The faster-than-expected U.S. economic recovery, driven by ultra-loose monetary policy, several fiscal stimulus packages and an improving job market, has caused the inflation rates in the United States to climb to 13-year highs. In May 2021, the Consumer Price Index increased 5% year-over-year, making it the largest 12-month rise since August 2008. The Federal Reserve expects the inflation rate to rise further in the near term, driven by increasing consumer spending and impressive job growth. The Fed forecasts inflation to be 3.4% in 2021.
Given the rising price levels—which could precipitate a stock market correction—betting on inflation-resistant stocks could be the way to hedge the current downside risk in an investment portfolio. Because industries such as consumer goods, manufacturing and precious metals typically perform well even in an inflationary environment, it could be wise to bet on fundamentally sound stocks from these industries.
We believe Procter & Gamble Company (PG), Colgate-Palmolive Company (CL), Centerra Gold Inc. (CGAU), and Preformed Line Products Company (PLPC) have the potential to deliver solid returns, dodging the consequences of rising inflation.
The Procter & Gamble Company (PG)
Founded in 1837, PG provides branded consumer packaged goods to consumers worldwide. The company operates in five segments—beauty, grooming, health care, fabric & home care, and baby, feminine & family care. Its products are sold through mass merchandisers, e-commerce, grocery stores, membership club stores, drug stores and department stores.
On May 21, 2021, Pampers, one of PG’s baby and toddler products, introduced Pampers Pure Protection Hybrid Diapers, the company’s first diapering system that is part reusable, part disposable and provides superior dryness and leak protection. Amid the heightened demand from parents for quality baby care products, these disposable diapers are expected to achieve an expanded market reach soon.
On April 1, 2021, PG’s Olay, a skincare product for women, introduced three new premium body care collections, making it the brand's biggest and most innovative product bundle to date. Olay’s body skin experts partnered with dermatologists to target specific dry skin concerns and help relieve and visibly improve the skin. The product is expected to generate good sales in the coming months.
During its fiscal third quarter, ended March 31, 2021, PG’s net sales increased 5.2% year-over-year to $18.11 billion. The company’s gross profit was $9.19 billion, up 8.1% from the prior-year period. Its operating income is reported at $3.79 billion, which represents a 9.6% year-over-year improvement. PG’s total comprehensive income increased 47.8% year-over-year to $2.87 billion. Its EPS increased 12.5% year-over-year to $1.26. And it had $10.01 billion in cash, cash equivalents and restricted cash as of March 31, 2021.
A $1.64 consensus EPS estimate for the next quarter, ending September 30, 2021, represents a marginal improvement from the prior-year period. PG surpassed the Street’s EPS estimates in each of the trailing four quarters. The $19.61 billion consensus revenue estimate for the next quarter represents a 6.9% rise from the prior-year period. The stock’s EPS is expected to grow at an 8.7% rate over the next five years. PG has climbed 10.7% over the past year to close yesterday’s trading session at $133.07.
PG’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Stability, and a B grade for Quality. To see additional POWR Ratings for PG’s Growth, Value, Sentiment, and Momentum, click here.
PG is ranked #15 of 72 stocks in the Consumer Goods industry.
Colgate-Palmolive Company (CL)
Founded in 1806, CL manufactures and sells consumer products worldwide. The company operates through two segments—oral, personal and home care, and pet nutrition. It markets and sells its products to various retailers, wholesalers, e-commerce and distributors.
On June 18, 2021, Hill's Pet Nutrition, CL’s pet food subsidiary, announced its intention to invest more than $250 million to build a new factory in Tonganoxie, Kansas to help meet the growing demand for its #1 vet recommended Hill's pet nutrition. The site’s excellent location, talented workers and its proximity to distributors and suppliers should enable Hill’s Pet Nutrition to meet the increasing demand for science-led pet nutrition.
This month, CL sent an oral care experiment to the International Space Station (ISS) aboard SpaceX’s 22nd commercial resupply services mission in the SpaceX dragon spacecraft. Its objective is to learn more about the growth and metabolism of oral biofilms in a microgravity environment. The space station’s crew will use microfluidic devices to stimulate bacterial growth on a tooth-like surface, which will be returned to Earth after it has been exposed to microgravity for one month. CL’s efforts to create more effective therapies to fight disease, cavities, and other threats to oral and overall health should help it to grow substantially in the coming months.
