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Consumer Staples Company Presentation

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					  Consumer Staples
Company Presentation
        Lalit Bohra
        Ryan Frey
       Vikas Ghayal
      Taylor Luebke
Previous Sector Recommendation
► HOLD
  Valuations relatively constant over the past two
   years.
  Receiving good dividends above market rate at
   current position.
  Slow expected GDP growth.
  Defensive business cycle attractive with sluggish
   market.
Composition & Past Action
P&G      4.08%    Household Products   Buy 10 bps



Sysco    2.37%    Retail Grocery       Buy 14bps


CVS      2.16%    Retail Drugs         Hold


Anheuser- 1.99%   Beverage-Alcohol     Hold
Busch
     Company Recommendations
►   Current Sector Position
     Approximately 50 basis points overweight
►   Hold Sysco and P&G
►   Sell Anheuser-Busch
►   Buy CVS
►   Buy PepsiCo
Anheuser-Busch
► Current Position 1.93% of SIM portfolio
► Businesses:
     Domestic and International Beer
       ►   Largest domestically (~ 50% market share)
     Packaging
     Theme Parks
►   Main Beverage Products
Anheuser-Busch




     75.4% of business driven by domestic beer sales
Anheuser-Busch
Business: Demand
► Population in target market of 21-28 years of
  age will remain relatively unchanged in US
► International growth was 5.7% of sales for
  FY04 but 17.8% of profits
     Taking a larger stake in China – 27% in Tsingtao
►   Beers sales flat domestically
     Consumer preference
►   Marketing campaigns for new low carb and
    specialty beers
Anheuser-Busch
Anheuser-Busch
Anheuser-Busch
Recommendation
► SELL IT ALL
   U.S. beer market weak since 2003 – A-B’s “bread and
    butter”
     ►   No market growth domestically - <1% annually
     ►   Consumer preference changing to wine and spirits
   Strong competition in an industry
     ► Bud Light losing market share to Miller Lite
   Shrinking Margins – higher commodity costs, increased
    spending on marketing
   From Warren Buffett: “I would not expect the earnings
    to do much for some time, but that’s fine for us”.
► Why wait? Better opportunities exist in the sector
CVS Corporation
            CVS Segments

                  % Sales   % Profits


Retail Pharmacy   93.9%     90.8%

Pharmacy          6.1%      9.2%
Benefit
Management
(PBM)
             Recent Good News
► First   Qtr Earnings:
   19 percent growth
   Net income: $286.2 million or 69 cents per
    share
   Revenue: $9.18 billion
►2   for 1 stock split
Valuation Analysis
               Price Targets
► Yahoo   Finance:
   1yr Target Est.: $61.50



► Personal:
   1 yr Target Est.: $61.87
            Recommendation
► Buy   CVS (43 basis points)

   Retail drug market is expanding
   Not in a bad position to react to industry
    changes
   Eckerd acquisition starting to pay off
   Long term growth rate: 13%
PepsiCo
PepsiCo


          Margin
          steadily
          Increasing -
          near HI.
               Recommendation
►   Buy PepsiCo (150 basis points)

     Great brand recognition
      ►   Vital to consumer staples sector
     Large and growing consumer base
     Global diversification
     Product diversification
      ►   Has allowed PepsiCo to outperform Coca-Cola
         Sector Recommendation
► Hold  Sysco and P&G
► Sell Anheuser-Busch
   193 basis points
► Buy   CVS
   43 basis points (total of 301 basis points)
► Buy   PepsiCo
   150 basis points
Questions

				
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posted:12/19/2011
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