4 Soaps & Cleaning Materials Stocks to Gain as Industry Catches On

6 Aug 2023

Companies in the Zacks Soap and Cleaning Materials sector have been profiting from strong consumer demand for their products and brands, effective operational performance, and expansion into untapped markets. Implementing successful pricing strategies has played a crucial role in driving sales for these industry players. These companies maintain their dedication to fostering digital commerce advancement, product creativity, and brand development strategies.

However, the companies are still facing difficulties due to challenges such as increased expenses in manufacturing and logistics, higher costs for materials, and a decrease in sales. Additionally, the increased spending on advertising and sales promotions is negatively affecting their profits. In order to combat these rising costs, companies like Unilever PLC, Church & Dwight Co., Inc., The Procter & Gamble Company, and Colgate-Palmolive have implemented measures to reduce expenses.

The Zacks Soap and Cleaning Materials industry is mainly composed of companies that produce and distribute consumer goods that are frequently bought and used. This includes products for personal care, household use, and specialized purposes. The personal care category consists of items for taking care of the skin, hair, and oral hygiene, as well as deodorants. The household category includes products for various cleaning tasks in the home, such as laundry care, cleaning agents for the house, bleaching products, air fresheners, dishwashing liquids, and other cleaning supplies. Among these categories, laundry detergent is a particularly large market. Some companies also offer products for baby care, feminine hygiene, and pet care. These companies sell their products through a wide range of outlets, including supermarkets, mass merchandisers, grocery stores, distributors, wholesalers, department stores, drugstores, specialty stores, dollar stores, pet stores, and websites.

The Factors Influencing the Future of the Soap and Cleaning Products Sector

Positive Demand & Pricing Strategies: The industry for soaps and cleaning products has seen an increase in demand in various markets. Companies in this industry have been profiting from strong consumer interest in their products and brands, which have remained popular over time. In addition to this, companies are also benefiting from implementing effective pricing strategies and managing their revenues. These initiatives are driving the growth of sales for many players in the industry. To counter the challenges of rising costs caused by inflation, increased freight fees, and currency complications, companies have been taking bold actions to adjust their prices in different markets. These pricing strategies, which are based on the cost of production, are boosting the profit margins and overall profitability for many companies in the industry.

Product Innovation & Strategic Initiatives: Companies frequently invest in the development of new products to meet the evolving needs of consumers. Investments in innovation, expanding product offerings, and enhancing digital capabilities have played a crucial role in driving sales for companies in the soap and cleaning products industry. In addition to this, companies have been implementing various strategies such as price adjustments, changes in packaging, marketing campaigns, and restructuring activities, including acquisitions and divestitures. Companies are also focused on expanding their presence in new markets and distribution channels. Another area of focus for industry players is the development of products that feature eco-friendly and natural ingredients, as there is an increasing preference among consumers for environmentally-friendly options in their everyday items. The rise in popularity of online shopping, especially in the wake of the pandemic, has also been a significant driver of sales for companies in this industry. As a result, companies are continuously enhancing their efforts in the e-commerce sector by improving delivery and payment systems. Consumer goods companies are also implementing plans to improve efficiency and reduce costs in order to increase profit margins.

Growing Expenses a Worry: Those involved in the industry are facing problems with the flow of supplies, transportation difficulties, and rising prices of raw materials and other costs. These issues have been putting pressure on their profits and ability to make money. The increased costs of manufacturing and distributing products, as well as higher expenses for advertising and sales promotions, are also affecting profits. Additionally, some businesses are facing higher costs for salaries, bonuses, and investments in digital technology and ways to be more productive. To combat these challenges, some companies are focusing on reducing costs by improving their supply chains and minimizing unnecessary expenses. Many companies are also raising prices to help protect their profits.

Zacks's ranking of the industry indicates strong potential.

The Zacks Soap and Cleaning Materials sector can be found in the wider Zacks Consumer Staples sector. Currently, this sector holds a Zacks Industry Rank of #36, putting it in the upper 14% among over 250 Zacks industries.

According to our analysis, the Zacks Industry Rank of the group, which calculates the average of the Zacks Rank for all the stocks in the group, suggests positive outlook in the short term. Our studies demonstrate that the top half of industries ranked by Zacks perform significantly better than the bottom half, with a ratio of more than double.

The sector's position in the upper half of the Zacks-ranked industries is due to a favorable overall earnings outlook for the companies in this sector. Analysts are becoming more confident in the potential for earnings growth in this group by examining the collective revisions of earnings estimates. The earnings forecasts for the industry in 2023 have risen by 0.7% since the beginning of this year.

