Elevated inflation, a tight labor market, and tighter lending standards are adding to the concerns of the economy tipping into a recession. To that end, investors could look to buy fundamentally strong consumer stocks Unilever PLC (UL), Yue Yuen Industrial (Holdings) Limited (YUEIY), and Edgewell Personal Care Company (EPC). These stocks are Buy-rated in our POWR Ratings system.
Before taking a closer look at their fundamentals, let’s discuss why it could be wise to invest in the consumer goods sector.
Despite macroeconomic headwinds and growing concerns of a slowing economy, retail sales rose 0.4% in April, and core sales increased 0.7%. Several economists expect consumer spending to support the economy despite rising recession risks.
Citigroup’s chief U.S. economist, Andrew Hollenhorst, believes that this consumer spending report will help reassure markets that consumer spending is not about to contract, rather, it will support modest continued economic growth.
Amid recessionary fears, investing in sectors less prone to changes in economic cycles could be wise. The consumer goods industry performs steadily because of the inelastic demand for its products. Such companies are able to pass on high input costs to their customers, helping them maintain their profit margins.
Considering these factors, it could be wise to buy the featured stocks. Let’s take a closer look at their fundamentals.
Unilever PLC (UL)
Headquartered in London, the United Kingdom, UL operates as a fast-moving consumer goods company. It operates through Beauty & well-being, Personal Care, Home Care, Nutrition, and Ice Cream segments.
In terms of forward non-GAAP P/E, UL’s 18.49x is 0.8% lower than the 18.64x industry average. Likewise, its 15.20x forward EV/EBIT is 1.8% lower than the 15.47x industry average.
UL’s turnover for the fiscal first quarter ended March 31, 2023, increased 7% year-over-year to €14.75 billion ($15.95 billion), with an underlying sales growth of 10.5%. Its underlying sales growth came in at 10.5%.
Its Beauty & Wellbeing turnover rose 13.3% year-over-year to €3.09 billion ($3.34 billion). Also, its Home Care turnover increased 8.6% year-over-year to €3.35 billion ($3.62 billion).
Analysts expect UL’s revenue for the quarter ending June 30, 2023, to increase 5.6% year-over-year to $16.93 billion. Its EPS for fiscal 2023 is expected to increase 2.6% year-over-year to $2.83. Over the past year, the stock has gained 19% to close the last trading session at $52.34.
UL’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Consumer Goods industry, it is ranked #5 out of 52 stocks. It has a B grade for Value, Stability, and Sentiment.
To see the additional POWR Ratings of UL for Growth, Momentum, and Quality, click here.