CL’s total net sales came in at $4.34 billion for the fiscal first quarter, ended March 31, 2021, which represents a 6% year-over-year rise. The company’s non-GAAP gross profit increased 6.8% year-over-year to $264 billion. Its non-GAAP operating profit is reported at $1 billion, up 4.8% from the prior-year period. While its total comprehensive income increased 39.3% year-over-year to $571 million, its non-GAAP EPS increased 6.7% year-over-year to $0.80. As of March 31, 2021, the company had $995 million in cash and cash equivalents.
Analysts expect CL’s EPS to improve 6.2% year-over-year to $0.84 for the next quarter, ending September 30, 2021. Its revenue is expected to improve 6% year-over-year for the next quarter to $4.40 billion. The stock surpassed consensus EPS estimates in each of the trailing four quarters. Analysts expect the stock’s EPS to grow at 7.9% per annum over the next five years.
CL has gained 10.1% over the past year and 6.5% over the past three months. It closed yesterday’s trading session at $81.44.
CL’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system.
The stock has an A grade for Quality, and a B grade for Stability. In addition to the POWR Ratings grades we’ve just highlighted, one can see CL’s ratings for Growth, Value, Momentum, and Sentiment here.
CL is ranked #7 in the Consumer Goods industry.
Centerra Gold Inc. (CGAU)
Headquartered in Toronto, Canada, CGAU is a gold mining company that acquires, explores for, develops, and operates gold and copper properties internationally. The company operates the Kumtor Mine in the Kyrgyz Republic, the Mount Milligan Mine in Canada, the Oksut Mine in Turkey and The Thompson Creek Metals.
For its fiscal quarter, ended March 31, 2021, CGAU’s revenues came in at $401.85 million, which represents a 6.1% improvement year-over-year. The company’s earnings from operations have been reported at $119.02 million, up 249.6% from the prior-year period. CGAU’s adjusted net earnings increased 81.5% year-over-year to $84.20 million. Its adjusted EPS increased 75% year-over-year to $0.28. The company had $823.23 million in cash and cash equivalents as of March 31, 2021. CGAU ended yesterday’s trading session at $7.91.
CGAU’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
The stock has an A grade for Value and Quality, and a B grade for Growth and Momentum. We have also graded CGAU’s for Stability and Sentiment. Click here to access all CGAU's ratings.
CGAU is ranked #1 of 44 stocks in the Miners - Gold industry.
Click here to check out our Gold and Silver Industry Report for 2021
Preformed Line Products Company (PLPC)
Preformed Line Products Company designs and manufactures products and systems used in the construction and maintenance of overhead, ground-mounted, and underground networks for the energy, telecommunication, cable operators, information and other industries worldwide. The company markets its products through a direct sales force, as well as through manufacturing representatives.
PLPC’s net sales for its fiscal first quarter, ended March 31, 2021, increased 14.3% year-over-year to $117.55 million. The company’s gross profit came in at $40.19 billion, up 22.1% from the prior-year period. Its operating income is reported at $10.77 million, which represented a 109% year-over-year improvement. While its net income increased 94.1% year-over-year to $7.18 million, its EPS increased 95.9% from the prior-year period to $1.45. As of March 31, 2021, the company had $34.69 million in cash and cash equivalents.
PLPC has gained 47.2% over the past year and 45.9% over the past nine months. It closed yesterday’s trading session at $73.47.
It’s no surprise that PLPC has an overall A rating, which translates to Strong Buy in our POWR Ratings system.
PLPC has an A grade for Value and Momentum, and a B grade for Growth, Quality, and Sentiment. In addition to the POWR Ratings grades we’ve just highlighted, one can see PLPC’s ratings for Stability here.
PLPC is ranked #1 of 87 stocks in the B-rated Industrial - Equipment industry.
Note that PLPC is one of the few stocks handpicked by our Chief Value Strategist, David Cohne, currently in the POWR Value portfolio. Learn more here.
Click here to check out our Industrial Sector Report for 2021
PG shares were trading at $133.83 per share on Tuesday morning, up $0.76 (+0.57%). Year-to-date, PG has declined -2.62%, versus a 13.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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