The COVID-19 lockdown enforced in the initial days of the pandemic led to a spike in demand for consumer staples from people panic shopping and hoarding essentials. This drove heightened demand for consumer staples companies despite sudden changes in demand and periodic supply chain disruptions. These companies invested heavily in digital capabilities and logistics to serve customers both online and offline. They prepared quickly for the accelerated demand growth and benefitted from the crisis. This is evident from iShares U.S. Consumer Goods ETF’s (IYK) 36.3% gains over the past year.

The pandemic has changed consumer behavior and social norms in some fundamental ways. There has been a structural shift to in-home consumption, which is fueling growth in the consumer staples industry. With major countries now witnessing a second wave of the virus and resuming lockdowns, the sector should rally further, outpacing the broader market. Moreover, most of the companies in this industry have invested heavily in their logistics and digital channels to ensure quick and efficient delivery during such times.

Procter & Gamble Company (PG), Philip Morris International Inc. (PM), The Estée Lauder Companies Inc. (EL), Monster Beverage Corporation (MNST) and Constellation Brands, Inc. (STZ) have performed well over the past year and we think are well positioned to stay resilient even if the uncertainty continues for long.

The Procter & Gamble Company (PG)

PG provides branded consumer packaged goods across five segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. Some prominent brands under which it offers products are – Olay, Old Spice, Head & Shoulders, Pantene, Rejoice, Mach3, Venus, Bounty and Charmin.

In December, PG launched recyclable HDPE tubes across its leading toothpaste brands, Crest, Oral-B and Blend-a-med in North America and Europe to increase the level of recyclability of its toothpaste tubes. This will enable millions of households to recycle their toothpaste packaging, making PG’s products a popular choice amid the global sustainability drive.

PG introduced a new Microban 24 Multi-Purpose Cleaner last month, which received emergency authorization from Health Canada. With a rising number of cases across North America, this product should witness significant demand over the next couple of months.

PG’s net sales have increased 9% year-over-year to $19.32 billion in the fiscal first quarter ended September 30, 2020. Its gross profit has risen 12% from the year-ago value to $10.18 billion, while EPS has increased 20% from the same period last year to $1.69.

Analysts expect PG’s revenues to grow 5.4% year-over-year to $19.23 billion in the fiscal second quarter ended December 31, 2020. The consensus EPS estimate of $1.50 for the second quarter indicates a 5.6% improvement year-over-year. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 13.3% over the past year.

How does PG stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

B for Peer Grade

A for Industry Rank

A for Overall POWR Rating

You cannot ask for better. The stock is also ranked #1 of 65 stocks in the Consumer Goods industry.

Philip Morris International Inc. (PM)

PM manufactures and sells cigarettes, other nicotine-containing products, smoke-free products, and related electronic devices and accessories in markets outside of the United States.

In November, PM was included for the first time in the Dow Jones Sustainability Index (DJSI) North America, recognizing its exemplary sustainability performance. This recognition shows PM’s continued progress towards delivering tobacco alternatives and reduced-risk products.

PM has received authorization from the U.S. FDA for the sale of IQOS, an electrically heated tobacco system, in the United States. This product is expected to see significant demand given its long battery life and quicker recharge capacity.

PM’s operating income has increased 16.3% year-over-year to $3.24 billion in the third quarter ended September 30, 2020. Its EPS has increased 21.3% from the same period last year to $1.48.

Analysts expect PM’s revenues to grow 2.5% year-over-year to $7.33 billion in the current quarter ending March 31, 2021. The consensus EPS estimate of $1.27 for the current quarter indicates a 5% improvement year-over-year. The company has an impressive earnings surprise history, as it beat the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 14.9% over the past six months.

PM’s POWR Ratings reflect this promising outlook. It has an overall rating of “Strong Buy” with an “A” for Trade Grade, Peer Grade, and Buy & Hold Grade, and a “B” for Industry Rank. Among the 12 stocks in the Tobacco Industry, it is ranked #1.

