2024 Q4 Earnings Preview: Consumer Staples Under Scrutiny
The 2024 Q4 earnings season is gaining momentum this week, with numerous companies set to report their results. Among those expected to share their figures are three major players in the consumer staples industry: Procter & Gamble PG, Johnson & Johnson JNJ, and Kimberly-Clark KMB.
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Let’s examine how each company is performing ahead of their quarterly reports.
Procter & Gamble Faces Downgrades
Procter & Gamble’s stock is down about 3% over the last six months, slightly better than the overall performance of the Zacks Consumer Staples sector. Analysts have expressed cautious views, with the $1.86 Zacks Consensus EPS estimate reflecting a 2% drop compared to earlier estimates, implying a modest 1% growth year-over-year.
Sales forecasts also indicate a slight uptick, with projected revenues of $21.6 billion, which is about 0.7% higher than the previous year.
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Despite muted growth expectations, the company’s gross margin has improved, boosting overall profitability. Notably, P&G has maintained its guidance for the current year, which may help avoid significant surprises.
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valuation metrics show a 22.5X forward earnings multiple, consistent with the five-year median but below its five-year peak of 26.7X. The PEG ratio stands at 3.5X, which appears high given the expected growth.
P&G currently holds a Style Score of ‘D’ for Value.
Johnson & Johnson Dealing with Margin Pressure
Johnson & Johnson’s stock has similarly declined by 2% over the past six months, yet it outperformed the Zacks Consumer Staples sector. Analysts have lowered their expectations for JNJ, with the $2.00 Zacks Consensus EPS estimate down slightly and indicating a 13% decline from last year.
On a positive note, sales are projected to grow by 5.3% year-over-year.
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However, margin trends have taken a hit, affecting profitability and contributing to the lower EPS. Positive updates on margins could help bolster investor confidence.
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In terms of valuation, JNJ appears more appealing than P&G, with a 13.9X forward earnings multiple below the five-year median of 16.1X. The PEG ratio of 2.4X, though somewhat elevated, is still under the five-year median of 2.7X.
JNJ carries a Style Score of ‘B’ for Value.
Kimberly-Clark Sees Declining Performance
Kimberly-Clark has struggled the most among these three companies, with a 10% decline over the past six months, significantly underperforming the sector. The forecast for EPS remains stable at $1.50, down by only a penny from previous estimates, suggesting flat year-over-year growth.
Revenue projections also align with this trend, showing an anticipated 3% decline compared to last year.
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Despite its challenges, Kimberly-Clark has experienced margin growth, a trend that has yet to attract investor interest, keeping the stock relatively flat over the past three years.
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Currently, Kimberly-Clark’s valuation stands at 16.7X forward earnings, which is below both the five-year median and the highs seen in that period. The PEG ratio is 3.6X, slightly high yet in line with historical averages.
The stock has a Style Score of ‘C’ for Value.
Conclusion
As the 2024 Q4 earnings season unfolds, many companies will reveal their performance. Notably, Procter & Gamble PG, Johnson & Johnson JNJ, and Kimberly-Clark KMB are highlights in the consumer staples sector.
The performance of margins will be particularly important to watch in their upcoming releases, alongside revenue growth. Given their stable nature, significant post-earnings fluctuations may not be expected.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
