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Clorox vs Procter & Gamble: Which Consumer Staples Stock is More Attractive?

Clorox vs Procter & Gamble: Which Consumer Staples Stock is More Attractive?

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Typically, investors consider consumer staple stocks as safe bets during economic slowdowns or recessions. The defensive nature of consumer staples and attractive dividends make them desirable during challenging times.

Generally, consumer staples do not deliver spectacular sales growth rates. However, COVID-19 changed that for some companies like Clorox (CLX). Heightened focus on sanitizing and cleaning led to a major spike in Clorox’s sales. Procter & Gamble is another staples company that benefited from higher pandemic-led demand for some of its products.

Using the TipRanks’ Stock Comparison tool, we lined up the two staples alongside each other to see which stock offers the most compelling investment opportunity right now.

Clorox (CLX)

Clorox has been experiencing an unprecedented demand for its disinfecting and cleaning products since the COVID-19 outbreak. The company finished fiscal 2020 on a strong note with consumers stocking up its namesake Clorox bleach brand and other cleaning products to fight the pandemic. Despite additional capacity, many of the company’s products went out of stock due to the elevated demand.  

In the fiscal fourth quarter (April to June quarter), Clorox’s sales surged 22% year-over-year to $1.98 billion. The top line was supported by double-digit growth across all the four segments – Health and Wellness, Household, Lifestyle and International. The Health and Wellness segment’s sales were up 33%, driven by strong sales of cleaning products.

The stay-at-home mandates helped in driving higher sales of bags and wraps as well as grilling products and led to a 17% increase in the Household segment’s sales. The Health and Wellness and Household segments together accounted for over 71% of Clorox’s fourth-quarter sales. Impressive fourth-quarter sales led to an EPS of $2.41, reflecting a 28.2% year-over-year growth. However, higher manufacturing and logistics costs as well as advertising investments were a drag on the bottom line.

Increased cleaning and hygiene needs might continue to benefit Clorox. However, the rate of sales growth might not be as strong as that in the fiscal fourth quarter. The company’s fiscal 2020 sales and EPS grew by 8.2% and 16.5%, respectively. Clorox predicts a flat to low single-digit rise in its fiscal 2021 sales and a mid-single-digit decline to mid-single-digit growth in EPS.

Clorox aims to boost its sales through innovation. Also, recent strategic partnerships with United Airlines, Uber Technologies, AMC Theaters and Cleveland Clinic to maintain safety protocols amid the pandemic are expected to further enhance sales.

Clorox stock has gained 52% year-to-date. Despite robust sales momentum, several analysts are on the sidelines due to valuation concerns. Following the fiscal fourth-quarter results, Credit Suisse analyst Kaumil Gajrawala raised the price target for Clorox stock to $200 from $185 while maintaining a Neutral rating.

He noted, “Clorox delivered a strong quarter behind continued elevated demand across its portfolio due to COVID-19. Capacity shortage, particularly in cleaning and disinfecting products, has been met with inventory drawdowns and new co-packers. Firm is investing aggressively behind its brands and increased production. This should support high rates of growth through the remainder of 2020 as consumption shows little signs of abating and inventories (both company and channel) still need to get replenished. Valuation keeps us on the sidelines.”

Overall, Clorox has a Hold analyst consensus rating from the Street based on 2 Buys, 5 Holds and 2 Sells. The average price target of $223.33 implies a possible decline of 4.3% over the next year. (See Clorox stock analysis on TipRanks)

Procter & Gamble (PG)

Leading staples firm Procter & Gamble is recognized worldwide through several popular brands, including Ariel, Gillette, Head & Shoulders, Pampers and Tide. Since the COVID-19 crisis, Procter & Gamble has been experiencing higher demand for categories like fabric care, home cleaning and dishwashing products, as well as baby, feminine and family care products. The company’s personal health care business also gained from pandemic-led demand.

However, movement restrictions and travel disruptions to curb the virus have hurt the sales of some of the company’s beauty and grooming products. Overall, Procter & Gamble’s fiscal fourth-quarter sales of $17.7 billion were up 3.5% year-over-year. The fourth-quarter adjusted EPS grew by 5.5% to $1.16. Higher sales coupled with productivity savings drove the earnings growth.

Summarizing fiscal 2020, the company’s sales and EPS rose 4.8% and 13.3%, respectively. Looking ahead, Procter & Gamble expects sales growth of 1% to 3% in fiscal 2021. It predicts fiscal 2021 adjusted EPS growth in the range of 3% to 7%. The company’s conservative guidance compared to fiscal 2020 reflects the impact of a challenging macro environment, the corona crisis and intense competition.

