Which Consumer Staple Stock Has the Strongest Earnings Trends: Procter & Gamble, Kimberly-Clark or Colgate-Palmolive?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

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Here’s your Cheat Sheet to how the top 3 consumer staple stocks rank via earnings trends:

Procter & Gamble Co. (NYSE:PG): Current Price $75

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 79,260 76,690 77,570 81,100 83,680
Diluted EPS ($) 3.64 4.26 4.11 3.93 3.66

Procter & Gamble has shown a rising revenue trend after 2009. Unfortunately, EPS is quite another story, falling off every year for the last four years.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 21,740 20,190 20,210 20,740 22,180
Diluted EPS ($) 0.57 0.82 1.24 0.96 1.39

Quarterly revenue numbers are all over the place, though EPS climbed nicely between December 2011 and June 2012. Profits took a hit in the latest September, but earnings are now increasing quarter-over-quarter…

Kimberly-Clark (NYSE:KMB): Current Price $88.40

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 19,420 19,120 19,750 20,850 21,060
Diluted EPS ($) 4.03 4.52 4.45 3.99 4.42

Sales have been growing just fine for the last three years, but possibly at the cost of profits, judging by the fact that EPS is not consistent.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 5,176 5,241 5,269 5,246 5,307
Diluted EPS ($) 1.01 1.18 1.26 1.30 0.68

Kimberly-Clark was addressing that issue in recent quarters, but then delivered weak earnings recently. KMB fails our test with earnings shrinking quarter-over-quarter…

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Colgate-Palmolive Co. (NYSE:CL): Current Price $111.15

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 13,790 15,330 15,330 15,560 16,730
Diluted EPS ($) 3.20 3.66 4.37 4.31 4.94

We like these numbers from Colgate, which show a steady growth in revenue and profits every year. 2010 was the odd man out, but never mind about that.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 4,383 4,172 4,200 4,267 4,332
Diluted EPS ($) 1.31 1.21 1.23 1.30 1.36

The quarterly numbers are encouraging, too, and revenue has risen nicely across the last four quarters. Growth in EPS has also kept pace.

Conclusion

Colgate Palmolive is the winner in thisĀ “E-Squared” investment analysis, and scores over P&G because of its more consistent numbers.

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!