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Consumer Staples Stock Earnings to Watch on Apr 30: CLX, CL, NWL

The Consumer Staples stocks have been in the forefront throughout the pandemic, making every possible effort to provide uninterrupted supplies of essential commodities, be it food items or cleaning and sanitizing supplies. Gains from their efforts to meet the growing consumer demand for household essentials and other staple products have been aiding the top lines of consumer staples stocks since 2020.

The demand for certain household essentials is likely to have been sturdy due to the continuity of the pandemic-led precautions in first-quarter 2021. However, some companies are likely to have witnessed a moderation in demand trends when compared with the peak experienced in the same period last year. The factors are expected to have weighed on year-over-year sales comparisons of a number of players in the Consumer Staples space.

Moreover, costs associated with the additional efforts to support growth amid the crisis are likely to have been limiting factors. Players in the space have been encountering high costs associated with COVID-19, including increased pay, and elevated health and sanitization measures. Rising input costs as well as escalated raw material and transportation costs, owing to supply-chain hurdles, are also likely to have been hurdles for several companies.

These are likely to have weighed on margin performances of some industry participants. Also, higher advertising, e-commerce and other growth-related investments are expected to have been detrimental to margins in the to-be-reported quarter.

In order to overcome operational shortcomings and improve margins, some of the players in the industry have been focusing on cost-containment initiatives. This includes the streamlining of supply-chain operations and minimizing overhead costs among others. These are expected to have cushioned margins to some extent in the first quarter. Also, investments in product development to suit consumers’ changing needs are expected to have supported the top lines of companies in the space.

Additionally, e-commerce and omni-channel endeavors are likely to have boosted the top lines of participants in the first quarter. This makes us a little hopeful of the performance of Consumer Staples stocks despite the wavering impacts of the pandemic in several regions.

Notably, the sector is currently ranked among the bottom 7% out of the 16 Zacks sectors. The latest Zacks Earnings Outlook suggests that the Consumer Staples sector’s March-end quarter’s earnings are expected to grow 13.1% year over year, with revenues advancing 9.1%.

That said, let’s take a look at three Consumer Staples stocks, which are scheduled to report earnings on Apr 30. Our research shows that for stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), the chances of a positive earnings surprise are 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.

The Clorox Company CLX has been gaining from increased demand for disinfecting and cleaning products since the onset of the pandemic. In fact, on its last reported quarter’s earnings call, management updated the outlook for fiscal 2021 based on the current trends, expectations of continued strong demand for cleaning and disinfecting products globally, and aggressive investments in its global portfolio. Accordingly, it projected sales for the second half of fiscal 2021 to remain relatively flat.

Further, progress on the company’s IGNITE strategy and robust product portfolio bode well. Clorox has also been on track with its cost-saving and productivity initiatives. The positives have most likely aided the top line in third-quarter fiscal 2021.

The Clorox Company Price and EPS Surprise

 

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

However, the company has continued to witness elevated manufacturing and logistics costs, including pandemic-related expenses. Higher selling and administrative costs as well as increased advertising and sales promotion investments are expected to have hurt the bottom line in the to-be-reported quarter. Also, the company has been making investments in brands to support its robust innovation pipeline and customer engagement efforts.

Our proven model does not conclusively predict an earnings beat for Clorox this time around. The company has a Zacks Rank #4 (Sell) and an Earnings ESP of -2.13%. (Read More: Clorox Queues Up For Q3 Earnings: What's in the Cards?)

Colgate Palmolive Company CL has been witnessing robust top and bottom-line trends lately. The company has been experiencing continued strong demand for personal and home care products as well as the finest innovation across product categories. Its categories like liquid hand soap, dish liquid, bar soap and cleaners across all geographies are expected to have contributed to top-line growth in the first quarter of 2021.

Additionally, positive pricing across all regions and strong volume have been aiding organic revenues. The company has been witnessing gross margin expansion for the past few quarters, driven by robust pricing and productivity gains. Notably, its commitment toward pricing efforts through premiumization and revenue-growth management has been paying off. This is expected to have resulted in organic sales growth and gross margin expansion in the to-be-reported quarter.

ColgatePalmolive Company Price and EPS Surprise

 

ColgatePalmolive Company price-eps-surprise | ColgatePalmolive Company Quote

However, concerns related to higher selling, general & administrative expenses, unfavorable currency fluctuations, and stiff competition cannot be ignored. Moreover, any escalation in raw and packaging-material expenses is expected to have impacted margins to an extent.

Our proven model does not conclusively predict an earnings beat for Colgate this time around. The company has a Zacks Rank #4 and an Earnings ESP of -0.62%. (Read More: Factors Likely to Influence Colgate in Q1 Earnings)

Newell Brands Inc.’s NWL focus on lowering complexity, improving productivity, enhancing e-commerce growth and deepening customer engagement are likely to have aided its first-quarter performance. Endeavors, including strengthening of brands, developing omnichannel capabilities, tapping international growth opportunities and reducing overhead costs, have also been encouraging. Notably, the company has been witnessing sales growth in a few categories, namely Food, Commercial and Appliances. Gains from these are likely to get reflected in the company’s top line.

On its last reported quarter’s earnings call, management highlighted that the first quarter commenced on a strong note from both a consumption and shipment perspective. Notably, Newell Brands projected first-quarter 2021 net sales between $2.04 billion and $2.08 billion, indicating year-over-year growth of 8-10%, with core sales growth in the high single-digit range. It forecast normalized earnings of 12-14 cents a share, which suggests double-digit growth on a year-over-year basis.

Newell Brands Inc. Price and EPS Surprise

 

Newell Brands Inc. price-eps-surprise | Newell Brands Inc. Quote

The company also expected normalized operating margin expansion of 90-130 basis points year over year to 6.9-7.3%. This reflects benefits from productivity efforts as well as overhead cost and complexity reduction. However, higher advertising and marketing investments along with increased commodity and transportation costs are anticipated to have weighed on margins to an extent.

Our proven model does not conclusively predict an earnings beat for Newell Brands this time around. The company has a Zacks Rank #3 and an Earnings ESP of 0.00%. (Read More: Newell Brands Queued for Q1 Earnings: What's in Store?)

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ColgatePalmolive Company (CL): Free Stock Analysis Report
 
Newell Brands Inc. (NWL): Free Stock Analysis Report
 
The Clorox Company (CLX): Free Stock Analysis Report
 
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