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Consumer Staples Stock Earnings for May 1: CL, CLX & EL

Rajani Lohia

The quarterly reports of companies in the Consumer Staples sector are likely to reflect the spiked demand for everyday essentials as the coronavirus pandemic has confined everyone to their homes since early March. Amid the crisis, the consumer staples companies are trying to keep supplies on store shelves to meet the growing demand for hand sanitizers, tissue papers, foods essentials, infant supplies, disinfecting wipes, and other floor and house-cleaning products. Consumers’ initial panic-buying trend in March is expected to have aided the top lines of Consumer Staples stocks in the to-be-reported quarter.

However, the cost associated with additional efforts to support growth amid the crisis is a limiting factor. Additionally, headwinds related to escalating raw material prices and higher transportation expenses are likely to have increased the cost burden. These along with the uncertainty in global markets, higher operating expenses and unfavorable currency rates are likely to show on current-quarter profitability. Further, heightened competition, price wars and aggressive promotions remain deterrents.

Nonetheless, these companies have been resorting to cost-saving endeavors by cutting on non-essential operating expenses and postponing long-term projects. These efforts are likely to have cushioned margins to an extent.

This makes us hopeful of the performance of consumer staples stocks despite the discouraging effects of the COVID-19 outbreak. Notably, the sector is currently ranked among the top 44% out of the 16 Zacks sectors. The latest Zacks Earnings Trends suggests that the Consumer Staples sector’s March-quarter earnings are expected to grow 6.1% year over year, with revenues advancing 8.5%.

That said, let’s take a look at three Consumer Staples stocks, which are scheduled to report earnings on May 1. Our research shows that for stocks with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP, the chance of a positive earnings surprise is high. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.

Clorox Looks Well-Poised This Quarter

The Clorox Company’s CLX Cleaning segment primarily sells laundry, home-care, professional and auto-care products in the United States. Notably, the company’s facilities have been operational amid the virus outbreak to supply essential cleaning products like bleaches, and floor and other disinfectants.

The company has seen its disinfecting wipes and other household cleaning and personal hygiene products, including the namesake bleach, flying off supermarket shelves in the first half of March. This is expected to have been beneficial for Clorox’s third-quarter fiscal 2020 top-line performance.

The Clorox Company Price and EPS Surprise

The Clorox Company Price and EPS Surprise

The Clorox Company price-eps-surprise | The Clorox Company Quote

For third-quarter fiscal 2020, the Zacks Consensus Estimate for revenues is pegged at $1.71 billion, suggesting 10.5% growth from the prior-year reported figure. The consensus estimate for sales for the Cleaning segment stands at $660 million, suggesting year-over-year growth of 29.9% mainly due to gains from the coronavirus outbreak-induced sales.

Our proven model predicts an earnings beat for Clorox this time around. The company has a Zacks Rank #1 and an Earnings ESP of +2.43%. (Read More: Clorox to Report Q3 Earnings: What's in the Offing?)

Factors to Influence Colgate’s Earnings

Colgate Palmolive Company CL has been witnessing robust top and bottom-line trends lately. The company’s increased investment in brands, favorable pricing strategy, innovative product launches and enhancement of e-commerce capabilities have been contributing to top-line growth.

Colgate-Palmolive Company Price and EPS Surprise

Colgate-Palmolive Company Price and EPS Surprise

Colgate-Palmolive Company price-eps-surprise | Colgate-Palmolive Company Quote

Additionally, positive pricing across all regions and strong volume have been aiding organic revenues. The company has been also making concerted efforts to expand portfolio of products. Moreover, the company’s Global Growth and Efficiency Program and the Funding the Growth plan have been helping it reduce costs and improve productivity, which are likely to get reflected in margins in the to-be-reported quarter.

However, concerns related to higher selling, general & administrative, unfavorably currency fluctuations and stiff competition cannot be ignored. Moreover, any escalation in raw and packaging-material expenses may impact margins to an extent.

Our proven model predicts an earnings beat for Colgate this time around. The company has a Zacks Rank #3 and an Earnings ESP of +0.94%. (Read More: Factors Likely to Decide Colgate's Fate in Q1 Earnings)

Is Estee Lauder Also As Well-Placed As Its Peers?

The Estee Lauder Companies Inc. EL seems to be reeling under the coronavirus woes that have hit the cosmetics space, though other Consumer Staples counterparts remain stable. The cosmetics companies are under major pressure due to store closures and restricted air traffic. Estee Lauder recently notified that most of its retail stores (operated by the company as well as its customers) in the Americas, and Europe, the Middle East & Africa have been shut since mid-March. Also, air travel restrictions are hurting Estee Lauder’s travel retail operations.

On its last earnings call, management stated that it expects the global prestige beauty space to be hurt by the coronavirus outbreak. The company then said that it expects continued declines in air travel and consumer traffic in core tourist and shopping areas. Estee Lauder particularly expects the to-be-reported quarter’s sales to bear the largest adverse impact of COVID-19-related hurdles. Nonetheless, Estee Lauder has been operating online amid the pandemic and witnessing sales growth in this channel.

The Estee Lauder Companies Inc. Price and EPS Surprise

The Estee Lauder Companies Inc. Price and EPS Surprise

The Estee Lauder Companies Inc. price-eps-surprise | The Estee Lauder Companies Inc. Quote

Our proven model does not conclusively predict an earnings beat for Estee Lauder this season. The company has a Zacks Rank #4 and an Earnings ESP of -0.06%. (Read More: Factors Shaping the Fate of Estee Lauder's Q3 Earnings)

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Colgate-Palmolive Company (CL) : Free Stock Analysis Report
The Estee Lauder Companies Inc. (EL) : Free Stock Analysis Report
The Clorox Company (CLX) : Free Stock Analysis Report
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