Sales and margin headwinds expected to remain a drag
Most CPG (consumer packaged goods) manufacturers’ results impressed in the recent quarter, especially their sales. Higher pricing drove their organic sales and supported their top lines. However, currency volatility dragged down net sales, and higher commodity and transportation costs continued to hurt their margins and EPS.
We expect higher pricing and innovation-driven products to support organic sales for Procter & Gamble (PG), Clorox (CLX), Church & Dwight (CHD), Colgate-Palmolive (CL), and Kimberly-Clark (KMB). However, currency volatility is likely to affect their net sales growth. Analysts expect Kimberly-Clark’s and Colgate-Palmolive’s top line to fall in the first half of this year, and Procter & Gamble’s net sales growth to remain low. In comparison, higher volumes and pricing are expected to drive low- to mid-single-digit percentage sales growth for Church & Dwight and Clorox. Meanwhile, higher input and logistics costs could restrict bottom-line growth, and currency rates and higher tax could be a drag.
Most CPG stocks have risen this year. Colgate-Palmolive, Procter & Gamble, Kimberly-Clark, and Clorox have risen 11.7%, 7.1%, 3.9%, and 1.4%, respectively, while Church & Dwight stock has fallen 1.6%.