Piper Sandler analyst Korinne Wolfmeyer initiated coverage on several personal care stocks, noting that amid the present economic conditions, consumers are becoming more discerning in their spending.
This positions the personal care category favorably for the near and mid-term, due to its inherent inelasticity and robustness.
In the near term, the analyst says that companies focusing on innovation, looping in scientific and healthcare expertise, and having a healthy and resilient supply chain and distribution network are poised for growth.
Looking ahead to the long term, it's anticipated that the overall personal care industry will see modest growth in the low single-digit percentage range. This growth is projected to be primarily driven by an increase in volume, accounting for more than 50% of the growth, while the remainder is expected to come from a combination of price adjustments and product mix variations.
At an Overweight rating, the analyst initiated coverage on Perrigo Co PLC
Also, Wolfmeyer started coverage on Kenvue Inc
PRGO: The analyst notes the company's solid positioning in the current macro backdrop, with ~50% of sales coming from lower-cost store brands and upside potential from new products and brands like Opill.
Wolfmeyer sees EPS estimates of $2.56 in FY23 and $3.08 in FY24.
KMB: Wolfmeyer says KMB's strong product resilience and inelasticity in the current macro environment, a refreshed focus from management on innovation, and margin improvement can drive upside in the coming quarters and years.
EPS is estimated at $6.59 for FY23 and $7.26 for FY24.
KVUE: The analyst sees KVUE's heavy reliance on branded personal care and OTC products, lack of trading history, volatility in the business from the recent separation from Johnson & Johnson
Wolfmeyer estimates EPS of $1.27 for FY23 and $1.29 for FY24 for the company.
Price Action: PRGO shares are trading higher by 3.01% at $30.09, and KVUE shares are up 0.59% at $19.73, while KMB shares are down 0.12% at $121.56 on the last check Friday.
