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Let's have a look at a few earnings reports from earlier in the week. We'll check out two businesses operating in the arena of consumer products -- Colgate-Palmolive (CL) and Procter & Gamble (PG) -- and one that is prospering from a crimson DVD-rental kiosk that has become all the rage -- Coinstar (CSTR).
We'll start with the latter concern first. Coinstar was one of Friday's great stock stories. It shot higher by 16%, backed by an incredible amount of volume. Investors are apparently counting on this one to go even higher. In fact, some analysts believe that the shares may eventually reach $60.
According to TheStreet.com, Coinstar made 21 cents per share in Q1; this was eight pennies better than consensus expectations. Although the company is well-known for its coin-counting machines, the big killer app to the thesis is Redbox, the dollar-per-night DVD rental model that's been a thorn in the side of Hollywood studios. Redbox will continue to drive the results, and I believe the stock is poised to experience additional capital appreciation. It isn't without risk at these levels, however, so pullbacks would be welcome.
Now, let's check out Colgate-Palmolive. Earnings grew, on an adjusted basis, 25% to $1.21 per share in the first quarter. That stat excludes a charge related to Venezuelan currency issues. Net cash from operations increased to $733 million from $690 million in the year-ago period. The management team is appropriately focused on keeping costs in check and protecting the gross margin.
The company famous for brands related to toothpaste (Colgate, of course) and pet food (Hill's Science Diet) has been on the rise over the past twelve months. I think the stock should continue to do well, although I have to be honest and say that it isn't first on my list when it comes to consumer products.
Procter & Gamble, on the other hand, is a favorite of mine in the consumer arena. No, I don't own the stock, but I do believe it is one of the best core holdings an investor can purchase (the reason I don't currently own P&G is because I already have some core holdings in my portfolio). And its latest quarterly release proves that it remains a resilient producer of cash and profit.
Core earnings per share increased 10% to 89 cents. Adjusted free cash flow of $4.5 billion was more than 170% of net earnings. Furthermore, management had raised the quarterly dividend by over 9% during the quarter.
All of this adds up to a very useful long-term, dividend-reinvesting situation. Backed by a valuable portfolio of brands, P&G is an equity suitable for those who simply want to buy stocks and hold them. There might be some negative commentary out there on the company, but ignore the short-term naysayers. So long as you aren't trading the shares, you should do fine with P&G.
Disclosure: I don't own any company mentioned; positions can change without notice.
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