Procter & Gamble stock has risen 7% year-to-date- and several analysts raised their price target for PG following the company’s fiscal fourth-quarter results. Berenberg Bank analyst James Targett upped his price target to $136 from $123.

In a research note, he explained, “We understand investors’ current attraction to P&G due to its categories, balance sheet, buyback and dividend. These factors position it well into FY21. P&G is showing encouraging market share momentum (up 50bp globally in Q4), with higher shares online, and management again reiterated that P&G’s product offer is better positioned than in the previous recession.” However, the analyst maintained his Hold rating owing to “less exciting” valuation.

Procter & Gamble has a cautiously optimistic Moderate Buy analyst consensus rating based on 8 Buys and 4 Holds. The Street’s average price target of $141.08 reflects an upside potential of 5.21% over the next 12-months. (See Procter & Gamble stock analysis on TipRanks)

So which stock is better?

Both Clorox and Procter & Gamble might continue to enjoy strong demand for certain categories, especially cleaning products, even when the pandemic fades. However, Wall Street consensus rating, upside potential and Clorox’s comparatively lofty valuation make Procter & Gamble a more compelling investment. Procter & Gamble’s current dividend yield of 2.36% compared to Clorox’s 1.90% also acts in its favor.  

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment

The post Clorox vs Procter & Gamble: Which Consumer Staples Stock is More Attractive? appeared first on TipRanks Financial Blog.

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There will soon be one million seats on this popular Amtrak route

“More people are taking the train than ever before,” says Amtrak’s Executive Vice President.

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While the size of the United States makes it hard for it to compete with the inter-city train access available in places like Japan and many European countries, Amtrak trains are a very popular transportation option in certain pockets of the country — so much so that the country’s national railway company is expanding its Northeast Corridor by more than one million seats.

Related: This is what it's like to take a 19-hour train from New York to Chicago

Running from Boston all the way south to Washington, D.C., the route is one of the most popular as it passes through the most densely populated part of the country and serves as a commuter train for those who need to go between East Coast cities such as New York and Philadelphia for business.

Veronika Bondarenko captured this photo of New York’s Moynihan Train Hall. 

Veronika Bondarenko

Amtrak launches new routes, promises travelers ‘additional travel options’

Earlier this month, Amtrak announced that it was adding four additional Northeastern routes to its schedule — two more routes between New York’s Penn Station and Union Station in Washington, D.C. on the weekend, a new early-morning weekday route between New York and Philadelphia’s William H. Gray III 30th Street Station and a weekend route between Philadelphia and Boston’s South Station.

More Travel:

According to Amtrak, these additions will increase Northeast Corridor’s service by 20% on the weekdays and 10% on the weekends for a total of one million additional seats when counted by how many will ride the corridor over the year.

“More people are taking the train than ever before and we’re proud to offer our customers additional travel options when they ride with us on the Northeast Regional,” Amtrak Executive Vice President and Chief Commercial Officer Eliot Hamlisch said in a statement on the new routes. “The Northeast Regional gets you where you want to go comfortably, conveniently and sustainably as you breeze past traffic on I-95 for a more enjoyable travel experience.”

Here are some of the other Amtrak changes you can expect to see

Amtrak also said that, in the 2023 financial year, the Northeast Corridor had nearly 9.2 million riders — 8% more than it had pre-pandemic and a 29% increase from 2022. The higher demand, particularly during both off-peak hours and the time when many business travelers use to get to work, is pushing Amtrak to invest into this corridor in particular.

To reach more customers, Amtrak has also made several changes to both its routes and pricing system. In the fall of 2023, it introduced a type of new “Night Owl Fare” — if traveling during very late or very early hours, one can go between cities like New York and Philadelphia or Philadelphia and Washington. D.C. for $5 to $15.

As travel on the same routes during peak hours can reach as much as $300, this was a deliberate move to reach those who have the flexibility of time and might have otherwise preferred more affordable methods of transportation such as the bus. After seeing strong uptake, Amtrak added this type of fare to more Boston routes.

The largest distances, such as the ones between Boston and New York or New York and Washington, are available at the lowest rate for $20.

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The next pandemic? It’s already here for Earth’s wildlife

Bird flu is decimating species already threatened by climate change and habitat loss.

