Consumer stocks often represent companies that provide essential goods and services, such as food, beverages, household products, healthcare, and retail. These companies tend to be less sensitive to economic downturns than other sectors, as people continue to purchase these items regardless of the state of the economy.
With the economy surrounded by uncertainties, I have assessed the prospects of Kimberly-Clark Corporation (KMB), Acme United Corporation (ACU), and Mannatech, Incorporated (MTEX) and found them wise additions to your portfolios now.
But before jumping into the fundamentals of the featured stocks and explaining what makes me bullish about these stocks, let us look at a few factors shaping the prospects of the consumer essentials industry.
Despite the blues of high inflation and the Fed’s aggressive interest rate hikes for more than a year, the consumer goods sector fared well and outperformed the broader market. Even when prices rise, consumers find it difficult to forgo the usage of essential items and accept the increased prices. Thus, companies in this space tend to perform steadily regardless of economic cycles.
The sector’s steadiness is evident from the Consumer Staples Select Sector SPDR Fund ETF’s (XLP) 2.7% gains over the past year and 6.6% over the past nine months.
The value added in the consumer goods market is estimated to reach approximately $3.08 trillion by 2023 and grow at a CAGR of 3.3% over the next five years.
Additionally, the Fed’s aggressive battle against inflation now appears to bear fruit, as inflation made a sharp pullback from its highs last year. The Consumer Price Index (CPI) increased 4% year-over-year in May, easing sharply from the 8.6% print in the same period last year. Despite the encouraging signs, Federal Reserve Chair Jerome Powell reiterated that the battle against inflation ‘has a long way to go.'
In such a scenario, it could be wise for investors to invest in consumer stocks that are often categorized as defensive investments due to their tendency to outperform the broader market during economic downturns. Therefore, adding KMB, ACU, and MTEX to your portfolios could be wise.
That said, let us now evaluate the fundamentals of the featured stocks in detail:
Kimberly-Clark Corporation (KMB)
KMB manufactures and markets personal care and consumer tissue products worldwide. It operates through three segments: Personal Care; Consumer Tissue; and K-C Professional. Its product portfolio includes feminine and incontinence care products, paper towels, napkins, wipers, apparel, sanitizers, and more.
On April 20, KMB declared a quarterly dividend of $1.18 per share, payable to its shareholders on July 5, 2023. This represents the 51st consecutive year KMB raised its dividend and marked the 89th straight year of paying dividend to its shareholders.
The company’s annual dividend of $4.72 translates to a 3.45% yield on the prevailing prices, while its four-year average dividend yield is 3.27%. Its dividend payouts have grown at CAGRs of 3.7% and 3.5% over the past three and five years, respectively.
In the same month, Kimberly-Clark Professional introduced The RightCycle Programme to the Netherlands and Switzerland, extending its reach in providing contamination control solutions for cleanrooms and laboratories. This program is a pioneering initiative for recycling non-hazardous personal protective equipment (PPE) waste used in industrial settings, cleanrooms, and laboratories.
Commenting upon this, Ashley Davis, Global Sustainability Manager of Kimberly-Clark Professional, said, "This is part of our ongoing commitment to help our customers reduce their environmental footprint and to deliver on our purpose of Better Care for a Better World."
The stock’s trailing-12-month net income and levered FCF margins of 9.75% and 9.78% are 209% and 228% higher than the 3.16% and 2.98% industry averages, respectively. Likewise, its trailing-12-month ROTC of 17.46% is 177.4% higher than the industry average of 6.29%.
For the first quarter that ended March 31, 2023, KMB’s net sales increased marginally year-over-year to $5.19 billion, while its gross profit grew 13.6% from the year-ago value to $1.73 billion.
The company’s attributable net income amounted to $566 million and $1.67 per share, representing an increase of 8.2% and 7.7% from the prior-year quarter. Also, its operating profit rose 13.6% from the year-ago value to $787 million.
The consensus revenue estimate of $5.12 billion for the second quarter (ending June 30, 2023) represents a marginal increase year-over-year. The consensus EPS estimate of $1.45 for the ongoing quarter indicates an 8.3% improvement from the same period last year. Moreover, it surpassed the revenue and EPS estimates in three of the trailing four quarters, which is impressive.
