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5 Soaps & Cleaning Products Stocks Worth a Look Amid Coronavirus Woes

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High demand for cleansing products amid the ongoing coronavirus pandemic has led to a significant upside for the Zacks Soap and Cleaning Materials industry. Companies such as The Procter & Gamble Company (PG), The Unilever Group (UL), Colgate-Palmolive Company (CL), The Clorox Company (CLX) and Church & Dwight Co., Inc. (CHD) have been making the most of this opportunity by coming up with new products and improved marketing efforts. Apart from this, players in the space have been undertaking prudent measures to boost productivity and enhance e-commerce presence.

However, the industry participants have been witnessing high costs associated with operating amid the pandemic, along with higher input costs and promotional expenses. Nevertheless, some of the players are undertaking prudent cost-curtailment actions to support margins.

About the Industry

Companies involved in the manufacturing and supply of fast-moving consumer goods (FMCG), including personal care, household and specialty products, mainly make up the Zacks Soap and Cleaning Materials industry. The personal care segment comprises skin and hair care products, deodorants, and oral care items. The household category covers home care products, including fabric and laundry care, house cleaning agents, bleaching products, air care, dishwashing liquids and other cleaning items. Laundry detergent is one of the largest markets among these. Some of the players in this space also offer baby and feminine care items. Additionally, some companies offer food and refreshments, including soups, sauces, snacks, salad dressings, spreads, ice creams and tea-bag beverages. The industry also includes companies offering pet nutrition products.

These companies market and sell products through supermarkets, mass merchandisers, grocery stores, wholesale clubs, distributors, wholesalers, department stores, drugstores, convenience stores, home stores, baby stores, specialty beauty stores, dollar stores and pet stores, and other specialty stores as well as through websites. Pet nutrition products are mainly distributed via pet supply retailers and veterinarians.

Major Trends Shaping the Future of the Soaps & Cleaning Materials Industry

COVID-19 Boosts Demand for Cleansing Products: Maintaining good hygiene, especially washing hands and keeping surfaces clean, has been an effective way to prevent being infected by COVID-19. The cleaning frenzy among consumers amid the pandemic has been a boon for the soaps and cleaning materials industry. The outbreak has significantly boosted demand for hand sanitizers, soaps, toilet paper, surface cleaners, disinfecting wipes and other personal and household cleansing essentials. Industry experts believe that such trends are likely to persist even after the pandemic subsides, as consumers have begun to increasingly understand the importance of personal hygiene in maintaining a healthy lifestyle. Additionally, the pandemic also served as an opportunity for companies to broaden product lines and launch items with improved features that aid protection from the virus.

Product Innovation & Strategic Efforts: Efforts to boost productivity and investments in product development to suit consumers’ changing needs have been favoring the companies in the soaps and cleaning products space. Additionally, the players are undertaking pricing, packaging and marketing initiatives along with restructuring actions including acquisitions and divestitures. Companies are also looking to expand into new markets and channels. Developing products with eco-friendly and natural ingredients is another area of focus among industry players as consumers increasingly prefer environment-friendly ingredients in their daily use items. Further, online availability of products is another key sales driver across various markets due to convenience and ease of shopping.
 
High Costs are a Concern: The soaps and cleaning materials industry players are grappling with escalating raw material and transportation costs, owing to supply chain hurdles due to the pandemic. Furthermore, heightened competition has resulted in increased pricing pressure and higher advertising investments, which are also hurting margins. Consequently, players in the industry are focusing on cost-containment initiatives to overcome operational shortcomings and improve margins. These initiatives include streamlining of supply chain operations and minimizing overhead costs among others.

Zacks Industry Rank Indicates Bright Prospects

The Zacks Soap and Cleaning Materials industry is housed within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #104, which places it in the top 41% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually becoming more confident in this group’s earnings growth potential. Since the beginning of July 2020, the industry’s earnings estimate for 2020 has improved 6%.

Given the encouraging scenario, we will present a few stocks that one can buy or retain, given their solid growth endeavors. But before that, it’s worth taking a look at the industry’s performance and current valuation.

Industry Vs. Broader Market

The Zacks Soap and Cleaning Materials industry has outperformed the S&P 500 composite as well as the broader Zacks Consumer Staples sector over the past year.

The industry has gained 25.9% over this period compared with the S&P 500’s rise of 18%. Meanwhile, the broader sector has inched down 0.5% in the said time frame.

One-Year Price Performance


 

Industry’s Current Valuation

On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing Consumer Staples stocks, the industry is currently trading at 26.53X compared with the S&P 500’s 22.67X and the sector’s 20.06X.

Over the past five years, the industry has traded as high as 26.53X and as low as 17.89X, with the median being 21.58X as the chart below shows

Price-to-Earnings Ratio (Past 5 Years)


 

5 Stocks to Keep a Close Eye on

The Unilever Group: This Zacks Rank #2 (Buy) company has been gaining from enhanced demand for hygiene products and at-home dining practices.  Moreover, the company has been broadening assortments available for online purchasing, while also boosting penetration across markets. Notably, the Zacks Consensus Estimate for 2020 earnings has remained stable over the past 30 days. Shares of this well-known consumer staples products company have gained 6.1% over the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price and Consensus: UL


 

The Procter & Gamble Company: This Cincinnati, OH-based consumer goods giant has been gaining from strong organic sales growth, backed by improved demand across most brands. Effective pricing and mix have been favoring the company’s margins. Moreover, the company is progressing well with its five-year restructuring plan, which mainly targets cutting costs in areas such as supply chain and marketing. The Zacks Consensus Estimate for fiscal 2021 earnings has been stable in the past 30 days. This Zacks Rank #3 (Hold) stock has risen 19.2% over the past six months.

Price and Consensus: PG


 

Colgate-Palmolive Company: This consumer goods giant has been gaining from robust demand for personal and home care products as well as prudent innovation across product categories. Additionally, this Zacks Rank #3 company’s efficient pricing measures have been paying off. Colgate is also working toward enhancing e-commerce presence of its brands, while also expanding into fast growing channels such as skincare and pharmacy. Shares of this New York City-based company have surged 21.2% in the past six months. The Zacks Consensus Estimate for 2020 earnings has improved nearly 1% over the past 30 days.

Price and Consensus: CL


 

The Clorox Company: This Zacks Rank #3 company has been gaining from persistent strong demand for cleaning and disinfecting products as well as aggressive investments in its global brand portfolio. Moreover, Clorox has been progressing well with its cost-saving and ‘Go Lean’ productivity initiatives. Markedly, the Zacks Consensus Estimate for fiscal 2021 earnings has improved 4.2% over the past 30 days. Shares of the company have declined 1.3% in the past six months.

Price and Consensus: CLX


 

Church & Dwight Co.: This well-known specialty products company has been gaining from consumption growth across several product categories including gummy vitamins, women’s hair removal, cleaners and baking soda. Moreover, this Zacks Rank #3 company’s international business has been doing remarkably well owing to strong brand presence across markets. Further, Church & Dwight’s e-commerce sales have also remained sturdy. Shares of this Ewing, NJ-based company has moved up 16.1% in the past six months. The Zacks Consensus Estimate for 2020 earnings has remained stable over the past 30 days.

Price and Consensus: CHD


 


These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>

 


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Unilever PLC (UL) : Free Stock Analysis Report
 
Procter & Gamble Company The (PG) : Free Stock Analysis Report
 
The Clorox Company (CLX) : Free Stock Analysis Report
 
ColgatePalmolive Company (CL) : Free Stock Analysis Report
 
Church & Dwight Co., Inc. (CHD) : Free Stock Analysis Report
 
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