In this blog post, we have curated a selection of stocks that you may consider keeping in your investment portfolio due to their impressive efforts in achieving growth. However, it is important to first examine the industry's overall performance and its current valuation.

Comparing Industry to the Broader Market

The Zacks Soap and Cleaning Materials industry performed better than the wider Zacks Consumer Staples sector but did not perform as well as the S&P 500 index in the previous year.

The business has experienced a growth of 7.4% in the previous year, while the overall sector has seen a decrease of 0.7% and the S&P 500 has shown an increase of 9.1%.

According to the forward 12-month price-to-earnings ratio (P/E), which is frequently utilized to assess the value of Consumer Staples stocks, the industry is presently being traded at a multiple of 22.99X, in contrast to the S&P 500's multiple of 19.79X and the sector's multiple of 18.34X.

In the last five years, the sector's valuation has fluctuated between a maximum of 25.13 times and a minimum of 17.95 times earnings. The average valuation during this period has been 22.29 times earnings.

These 4 companies deserve your undivided attention.

Unilever: This corporation specializes in producing and packaging consumer goods, such as food, detergents, and products for personal care. Unilever has been benefitting from increases in various product areas, such as beauty and personal care, household cleaning, and food and drinks. Additionally, the company has been expanding the range of items available for online shopping, while also increasing its presence in different markets.

The organization has been experiencing strong increases in sales, boosted by success in all areas of the business. The main emphasis has been on expanding in three important markets: the United States, India, and China. UL has also been making progress with its efforts to reduce costs and improve productivity. The expected sales growth for 2023, according to the Zacks Consensus Estimate, is a 2.6% increase compared to the previous year. The company's stock, rated as a Zacks Rank #2 (Buy), has seen an increase of 8.7% in value over the past year.

Church & Dwight: The famous specialty products company has benefited from its wise acquisitions, strong creativity, and positive consumer demand. Church & Dwight is hopeful about its 2023 category expansion and remarkable brand success. The company is making progress in managing price increases and enhancing efficiency to offset rising costs. The company, based in Ewing, NJ, is dedicated to developing new products to continue growing.

Church & Dwight is prioritizing investments in their manufacturing facilities and suppliers in order to meet the growing demand for their products. They continually strive to improve their brand's market position through innovation. Over the past year, the company's stock has increased by 9.3%. According to the projections from financial analysts at Zacks, Church & Dwight is expected to experience a growth rate of 8.1% in sales and 6.1% in earnings for the year 2023. Furthermore, the estimated earnings for 2023 have increased by 1.6% in the last month.

Procter & Gamble, a major consumer goods company headquartered in Cincinnati, Ohio, is experiencing positive results across all sectors. This is due to strong demand, competitive pricing, and a diverse product range. Procter & Gamble's products are essential in fulfilling the everyday needs of consumers worldwide, in terms of health, hygiene, and cleanliness. Additionally, the company has observed substantial growth in its online sales across the globe.

Procter & Gamble is prioritizing strategies to improve profitability and reduce costs. The company's ongoing investments in its business, coupled with its efforts to overcome economic challenges and maintain growth, highlight its focus on productivity. It has experienced positive results in terms of reducing SG&A expenses through savings in various areas such as overhead and marketing, as well as benefiting from increased sales and real estate. According to the Zacks Consensus Estimate, PG's sales and earnings for fiscal year 2023 are expected to increase by 4.6% and 7.8% respectively compared to the previous year. In the past 30 days, the consensus estimate for its fiscal 2023 earnings has risen by 0.5%. Over the past year, the stock price of this Hold-rated company, according to Zacks Rank, has gone up by 8.6%.

Colgate: The company ranked #3 by Zacks is experiencing positive results due to strong consumer interest in personal care, hygiene, and household products. Colgate's emphasis on creativity and digital advancement, along with its powerful brand reputation, is propelling its success. The company's efforts to enhance its Oral Care offerings through significant innovations have proven advantageous. Recently, its high-end innovative products such as CO. by Colgate, Colgate Elixir toothpaste, and Colgate enzyme whitening toothpaste have been performing exceptionally well.

The company has been aggressively expanding into faster-growing areas and increasing the reach of its brands in different parts of the world. It is worth mentioning that analysts predict a 7.7% increase in sales and a 6.4% increase in earnings for CL in 2023 compared to the previous year. The forecast for earnings in 2023 has increased by 0.6% in the last month. Although the stock of this leading oral care company has fallen by 4.8% in the last year, it has risen by 3.7% in the last six months. Unilever PLC (UL): Free Stock Analysis Report