The Estée Lauder Companies Inc. (EL)

EL operates in the beauty products segment, manufacturing and marketing skin care, makeup, fragrance, and hair care products. Some prominent brands include Estee Lauder, Aramis, Clinique, Origins, Tommy Hilfiger, MAC, DKNY, Aveda, Jo Malone London, Bumble and bumble, Michael Kors, and Tom Ford.

In November, EL achieved net zero emissions and sourced 100% renewable electricity globally for its direct operations. The company has also set science-based emissions reduction targets for its direct operations and value chain. Thereby positioning itself to take an even more meaningful stance against climate change in the next decade.

EL’s net sales increased 46.6% sequentially to $3.56 billion in the fiscal first quarter ended September 30, 2020. Its gross profit rose 64.6% sequentially to $2.74 billion over the same period, while its EPS increased 212.5% sequentially to $1.44.

Analysts expect EL’s revenues to grow 14.8% year-over-year to $3.84 billion in the current quarter ending March 31, 2021. The consensus EPS estimate of $1.46 for the current quarter represents  a 71.8% improvement year-over-year. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 25.5% over the past year.

It is no surprise that EL is rated “Strong Buy” with an “A” for Trade Grade and Buy & Hold Grade, and a “B” for Peer Grade and Industry Rank. It is currently ranked #1 of 77 stocks in the Fashion & Luxury Industry.

Monster Beverage Corporation (MNST)

MNST develops, markets, sells, and distributes energy drink beverages, sodas and concentrates worldwide. It operates through three segments: Monster Energy Drinks, Strategic Brands, and Other Segment, which includes the American Fruits & Flavors (AFF) third-party products.

MNST’s net sales increased 9.9% year-over-year to $1.25 billion in the third quarter ended September 30, 2020. Its operating Income rose 22.8% from the year-ago value to $485.60 million, while its EPS increased 20% from the same period last year to $0.66.

Analysts expect MSFT’s revenues to grow 10.5% year-over-year to $1.12 billion in the fourth quarter ended December 31, 2020. The consensus EPS estimate of $0.55 for the fourth quarter indicates a 17.0% improvement year-over-year. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 48.8% over the past year.

MNST is rated a “Strong Buy” in our POWR Ratings system. It has an “A” for Trade Grade, Buy & Hold Grade, and Peer Grade and a “B” for Industry Rank. In 44-stock Beverages Industry, it is ranked #5.

Constellation Brands, Inc. (STZ)

STZ is an international beverage alcohol company. The Company is a producer and marketer of multi-category beverages – beer, wine, and spirits. It delivers its products to wholesale distributors, retailers, on-premises locations, and state alcohol beverage control agencies.

On December 24, STZ and E. & J. Gallo Winery received authorization from the Bureau of Competition of the U.S. Federal Trade Commission (FTC) regarding Gallo’s acquisition of a portion of STZ’s wine and spirits portfolio. The price of acquisition was  approximately $1.03 billion, which will provide sufficient cash for STZ to conduct its business operations.

STZ’s net sales increased 21.9% year-over-year to $2.44 billion in the fiscal third quarter ended November 30, 2020. Gross profit rose 28.4% from the year-ago value to $1.27 billion, while net income increased 255.4% from the same period last year to $1.28 billion.

Analysts expect STZ’s revenues to grow 1.7% year-to-year to $8.48 billion in the fiscal 2021 (ending February 28). The consensus EPS estimate of $9.61 for the fiscal 2021 indicates a 5.4% improvement year-over-year. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 21% over the past year.

STZ’s POWR Ratings reflect this promising outlook. It has an overall rating of “Strong Buy” with an “A” for Trade Grade, Peer Grade, and Buy & Hold Grade; and a “B” for Industry Rank. Among the 44 stocks in the Beverages Industry, it is ranked #7.

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PG shares rose $0.02 (+0.01%) in after-hours trading Monday. Year-to-date, PG has declined -0.93%, versus a 1.29% rise in the benchmark S&P 500 index during the same period.

About the Author: Rishab Dugar

Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...

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