Earnings Season Preview: Which Consumer-Goods Companies Investors Need to Watch This Earnings Season
Here at the Fool, we love our seasons: football season, flip-flop season, and our favorite, earnings season. It's that wonderful time of year when we get to celebrate those picks that outperformed and be humbled by those that didn't.
Each quarter we get to arm ourselves with a new set of expectations and estimates to better judge the economic landscape. We don't always nail our bets, but taking the initiative to learn about the expectations for a given sector will place investors well ahead of many of their peers. Woody Allen put it best when he observed that "80% of success is showing up."
With that in mind, here's what you can expect to see out of some of the biggest consumer-goods companies this earnings season just by showing up and staying engaged.
Source: Standard & Poor's.
Household consumer-goods companies tend to show remarkable resilience in tough times. The historical performance of the consumer-staples sector reiterates this. During the depths of the financial crisis, this sector hardly registered in the news, falling only 16% from its 2008 high. This poise isn't without consequence, though, as these behemoths tend to lose out on big market run-ups. From their 2009 lows until today, this sector has underperformed the S&P by almost 17%.
Moving with the speed of an iceberg doesn't make these companies any less interesting, though. Being stable doesn't necessarily equate to lack of excitement. With that in mind, here are some of the earnings you can expect to see in the coming weeks from your favorite plain Jane household-goods companies.
Earnings Estimate 90 Days Ago
|WD-40 (NYS: WDFC)||Oct. 17||$0.54||$0.53||$0.41|
|Kimberly Clark (NYS: KMB)||Oct. 24||$1.26||$1.29||$1.14|
|Avon Products (NYS: AVP)||Oct. 27||$0.46||$0.48||$0.41|
|Procter & Gamble (NYS: PG)||Oct. 27||$1.03||$1.14||$1.02|
|Revlon (NYS: REV)||Oct. 27||$0.34||$0.34||$0.23|
|Colgate-Palmolive (NYS: CL)||Oct. 28||$1.30||$1.31||$1.21|
|Clorox (NYS: CLX)||Nov. 2||$0.93||$1.00||$0.98|
|Prestige Brand Holdings (NYS: PBH)||Nov. 7||$0.26||N/A||$0.23|
|Church & Dwight (NYS: CHD)||Nov. 8||$0.53||$0.54||$0.48|
Sources: S&P Capital IQ and Earnings.com. Earnings dates subject to change.
These companies have largely upbeat forecasts, with all but one expected to outperform the earnings from this quarter last year and Revlon's earnings anticipated to top year-ago earnings by 48%. So what is it that's driving these companies' earnings steadily higher?
- International sales. Flat sales in the United States continue to stymie most domestic companies' goals of higher earnings, but these veteran companies haven't put all their eggs in one basket. Consider Procter & Gamble. In 2004, something exciting happened: International sales surpassed domestic revenues for the first time, and they never looked back. While international sales have grown 176% since their 2001 report, domestic sales have risen by only 50%. Clearly, there is money to be made abroad.
- Bargain brands. Typically, big consumer-goods companies rely on powerful branding to sell their goods, but even the most essential items, like dish soap and detergent, aren't immune from the poor economic conditions as consumers trade down to more affordable options. Procter & Gamble and Church &Dwight are well aware of this trend and looking to cash in. P&G has recently released bargain-priced dish soap, while C&D has seen gains from its already-established and low-priced Xtra detergent brand.
How to play earnings?
There is no right or wrong way to play earnings this season, but when it comes to consumer goods you can be sure that I'm keeping an eye on the companies with a strong international presence, as well as those that have decided to add bargain brands or play off existing ones. These trends are simply too big to ignore. Our analysts have also taken note and have recommended buying one of the stocks mentioned here in their newsletter services. Their thoughts are outlined in a special Motley Fool free report called "13 High-Yielding Stocks to Buy Today" You can view the report today at no cost and read our best experts' top picks.
At the time this article was published Austin Smith holds no positions in any of the companies mentioned in this article. The Motley Fool owns shares of Clorox and Johnson & Johnson.Motley Fool newsletter serviceshave recommended buying shares of Clorox, Kimberly-Clark, Procter & Gamble, and Johnson & Johnson and creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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