turnover increased 14.5% year-over-year to €60.07 billion ($65.52 billion) during the fiscal year that ended December 31, 2022. Its operating profit rose 23.6% year-over-year to €10.76 billion ($11.73 billion). Also, the company’s net profit increased 24.9% from the year-ago value to €8.27 billion ($9.02 billion), while EPS came in at €2.99, up 28.8% year-over-year.
The consensus revenue estimate of $65.48 billion for the fiscal year (ending December 2023) reflects a 1.5% year-over-year improvement. Likewise, the consensus EPS estimate of $2.77 for the ongoing year indicates a marginal rise year-over-year. Moreover, the company topped its consensus revenue estimates in three of four trailing quarters.
The stock has gained 19.5% over the past six months to close the last trading session at $52.70.
UL’s strong fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
UL has a B grade for Value, Sentiment, and Stability. It ranks #3 in the 53-stock Consumer Goods industry.
In addition to the POWR Ratings I’ve just highlighted, you can see UL’s ratings for Growth, Quality, and Momentum here.
Yue Yuen Industrial (Holdings) Limited (YUEIY)
Headquartered in Hong Kong's Kwun Tong, YUEIY is an investment holding firm that manufactures, markets, and retails athletic, leisure, casual, and outdoor footwear. It also operates as an original design manufacturer for prominent brands like Puma, Nike, and Timberland, producing leather products, soles, and other components.
In its latest earnings report, YUEIY revealed plans to strengthen its mid-term capacity allocation strategy by diversifying manufacturing capacity in regions with supportive labor supply and infrastructure. The company is also expected to leverage trends in value growth, athleisure, and premiumization.
UL’s diversified manufacturing capacity and emphasis on value growth, athleisure, and premiumization trends should attract high-value orders and increase brand loyalty. Its digital transformation strategy could improve operational excellence and enable efficient adaptation to fast-moving market environments, leading to increased customer demand for versatility, flexibility, eco-friendliness, and on-time delivery.
For the year that ended December 31, 2022, YUEIY’s revenue increased 5.1% year-over-year to $8.97 billion, while its gross profit rose 4.3% from the year-ago value to $2.14 billion. Furthermore, the company’s profit for the year grew 106.6% from the prior year’s period to $293.20 million, and its EPS stood at $0.18, a 157.6% year-over-year increase.
Analysts expect YUEIY’s revenue to increase 2.6% year-over-year to $9.21 billion for the fiscal year ending December 2023. Likewise, the company’s revenue for the fiscal year 2024 is expected to grow 7.8% from the previous year to $9.92 billion. Also, the company surpassed its consensus revenue estimates in three of the trailing four quarters.
Shares of YUEIY have gained 8% over the past six months to close the last trading session at $6.79.
YUEIY’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
YUEIY has an A grade for Growth and Value and a B for Stability. Within the same industry, it ranks #2 out of 53 stocks.
Click here to access additional YUEIY ratings for Quality, Sentiment, and Momentum.
Ennis, Inc. (EBF)
EBF manufactures and sells business forms and products like snap sets, tags, labels, and pressure-sensitive items. It also provides advertising, knitting, and fulfillment services. Additionally, the company distributes custom-printed labels, financial and security documents, and imprinted envelopes through independent distributors.
On November 30, 2022, EBF announced the acquisition of School Photo Marketing, which offers printing, yearbook publishing, and marketing services to school and sports photographers. The acquisition should broaden EBF’s customer base and geographic footprint in the country.
EBF’s revenue rose 7.1% year-over-year to $110.25 million in the third quarter that ended November 30, 2022. Its operating income rose 38.4% from the year-ago value to $16.17 million. The company’s net earnings increased 49.2% year-over-year to $11.29 million, and earnings per share stood at $0.44, up 51.7% from the prior-year quarter.
Analysts expect EBF’s revenue to grow 7.7% year-over-year to $431 million for the fiscal year 2023 (ended February). The company’s EPS for the same year is expected to increase by 50% year-over-year to $1.71. Furthermore, the company surpassed its consensus revenue and EPS estimates in three of four trailing quarters, which is impressive.
The stock has gained 13.2% over the past year to close the last trading session at $21.12.
EBF’s POWR Ratings reflect its promising prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Quality and a B for Growth, Stability, and Sentiment. It has topped the 53-stock Consumer Goods industry.
To see additional POWR Ratings for Value and Momentum for EBF, click here.
What To Do Next?
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What gives these stocks the right stuff to become big winners, even in this brutal stock market?
First, because they are all low priced companies with the most upside potential in today’s volatile markets.
But even more important, is that they are all top Buy rated stocks according to our coveted POWR Ratings system and they excel in key areas of growth, sentiment and momentum.
Click below now to see these 3 exciting stocks which could double or more in the year ahead.
UL shares were trading at $52.79 per share on Tuesday afternoon, up $0.09 (+0.17%). Year-to-date, UL has gained 5.78%, versus a 7.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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