Deep Value Stocks in Consumer Goods (AVY, BMS, DF, JCI, KFT, LEG, NWL, PVH, RKT, SEE, XRX)

24/7 Wall St. has been conducting reviews looking for value stocks now that the market has softened.  Looking solely for “cheap stocks” on book value is very incomplete, so we have taken earnings growth, dividends, return on equity, and analyst data to create more of a complete review on these companies.  Consumer Goods is perhaps a very broad sector which could easily be broken into many more sub-sectors, but we identified 11 companies with standout price to book values.

In alphabetical order of their ticker symbols:  Avery Dennison Corporation (NYSE: AVY); Bemis Company, Inc. (NYSE: BMS); Dean Foods Co. (NYSE: DF); Johnson Controls Inc. (NYSE: JCI); Kraft Foods Inc. (NYSE:  KFT); Leggett & Platt, Incorporated (NYSE: LEG); Newell Rubbermaid Inc. (NYSE: NWL); Phillips-Van Heusen Corp. (NYSE: PVH); Rock-Tenn Co. (NYSE: RKT); Sealed Air Corporation (NYSE: SEE); and, Xerox Corp. (NYSE: XRX).

Price to book values range from Xerox’s 1.1 to Johnson Controls’ 2.4.  Even though we identified these companies in searching for attractive price to book values, every one of them offers respectable next-year earnings growth.  Analysts expect next-year earnings expansion ranging from Newell Rubbermaid’s 10.6% to Rock-Tenn’s 39%.  All sport forward PE multiples below 14.   Forward PE’s range from Xerox Corp’s 8.1 to Kraft Foods’ 13.9.

Seven of the eleven companies boast an implied upside price expansion exceeding 20%, based on current share prices versus consensus price targets. Leggett & Platt, Newell Rubbermaid, Xerox and Johnson Controls lead the rest with implied price expansions ranging from more than 27% to close to 31%.  Each of these eleven companies has an average daily trading volume exceeding 750,000 shares. Except where otherwise noted, the source for all performance and financial data is Finviz.com.

Avery Dennison Corporation (NYSE: AVY) has a price to book value near 2.3  to 1.  The company’s market cap is just less than $4 billion giving it a middle-of-the-pack rank among these companies.  Its forward PE is about 10.2.  With a consensus target price of $46.71, the shares have an implied upside exceeding 25%.  Shares of Avery Dennison closed Friday at $37.19, down 1.56%.  The 52-week price range is $30.54 to $43.26.  This outfit that makes labels and other office products recently took a downgrade to “Neutral” at Bank of America Merrill Lynch.  It pays a nice dividend with a yield of close to 2.7% and shares were above $60 back in 2007 before the recession.

Bemis Company, Inc. (NYSE: BMS) has a price to book value of 1.8  to 1.  The company’s market cap is just less than $3.4 billion.  Its forward PE is near 12.5.  With a consensus target price of $34.89, the shares have an implied upside of 8.6% among the lowest of these companies.  Bemis Company shares closed Friday at $32.11, down 0.43.  The 52-week price range is $25.79 to $33.57. The packaging materials company also has a respectable dividend yield of about 3%, even if Goldman Sachs did downgrade the rating to “Sell” in recent weeks..

Dean Foods Co. (NYSE: DF) boasts a price to book value of 1.4  to 1, ranking it second among these companies.  The company’s market cap is $2.2 billion, the smallest of these companies.  Its forward PE is near 13.2, among the highest on this list.  With a consensus target price of $13.50, the shares have an implied upside 12.5%.  In Friday trading Dean Foods closed at $12.00, down 1.80% for the day.  The 52-week trading range is $7.13 to $13.90.  This milk and dairy producer has been in recovery mode.  It made this screen even after a recovery of more than 75% from the bottom.  In 2007, shares were worth more than $40.00.

Johnson Controls Inc. (NYSE: JCI) has a price to book value of 2.4 to 1, a comparatively high price to book value ratio among these companies.  With a market cap exceeding $26 billion, Johnson Controls is the second largest company ranked here.  Its forward PE is a tad greater than 12.  After robust expansion of earnings for the current year, analysts expect next-year earnings expansion exceeding 34%.  With a consensus target price of $48.50, the shares have an implied upside of 23.8%.  Shares of Johnson Controls closed Friday at $39.17, unchanged.  The 52-week price range is $25.63 to $42.35.  The car parts and systems manufacturer is one of the few which pay a dividend (about 1.6%) and this one has recovered mightily from the recession lows when shares fell to well under $10.00.