KMB’s revenue and total assets have grown at CAGRs of 2.5% and 5.1%, respectively, over the past three years. Likewise, it levered FCF has increased at a CAGR of 6.5% in the same period.
Over the past nine months, the stock has gained 16.9% to close the last trading session at $136.96.
KMB’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Value, Stability, and Quality. In the 79-stock Consumer Goods industry, it is ranked #3. To see additional ratings of KMB for Growth, Momentum, and Sentiment, click here.
Acme United Corporation (ACU)
ACU supplies first aid and safety, cutting, sharpening, and measuring products to the school, home, office, hardware, sporting goods, and industrial markets worldwide. The company offers shears, knives, rulers, pencil sharpeners, paper trimmers, safety cutters, etc.
On June 15, ACU declared a dividend of 14 cents per share on its outstanding common stock, payable on July 24, 2023. The company’s annual dividend of $0.56 translates to a 2.29% yield on the current prices, while its four-year average dividend yield is 1.88%. Its dividend payouts have grown at CAGRs of 5.3% and 4.9% over the past three and five years, respectively.
In terms of trailing-12-month ACU’s gross profit margin of 33.02% is 10.7% higher than the industry average of 29.83%. Likewise, its trailing-12-month asset turnover ratio of 1.27x is 58.5% higher than the industry average of 0.80x.
ACU’s net sales increased 5.8% year-over-year to $45.84 million for the first quarter (ended March 31, 2023), while its gross profit rose 8.8% from the year-ago value to $16.28 million. The company’s net income and EPS improved 19.3% and 27.3% from the prior-year quarter to $990 thousand and $0.28, respectively. In addition, its income from operations grew 59.6% from the year-ago value to $2.19 million.
Analysts expect the company’s EPS to increase by 10% per annum over the next five years. Its revenue has increased at CAGRs of 10.2% and 7.9% over the past three and five years, respectively. Also, its total assets have grown at a CAGR of 13.4% over the past three years.
ACU’s shares have gained 12.3% over the past six months and 11.6% year-to-date to close the last trading session at $24.44.
ACU’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Value, Stability, and Sentiment. Within the same industry, it is ranked #6. Click here to see ACU’s ratings for Growth, Momentum, and Quality.
Mannatech, Incorporated (MTEX)
MTEX operates as a health and wellness company worldwide. It develops, markets, and sells nutritional supplements; topical and skin care, anti-aging products; weight management, and fitness products.
On June 29, MTEX paid its shareholders a dividend of $0.20 per share. By offering this dividend, MTEX aims to reward its shareholders and encourage long-term investment in its common stock.
The company’s annual dividend of $0.80 translates to a 6.25% yield on the prevailing prices, while its four-year average dividend yield is 6.50%. Its dividend payouts have grown at CAGRs of 16.9% and 5.1% over the past three and five years, respectively.
On April 18, MTEX revealed the establishment of a new wholly-owned subsidiary, which will function as an innovation hub for the company. Following thorough research and investigation, this subsidiary, known as Trulu, is set to enter the gig economy. Both entities will engage in collaborative efforts to drive progress.
In terms of trailing-12-month MTEX’s gross profit margin of 75.97% is 142.3% higher than the industry average of 31.36%. Likewise, its trailing-12-month asset turnover ratio of 2.48x is 175.2% higher than the industry average of 0.90x.
In the first quarter that ended March 31, 2023, MTEX’s net sales increased 5.3% year-over-year to $34.11 million, while its gross profit grew 5.6% from the year-ago value to $26.70 million.
The company’s net income increased 350.7% and 433.3% from the prior-year quarter to $604 thousand and $0.32 per share, respectively. Also, its income from operations rose significantly from the year-ago value to $713 thousand.
MTEX’s EPS is expected to improve by 17.5% per annum over the next five years. The stock has gained marginally over the past month to close the last trading session at $12.80.
It’s no surprise that MTEX has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Value and Quality and a B for Sentiment. Out of 79 stocks in the same industry, it is ranked #4.
In addition to the POWR Ratings we’ve stated above, we also have MTEX’s ratings for Growth, Momentum, and Stability. Get all MTEX ratings here.
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KMB shares were trading at $136.97 per share on Thursday afternoon, up $0.01 (+0.01%). Year-to-date, KMB has gained 2.77%, versus a 15.03% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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