Consumer staples are the everyday essentials that people continue to buy, even when the economy slows down. Thanks to this steady demand, stocks in this sector tend to outperform cyclical industries during uncertain times. For investors seeking stability, investing in companies such as Walmart Inc. (WMT), Philip Morris International Inc. (PM), and Colgate-Palmolive Company (CL) could be wise.

As of September 2024, markets are on edge as they await the Federal Reserve’s next move on interest rates. There’s much speculation around whether they’ll go for a quarter-point or a half-point cut, but for now, U.S. stock indexes remain mostly flat. The Fed’s decision could cause significant market shifts and influence investment strategies, adding to the current atmosphere of uncertainty.

However, with the S&P 500 rising 4.1%, the consumer staples sector has outpaced the broader market as investors flock to more stable options. Companies in this sector, which produce essential goods like groceries, household items, and even tobacco, tend to weather market ups and downs with resilience.

According to Statista, the consumer goods market is expected to grow by $594.50 billion this year, with an annual growth rate of 1.3% from 2024 to 2029. Meanwhile, in the U.S., the tobacco products market is projected to generate $107.50 billion this year, growing by 0.84% annually over the same period.

Considering these conducive trends, let’s examine the fundamentals of the above-mentioned stocks in detail:  

Walmart Inc. (WMT)

WMT operates a global network of retail, wholesale, and other business units through three segments: Walmart U.S.; Walmart International; and Sam’s Club. Its operations include supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, discount stores, membership-only warehouse clubs, e-commerce websites, and mobile commerce applications.

On August 27, 2024, WMT announced the expansion of its Marketplace with new categories, multichannel fulfillment solutions, and innovations to simplify selling. The company also introduced Premium Beauty, pre-owned items, and new omnichannel features to enhance the customer and seller experience.

In terms of the trailing-12-month Return on Common Equity, WMT’s 18.97% is 78.4% higher than the 10.63% industry average. Likewise, its 11.56% trailing-12-month Return on Total Capital is 66.4% higher than the 6.95% industry average. In addition, its trailing-12-month asset turnover ratio of 2.61x compares to the industry average of 0.85x.

WMT has paid dividends for 50 consecutive years. Its annual dividend is $0.83, which translates to a yield of 1.05% at the current share price. Its four-year average dividend yield is 1.49%. Moreover, the company’s dividend payouts have increased at a CAGR of 3.6% over the past three years.

For the fiscal second quarter that ended July 31, 2024, WMT’s total revenues increased 4.8% year-over-year to $169.34 billion. Likewise, its adjusted operating income rose 7.2% from the year-ago value to $7.94 billion. Moreover, the company’s consolidated attributable net income came in at $4.50 billion, or $0.56 per common share.

Street expects WMT’s EPS and revenue for the quarter ending October 31, 2024, to increase 3.7% and 4.1% year-over-year to $0.53 and $166.01 billion, respectively. Moreover, it surpassed the consensus EPS estimates in each of the trailing four quarters.

Over the past nine months, the stock has gained 53% to close the last trading session at $79.03.

WMT’s POWR Ratings reflect its strong fundamentals. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has an A grade for Stability and a B for Growth, Momentum, Sentiment, and Quality. Within the A-rated Grocery/Big Box Retailers industry, it is ranked #6 out of 37 stocks. Click here to see WMT’s ratings for Value.

Philip Morris International Inc. (PM)

PM operates as a tobacco company working to deliver a smoke-free future and evolve its portfolio for the long term to include products outside of the tobacco and nicotine sectors. The company’s product portfolio primarily consists of cigarettes, smoke-free products, and consumer accessories such as lighters and matches.

On September 12, 2024, PM announced a 3.8% increase in its annualized dividend rate to $5.40 per share. The new quarterly dividend of $1.35 per share is payable on October 10, 2024, to shareholders of record on September 26, 2024.

PM’s annual dividend translates to a yield of 4.46% at the current share price, while its four-year average dividend yield is 5.26%. In addition, the company’s dividend payouts have increased at a CAGR of 2.7% over the past three years. PM has paid dividends for the past 15 years.

In terms of the trailing-12-month Capex / Sales, PM’s 4.03% is 25.2% higher than the 3.22% industry average. Its 19.69% trailing-12-month Return on Total Capital is 183.4% higher than the 6.95% industry average. Moreover, its 24.15% trailing-12-month net income margin compares favorably to the industry average of 4.42%.

During the second quarter that ended June 30, 2024, PM’s net revenues increased 5.6% year-over-year to $9.47 billion. Similarly, its adjusted operating income grew 3.5% from the year-ago value to $3.66 billion. Additionally, the company’s adjusted EPS stood at $1.59.

The consensus revenue estimate of $9.68 billion for the fiscal third quarter (ending September 2024) represents a 5.9% increase year-over-year. The consensus EPS estimate of $1.82 for the ongoing quarter represents an 8.8% growth from the same period last year. The company has a promising earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters.

PM shares have gained 26.9% over the past six months and 28.6% year-to-date to close the last trading session at $120.96.

PM’s bright prospects are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.

It has a B grade for Stability and Quality. It is ranked #4 out of 10 stocks in the B-rated Tobacco industry. To access the additional grades of PM for Growth, Value, Momentum, and Sentiment, click here.

Colgate-Palmolive Company (CL)

CL and its subsidiaries manufacture and sell consumer products internationally. The company offers a wide range of oral, personal, home care, and pet nutrition products under various well-known brands worldwide. It operates through two segments: Oral, Personal, and Home Care; and Pet Nutrition.

On September 12, 2024, CL announced a regular quarterly dividend of $0.50 per share, payable on November 15, 2024, to shareholders of record on October 18, 2024.

The company’s annualized dividend of $2 per share translates to a dividend yield of 1.94% on the current share price. Its four-year average yield is 2.31%. Its dividend payouts have increased at a CAGR of 3.3% over the past three years. Also, CL has paid dividends for 60 consecutive years.

CL’s trailing-12-month gross profit margin of 59.70% is 66.5% higher than the 35.85% industry average. Likewise, its trailing-12-month EBITDA and levered FCF margins of 24.17% and 14.25% are 84.8% and 162.6% higher than their respective industry averages of 13.07% and 5.43%.

In the second quarter that ended June 30, 2024, CL’s net sales rose 4.9% year-over-year to $5.06 billion. Its non-GAAP operating profit grew 12.7% from the year-ago value to $1.12 billion. Furthermore, its non-GAAP net income attributable to CL came in at $753 million or $0.91 per share, up 16.9% and 18.2% over the prior-year quarter, respectively.

Analysts expect CL’s revenue for the current quarter (ending September 30, 2024) to increase 2% year-over-year to $5.01 billion. Its EPS for the same quarter is expected to grow 2.8% year-over-year to $0.88. Also, it surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.

CL’s stock has gained 39.7% over the past year to close the last trading session at $103.18.

It’s no surprise that CL has an overall rating of B, which translates to a Buy in our proprietary POWR Rating system.

It has an A grade for Quality and a B for Stability. Out of 53 stocks in the A-rated Consumer Goods industry, it is ranked #15. Beyond what we have stated above, we also have given CL grades for Growth, Value, Momentum, and Sentiment. Get all the CL ratings here.

What To Do Next?

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WMT shares were trading at $78.34 per share on Thursday afternoon, down $0.69 (-0.87%). Year-to-date, WMT has gained 50.52%, versus a 21.06% rise in the benchmark S&P 500 index during the same period.

About the Author: Abhishek Bhuyan

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments. More...

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