I am a conservation biologist who studies emerging infectious diseases. When people ask me what I think the next pandemic will be I often say that we are in the midst of one – it’s just afflicting a great many species more than ours.

I am referring to the highly pathogenic strain of avian influenza H5N1 (HPAI H5N1), otherwise known as bird flu, which has killed millions of birds and unknown numbers of mammals, particularly during the past three years.

This is the strain that emerged in domestic geese in China in 1997 and quickly jumped to humans in south-east Asia with a mortality rate of around 40-50%. My research group encountered the virus when it killed a mammal, an endangered Owston’s palm civet, in a captive breeding programme in Cuc Phuong National Park Vietnam in 2005.

How these animals caught bird flu was never confirmed. Their diet is mainly earthworms, so they had not been infected by eating diseased poultry like many captive tigers in the region.

This discovery prompted us to collate all confirmed reports of fatal infection with bird flu to assess just how broad a threat to wildlife this virus might pose.

This is how a newly discovered virus in Chinese poultry came to threaten so much of the world’s biodiversity.

H5N1 originated on a Chinese poultry farm in 1997. ChameleonsEye/Shutterstock

The first signs

Until December 2005, most confirmed infections had been found in a few zoos and rescue centres in Thailand and Cambodia. Our analysis in 2006 showed that nearly half (48%) of all the different groups of birds (known to taxonomists as “orders”) contained a species in which a fatal infection of bird flu had been reported. These 13 orders comprised 84% of all bird species.

We reasoned 20 years ago that the strains of H5N1 circulating were probably highly pathogenic to all bird orders. We also showed that the list of confirmed infected species included those that were globally threatened and that important habitats, such as Vietnam’s Mekong delta, lay close to reported poultry outbreaks.

Mammals known to be susceptible to bird flu during the early 2000s included primates, rodents, pigs and rabbits. Large carnivores such as Bengal tigers and clouded leopards were reported to have been killed, as well as domestic cats.

Our 2006 paper showed the ease with which this virus crossed species barriers and suggested it might one day produce a pandemic-scale threat to global biodiversity.

Unfortunately, our warnings were correct.

A roving sickness

Two decades on, bird flu is killing species from the high Arctic to mainland Antarctica.

In the past couple of years, bird flu has spread rapidly across Europe and infiltrated North and South America, killing millions of poultry and a variety of bird and mammal species. A recent paper found that 26 countries have reported at least 48 mammal species that have died from the virus since 2020, when the latest increase in reported infections started.

Not even the ocean is safe. Since 2020, 13 species of aquatic mammal have succumbed, including American sea lions, porpoises and dolphins, often dying in their thousands in South America. A wide range of scavenging and predatory mammals that live on land are now also confirmed to be susceptible, including mountain lions, lynx, brown, black and polar bears.

The UK alone has lost over 75% of its great skuas and seen a 25% decline in northern gannets. Recent declines in sandwich terns (35%) and common terns (42%) were also largely driven by the virus.

Scientists haven’t managed to completely sequence the virus in all affected species. Research and continuous surveillance could tell us how adaptable it ultimately becomes, and whether it can jump to even more species. We know it can already infect humans – one or more genetic mutations may make it more infectious.

At the crossroads

Between January 1 2003 and December 21 2023, 882 cases of human infection with the H5N1 virus were reported from 23 countries, of which 461 (52%) were fatal.

Of these fatal cases, more than half were in Vietnam, China, Cambodia and Laos. Poultry-to-human infections were first recorded in Cambodia in December 2003. Intermittent cases were reported until 2014, followed by a gap until 2023, yielding 41 deaths from 64 cases. The subtype of H5N1 virus responsible has been detected in poultry in Cambodia since 2014. In the early 2000s, the H5N1 virus circulating had a high human mortality rate, so it is worrying that we are now starting to see people dying after contact with poultry again.

It’s not just H5 subtypes of bird flu that concern humans. The H10N1 virus was originally isolated from wild birds in South Korea, but has also been reported in samples from China and Mongolia.

Recent research found that these particular virus subtypes may be able to jump to humans after they were found to be pathogenic in laboratory mice and ferrets. The first person who was confirmed to be infected with H10N5 died in China on January 27 2024, but this patient was also suffering from seasonal flu (H3N2). They had been exposed to live poultry which also tested positive for H10N5.

Species already threatened with extinction are among those which have died due to bird flu in the past three years. The first deaths from the virus in mainland Antarctica have just been confirmed in skuas, highlighting a looming threat to penguin colonies whose eggs and chicks skuas prey on. Humboldt penguins have already been killed by the virus in Chile.

