Published Tue, 05 April 2016 18:00 CET by TopYields.nl
The Consumer Goods sector includes companies that engage in the manufacture and sale of items that serve a range of industries, including automobiles, beverages, clothing, electronics, food production, and packaged goods. As the sector is heavily correlated to consumer behavior, the stock performance may be subject to consumer demand. For instance, when the economy is growing, the sector experiences a higher demand for high-end products while when the economy is shrinking, there is a growing demand for value products.
This article discusses three mid-cap stocks that trade in the Consumer Goods Industry. All three stocks have significantly outperformed both S&P 500 (+0.18%) and NYSE (-6.80%) YoY and trade at an average beta of 0.89. Their average dividend yield is 2.38%, higher than the average dividend yield of 2.22% of the sector while their average payout ratio is 51.7%, slightly higher than the average payout ratio of 43% of the Packaging & Containers Industry, where the two stocks of the three stocks trade.
Avery Dennison (NYSE: AVY) is a Glendale, California-based consumer goods company engaging in the production and sale of pressure-sensitive materials both in the United States and internationally. Through its Pressure-Sensitive Materials, Retail Branding & Information Solutions, and Vancive Medical Technologies segments, Avery Dennison sells its products to label printers and converters for labeling, decorating, fastening, and electronic data processing applications in the beer and beverage, durables, food market, home and personal care, pharmaceutical and wine and spirits industries. The company serves retailers, brand owners, apparel manufacturers, distributors, and industrial customers.
Strong Full Year 2015 Results: In spite of challenging economic conditions in the global financial markets and major headwinds as a result of currency translation, Avery Dennison has delivered strong organic sales growth in its full year 2015 results. More specifically, although revenues were down 5.7% YoY to $5.97 billion from $6.33 billion, gross profit margin reached 274.65 from 26.1% in 2014. Total operating expenses reached $5.56 billion, down 6.9% YoY from $ 5.97 billion, generating an operating income of $408.9 million, up 13.3% from $360.8 and a net income of $274.3 million, up 11.9% from $245.1 million in 2014.
Dividend Growth: Avery Dennison declares an annualized dividend of $1.48 per share, yielding 2.03% at a payout ratio of 50%. The payout ratio is in line with the average payout ratio of 50.2 % of the Appliance & Tool Industry. Moreover, the company’s dividend growth for the period 2000-2016 is 37.0% or 2.3% annually.
Forecasts: Analyst consensus estimates an average EPS of $4.23 through 2018, up 74.6% from the current EPS of $2.44, and a 5-year average earnings growth of 9.35% annually. The P/E is estimated at 19.38 in 2016, 17.39 in 2017 and 15.08 in 2018, but the 5-years PEG ratio is 1.92, which is higher than the industry average of 1.89.
Bemis (NYSE: BMS) is a Neenah, Wisconsin-headquartered consumer goods company, which engages in the manufacturing and sale of packaging products in the Unites States as well as internationally. Through the U.S. Packaging and Global Packaging segments, Bemis offers its products in a variety of industries, including electronics, food, industrial, medical, pharmaceutical, and personal care applications.
Strong Financials: For the fiscal year 2015, Bemis reported strong financial results. Compared to the fiscal year 2014, the results were improved as follows:
- Revenues $4.07 billion, down 6.3% YoY from $4.34 billion
- Gross profit margin improved to 21.5% from 19.8%
- Operating expenses down 7.0% YoY to $3.66 billion from $3.94 billion
- Operating income up 0.5% YoY to $409.6 million from $407.70 million
- Net income $239.3 million, up 25.2% YoY from $191.1 million
- Low debt-to-equity ratio of 1.12
Furthermore, Bemis declares an annualized dividend of $1.16 per share, yielding 2.22% at a payout ratio of 48%. The payout ratio is almost in line with the average payout ratio of 43% of the Packaging & Containers Industry, while the dividend growth from 2000 to 2016 is 20.8% or 1.3% annually.
2016 Outlook: Bemis focuses on generating strong cash flows by capitalizing on innovation and executing its growth strategy. The company seeks to deliver a full year 2016 operating cash flow in the range of $450 to $500 million as well as to achieve a sustainable return on sales and ROIC improvement within 2016. Analysts’ estimates expect an average EPS of $3.00 through 2018 and an average earnings growth of 8.03% annually through 2020.
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Sonoco Products (NYSE: SON) is a Hartsville, South Carolina-based consumer goods company, which engages in the manufacture and sale of industrial and consumer packaging products both in the United States and internationally. Through the Consumer Packaging, Paper and Industrial Converted Products, Display and Packaging, and Protective Solutions segments, Sonoco Products serves a range of industries, including chemical, construction, film, food, packaging, paper, textile and wire and cable.
Full Year 2015 Results: Revenues declined slightly 1.0% YoY to $4.96 billion from $5.02 billion in 2014, yet gross profit margin increased to 18.7% from 18.1%. Total operating expenses declined to $4.58 billion, down 1.2% YoY from $4.64 billion. Operating income increased 1.2% to $382.5 million from $ 378.1 million, generating a net income of $250.1 million, up 10.7% from $ 225.9 million in 2014. Operating cash flow was $453.0 million, up 8.4% YoY from $418.0 million and free cash flow reached $155.0 million, up 29.2% YoY from $120.0 in 2014.
Dividend Strength: Sonoco Products declares an annualized dividend of $1.40 per share, yielding 2.89% at a payout ratio of 57%. The payout ratio is higher than the average payout ratio of 43% of the Packaging & Containers Industry while the dividend growth from 2000 to 2016 is 75.0% or 4.7% annually.
Forecasts: Analyst that follow Sonoco Products expect an average EPS of $2.87 through 2018, up 17.6% from the current EPS of $2.44, and an average earnings growth of 5.88% annually for the next five years. The P/E is estimated at 18.07 in 2016, 16.94 in 2017 and 15.73 in 2018 while the 5-years PEG ratio is 3.62, significantly higher than the industry average of 1.47. Moreover, free cash flow is expected to be around $140 million reflecting expectations for higher pension and post-retirement plan contributions of $12 million.
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