Demand for tissues soared due to the flu season, and toilet paper sales were aided by a supply shortage from Georgia-Pacific, the maker of Angel Soft and Quilted Northern toilet paper. Meanwhile, sales of its Huggies diapers rose 50% in China and 10% in Russia. However, diaper sales were lower in the U.S. due to lower birth rates. The company intends to introduce more adult diapers in both North America and international markets to help balance out demand.
Unlike The Procter & Gamble Company (NYSE:PG), Kimberly Clark Corp (NYSE:KMB) raised its full-year guidance, and now expects to earn $5.60 to $5.75 per share for the full year, up ten cents from its prior guidance and exceeding analyst expectations.
Colgate-Palmolive
Colgate-Palmolive Company (NYSE:CL), which produces Colgate toothpaste, toothbrushes, Speed Stick, Irish Spring, Palmolive, Softsoap, Ajax and Science Diet, trades at the highest premium of these three consumer product giants. Like P&G, Colgate generates most of its sales overseas. In 2012, 78% of its sales came from international markets. Latin America is Colgate-Palmolive Company (NYSE:CL)’s most important region, comprising 29% of total sales. Approximately 50% of Colgate’s total sales come from emerging markets.
Last year, sales in Latin America rose 1.5%, but major problems in Venezuela – including a labor slowdown, inflation and the eventual devaluation of its currency – cut its operating income by 4%. Colgate’s problems in Venezuela show the dangers of being too exposed to emerging markets. Companies such as Colgate and P&G were able to slash costs in the past to compensate for currency fluctuations, but the strong dollar and unstable global currencies are rendering that tactic obsolete.
However, global demand for oral care products, Colgate-Palmolive Company (NYSE:CL)’s main source of revenue, is expected to continue growing as the global population grows. Odlum Brown analyst Stephen Boland noted in a report, “Per capita consumption of toothpaste in the U.S. is about 550 grams per year. In China, this figure is about 250 grams and in India it is about 125 grams.” This means that there is still a lot of room to grow in China and India, despite fears that these two markets are rapidly maturing. Colgate currently controls a whopping 45% of the global toothpaste market as well as nearly a third of the manual toothbrush market. This dominant position gives the company excellent pricing power against its rivals.
At the time of this writing, Colgate-Palmolive Company (NYSE:CL) has yet to report its first quarter earnings. However, I won’t be surprised if the stock pulls back slightly post-earnings, given its high P/E ratio. This could give investors a good opportunity to start building a position in this simple, stable business.
The Foolish bottom line
I believe that out of these three consumer giants, The Procter & Gamble Company (NYSE:PG) is the weakest, while Kimberly Clark Corp (NYSE:KMB) and Colgate have brighter prospects down the road. International exposure can be a blessing, as long as a company has the right products. P&G’s mix of detergents and soaps lacks the strength of Kimberly-Clark’s tissues and diapers, as well as the market dominance of Colgate-Palmolive Company (NYSE:CL)’s toothpaste and toothbrushes.
Therefore, I believe that investors should look for weakness in these three names and consider buying them in preparation for a summer that’s sure to be filled with drama and market turbulence.
The article It’s Time to Get Big and Get Boring originally appeared on Fool.com and is written by Leo Sun.
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