A colony of king penguins.
Remote penguin colonies are already threatened by climate change. AndreAnita/Shutterstock

How can we stem this tsunami of H5N1 and other avian influenzas? Completely overhaul poultry production on a global scale. Make farms self-sufficient in rearing eggs and chicks instead of exporting them internationally. The trend towards megafarms containing over a million birds must be stopped in its tracks.

To prevent the worst outcomes for this virus, we must revisit its primary source: the incubator of intensive poultry farms.

Diana Bell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

One month after the inflation outlook tracked…

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NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

One month after the inflation outlook tracked by the NY Fed Consumer Survey extended their late 2023 slide, with 3Y inflation expectations in January sliding to a record low 2.4% (from 2.6% in December), even as 1 and 5Y inflation forecasts remained flat, moments ago the NY Fed reported that in February there was a sharp rebound in longer-term inflation expectations, rising to 2.7% from 2.4% at the three-year ahead horizon, and jumping to 2.9% from 2.5% at the five-year ahead horizon, while the 1Y inflation outlook was flat for the 3rd month in a row, stuck at 3.0%. 

The increases in both the three-year ahead and five-year ahead measures were most pronounced for respondents with at most high school degrees (in other words, the "really smart folks" are expecting deflation soon). The survey’s measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) decreased at all horizons, while the median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—declined at the one- and three-year ahead horizons and remained unchanged at the five-year ahead horizon.

Going down the survey, we find that the median year-ahead expected price changes increased by 0.1 percentage point to 4.3% for gas; decreased by 1.8 percentage points to 6.8% for the cost of medical care (its lowest reading since September 2020); decreased by 0.1 percentage point to 5.8% for the cost of a college education; and surprisingly decreased by 0.3 percentage point for rent to 6.1% (its lowest reading since December 2020), and remained flat for food at 4.9%.

We find the rent expectations surprising because it is happening just asking rents are rising across the country.

At the same time as consumers erroneously saw sharply lower rents, median home price growth expectations remained unchanged for the fifth consecutive month at 3.0%.

Turning to the labor market, the survey found that the average perceived likelihood of voluntary and involuntary job separations increased, while the perceived likelihood of finding a job (in the event of a job loss) declined. "The mean probability of leaving one’s job voluntarily in the next 12 months also increased, by 1.8 percentage points to 19.5%."

Mean unemployment expectations - or the mean probability that the U.S. unemployment rate will be higher one year from now - decreased by 1.1 percentage points to 36.1%, the lowest reading since February 2022. Additionally, the median one-year-ahead expected earnings growth was unchanged at 2.8%, remaining slightly below its 12-month trailing average of 2.9%.

Turning to household finance, we find the following:

  • The median expected growth in household income remained unchanged at 3.1%. The series has been moving within a narrow range of 2.9% to 3.3% since January 2023, and remains above the February 2020 pre-pandemic level of 2.7%.
  • Median household spending growth expectations increased by 0.2 percentage point to 5.2%. The increase was driven by respondents with a high school degree or less.
  • Median year-ahead expected growth in government debt increased to 9.3% from 8.9%.
  • The mean perceived probability that the average interest rate on saving accounts will be higher in 12 months increased by 0.6 percentage point to 26.1%, remaining below its 12-month trailing average of 30%.
  • Perceptions about households’ current financial situations deteriorated somewhat with fewer respondents reporting being better off than a year ago. Year-ahead expectations also deteriorated marginally with a smaller share of respondents expecting to be better off and a slightly larger share of respondents expecting to be worse off a year from now.
  • The mean perceived probability that U.S. stock prices will be higher 12 months from now increased by 1.4 percentage point to 38.9%.
  • At the same time, perceptions and expectations about credit access turned less optimistic: "Perceptions of credit access compared to a year ago deteriorated with a larger share of respondents reporting tighter conditions and a smaller share reporting looser conditions compared to a year ago."

Also, a smaller percentage of consumers, 11.45% vs 12.14% in prior month, expect to not be able to make minimum debt payment over the next three months

Last, and perhaps most humorous, is the now traditional cognitive dissonance one observes with these polls, because at a time when long-term inflation expectations jumped, which clearly suggests that financial conditions will need to be tightened, the number of respondents expecting higher stock prices one year from today jumped to the highest since November 2021... which incidentally is just when the market topped out during the last cycle before suffering a painful bear market.

Tyler Durden Mon, 03/11/2024 - 12:40

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