U.S. consumers sentiments rebounded in April as inflation continued to ease, with the University of Michigan’s consumer sentiment index climbing to 63.5 in April from 62.0 in March. “Despite the increasingly negative news on business conditions heard by consumers, their short and long-run economic outlook improved modestly from last month,” the survey’s director Joanne Hsu said.
So, this could be the right time to scoop up consumer goods stocks Unilever PLC (UL) and Yue Yuen Industrial (Holdings) Limited (YUEIY). These stocks are A (Strong Buy) rated in our proprietary system.
Additionally, the global Consumer Packaged Goods (CPG) market is expected to expand at a CAGR of 3% until 2028. The iShares U.S. Consumer Goods ETF’s (IYK) 5.1% returns over the past three months and 6% returns over the past six months indicate investors’ confidence.
Despite the inflationary pressures and tighter credit conditions following recent financial market turmoil that have added to the risks of a recession this year, UL and YUEIY are expected to perform relatively well.
Unilever PLC (UL)
UL, headquartered in London, is a fast-moving consumer goods company. It operates through the broad segments of Beauty & Personal Care; Foods & Refreshment; and Home Care.
On April 3, 2023, UL, Accenture (ACN), and Microsoft (MSFT) completed a huge cloud conversion project for UL’s 400+ consumer brands, according to reports. Through Azure’s cloud platform, UL would be able to become a cloud-only organization, enhancing product launches, customer service, and operational efficiency.
In terms of trailing-12-month UL’s ROCE of 42.31% is 300.4% higher than the 10.57% industry average. Likewise, its trailing-12-month levered FCF margin of 12.44% is 368.6% higher than the industry average of 2.65%.
UL has paid dividends for 12 consecutive years. Over the last five years, UL’s dividend payouts have grown at a 1.2% CAGR. While UL’s four-year average dividend yield is 3.48%, the company’s annual dividend of $1.83 yields 3.36% at the current price level.
For the fiscal year that ended December 31, 2022, UL’s turnover increased 14.5% year-over-year to €60.07 billion ($6.42 billion), with an underlying sales growth of 9%. Its operating profit increased 23.6% year-over-year to €10.76 billion ($11.50 billion).
Its net profit came in at €8.27 billion ($8.84 billion), up 24.9% from the previous year, and its EPS increased 28.9% from the year-ago period to €2.99 for the same year.
The consensus revenue estimate of $68.34 billion for the year ending 2024 represents a 3.9% increase year-over-year. Its EPS is expected to grow 7.3% year-over-year to $3.03 in 2024. The stock has gained 21.4% over the past six months to close its last trading session at $55.53.
It’s no surprise that UL has an overall A rating, equating to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It also has a B grade for Value, Stability, and Sentiment. It is ranked four out of 54 stocks in the Consumer Goods industry. To access additional ratings for UL’s Growth, Momentum, and Quality, click 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 terms of trailing-12-month YUEIY’s levered FCF margin of 7.43% is 202.4% higher than the 2.46% industry average. Likewise, its trailing-12-month asset turnover ratio of 1.08x is 4.3% higher than the industry average of 1.04x.
While YUEIY’s four-year average dividend yield is 3.48%, the company’s annual dividend of $0.38 yields 5.07% at the current price level.
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 increased 4.3% from the year-ago value to $2.14 billion. Furthermore, the company’s profit for the year rose 106.6% from the prior year’s period to $293.20 million, and its EPS came in at $0.18, a 157.6% year-over-year increase.
Street expects YUEIY’s revenue to increase 7.8% year-over-year to $9.92 billion in 2024. The stock has gained 42.2% over past six months to close the last trading session at $7.40.
YUEIY’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, translating to Strong Buy in our proprietary rating system.
It also has an A grade for Growth and Value and a B grade for Stability. It is ranked three out of 54 stocks within the same industry. Click here to see the additional ratings for YUEIY (Momentum, Sentiment, and Quality).
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UL shares were unchanged in premarket trading Monday. Year-to-date, UL has gained 11.27%, versus a 9.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...
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