It has been more than two weeks since the earnings season ended. Different industries gave different surprises. Some didn’t. However, the cosmetics, household and personal care (CHPC) space wasn’t one of them. This industry had a tough first quarter of the year. In some cases, weather disturbed the expectations. In other situations, tough comps and soft end markets were claimed to be the main culprits of sequential declines in revenue.
However, what does this tell us about different companies in this space? Are they still attractive investments or not? Let’s have a look.
What the leader had to say
The Procter & Gamble Company (NYSE:PG), the largest company in this space, also took the lead in reporting its earnings this season. The company’s remarks on slow category growth sent warnings down Wall Street, as the company is known to be prescient of macro trends. Although the company didn’t claim it to be the main reason behind its revenue miss, many other companies in this space corroborated The Procter & Gamble Company (NYSE:PG)’s view on the external environment.
With disappointing organic sales growth despite an improvement in market share momentum, we can understand why The Procter & Gamble Company (NYSE:PG) shares under-performed the market since the company’s earnings release. To be sure, with Staples, Inc. (NASDAQ:SPLS)‘ valuations having reached near historic levels over the past couple of months, the bigger question will be whether or not The Procter & Gamble Company (NYSE:PG)’s commentary on the more challenging macro environment is the beginning of a trend or a one-off event.
Either way, I would expect The Procter & Gamble Company (NYSE:PG) shares to take a breather until the company is able to show a marked acceleration in top-line growth.
The return of A.G. Lafley to the CEO office has sent bullish signals to the market as he was the main hero behind the turnaround of the company in 2010. Not only this, but the company is slowly building growth momentum as the market is witnessing the change after the 40/20/10 strategy that the company employed last year (to focus on its top 40 countries and brand categories that generate the most sales and profit; the top 20 innovations with the most growth potential; and the company’s top 10 developing markets).
Weather ruined The Clorox Co (NYSE:CLX)’s results
The Clorox Co (NYSE:CLX)’s management blamed the weather for the company’s earnings miss. Given this quarter’s top-line and EPS miss, it was surprising to see The Clorox Co (NYSE:CLX) shares down only -1.4% on earnings day (vs. S&P 500 (INDEXSP:.INX) -0.9%), particularly as organic revenue fell short in each reported division. The Clorox Co (NYSE:CLX)’s revenue trends are often predicated on compares, with one year’s positives becoming the next year’s negatives.