Kraft Foods Inc. (NYSE:  KFT) has a price to book value of 1.85 to 1.  Its massive $60 billion market cap easily leads these eleven companies.  The company’s 13.9 forward earnings multiple is the highest among these companies.  Analysts expect an earnings expansion of 12% next year after an earnings decline for the current year.  Kraft Foods’ consensus target price of $36.76, implies a 6.2% upside, smallest upside among these eleven companies.  Shares of Kraft Foods closed Friday at $34.60, up 0.99%.  The 52-week price range is $26.84 to $35.44.  The food giant has been trying to get beyond its dead-money image and it pays a hefty 3.4% dividend yield while it gets that Cadburry deal absorbed.

Leggett & Platt, Incorporated (NYSE: LEG) has a price to book value near 2.3 to 1.  The company’s market cap is $3.3 billion.  Its forward price to earnings multiple is 13.3.  With the company posting a solid earnings increase of 57% for the current year, analysts expect earnings to increase almost 23% next year.  Leggett & Platt’s consensus target price of $30.00 implies a 31% upside, leading all eleven companies. Shares of Leggett & Platt closed Friday at $22.88, down 1.59%.  The 52-week price range is $17.94 to $26.64. The maker of engineered components and products has huge ties to residential and construction, so don’t just assume that the “value” is without risk.  We would also note that about two-thirds of its equity value is tied up in goodwill and intangibles. At least it has a high dividend, currently offering a yield of over 4.5%.

Newell Rubbermaid Inc. (NYSE: NWL) has a price to book value near 2.3 to 1.  The company’s market cap is $4.8 billion.  Its forward PE at less than 9 is third lowest among these companies.  Analysts expect an earnings expansion exceeding 10% next year after a small 1.2% earnings decline for the current year. Newell Rubbermaid’s consensus target price of $20.36 implies a 30% upside, near the highest among these companies.  In Friday trading Newell Rubbermaid shares closed at $15.66, up 2.02% for the day.  The 52-week price range is $13.95 to $20.24.  What makes Newell Rubbermaid interesting is that the company did recently warn on its results, in part due to input costs.  How that changes the valuation is still not set in stone, but that needs to be addressed as a consideration. Apparently there is value to others as well because Raymond James raised its rating to “Strong Buy” just last week.  Shares of this household storage container were north of $30 in 2007 before the recession and its current dividend yield is right at 2%.

Phillips-Van Heusen Corp. (NYSE: PVH) has a price to book value 1.6 to 1.  The company’s market cap is $4.3 billion.  Analysts expect an earnings expansion of 13.5% next year after an earnings decline for the current year. Phillip-Van Heusen’s $77.45 consensus target price implies a 20.4% upside. In Friday trading shares of Phillips-Van Heusen closed at $64.34, down 1.62% for the day.  The 52-week price range is $42.70 to $72.34. The apparel company with brands like Calvin Klein, IZOD, and others offers a tiny dividend with a yield of only about 0.2% and that 52-week high is also an all-time high.

Rock-Tenn Co. (NYSE: RKT) has a price to book value near 2.3 to 1.  Its market cap is $2.5 billion, second smallest among these companies.  Its forward PE at less than 8.3 is second lowest.  The company benefits from bullish outlooks throughout the highly cyclical paper products industry.  Its next-year expected earnings expansion of 39% ranks highest among these companies. Its consensus target price of $81.67 implies an upside of 27.2%, among the better companies covered here. Rock-Tenn shares closed Friday at $64.23, down 1.26%.  The 52-week price range is $46.18  to $78.64.  This paperboard and containerboard company’s 52-week high appears to be an all-time as well, and the dividend is not as high as some peers with a yield today of about 1.2%.

Sealed Air Corporation (NYSE: SEE) sports a 1.44 to 1 price to book value, third best among these eleven companies.  The company has a market cap of 3.6 billion, a forward PE of 11.2 and next-year expected earnings expansion of 16.2%.  Sealed Air’s consensus target price of $26.38, implies a 17.2% upside.  Shares of Sealed Air closed Friday at $22.51, up 0.04% for the day.  The 52-week price range is $18.87 to $28.49. The packaging company has also just absorbed its acquisition of Diversey, so any figures represented today are likely to look different ahead. Jefferies recently raised its rating to “Buy” based upon the additional earnings that will come from that acquisition.  It currently offers a dividend yield of about 2.3%.

Xerox Corp. (NYSE: XRX) boasts a bargain basement 1.1 to 1 price to book value, best among these eleven companies.  Its $14 billion market cap ranks it third largest.  With a forward PE barely greater than 8, Xerox leads this group.  Analysts expect an earnings expansion of 14% next year after an earnings decline for the current year.  Xerox’s $12.70 consensus target price implies a 28.4% upside.  Shares of Xerox closed Friday at $9.89, down 1.79% for the day.  The 52-week price range is $7.58 to $11.99. Xerox finds itself a fraction of its former glory days from the 1990s.  The copying and large office document company pays a dividend yield of about 1.7%, but it does need to be noted that almost all of its equity value is from goodwill and intangibles.  Still, that Xerox brand name and customer list does actually have value.

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JON C. OGG & JIM BERDOU