Upload
yasir-hill
View
54
Download
2
Tags:
Embed Size (px)
DESCRIPTION
Sector Outlook: Consumer Staples. Robert Blake Jason Ebbing Rica Rahardjo. Agenda. Sector Overview Sector Factors Economic Factors Financial Analysis Valuation Recommendations Questions. Consumer Staples Sector (SP-30). Ranked 7 out of 10 by market cap - PowerPoint PPT Presentation
Citation preview
Sector Outlook:Consumer Staples
Robert BlakeJason EbbingRica Rahardjo
Agenda
Sector Overview Sector Factors Economic Factors Financial Analysis Valuation Recommendations Questions
Consumer Staples Sector (SP-30)
•Ranked 7 out of 10 by market cap
•Consumer Staples lagging S&P500 by 1.06% QTD and 3.44% YTDS&P500 Data provided by Standard and Poor’s web site and is based on market closing information from 07/13/2007.
Number of Companies Market Cap
% of S&P500 QTD YTD
S&P 500 500 13,811,796 100.00% 3.27% 9.46%
Financials 92 2,859,130 20.70% 1.64% -0.39%
Information Technology 74 2,180,981 15.79% 4.61% 13.99%
Health Care 53 1,601,217 11.59% 2.09% 7.42%
Industrials 53 1,548,298 11.21% 4.24% 14.54%
Energy 32 1,546,234 11.20% 7.31% 24.79%
Consumer Discretionary 88 1,382,362 10.01% 2.01% 4.47%
Consumer Staples 39 1,268,144 9.18% 2.21% 6.02%
Telecommunications Services 9 498,688 3.61% -0.45% 13.06%
Utilities 32 485,055 3.51% 3.37% 10.85%
Materials 28 441,686 3.20% 6.14% 22.57%
Industry Makeup of SP-30
S&P500 Data provided by Standard and Poor’s web site and is based on market closing information from 07/13/2007.
Price Change (%)
% of Sector
13 weeks YTD 5-Year
Beta (5 Year)
Consumer Staples 100% 2.4 6.0 5.5 0.5
Agriculture Products 1.88 (3.7) 14.5 25.6 0.7
Brewers 3.39 (2.5) 4.8 0.2 0.3
Distillers & Vintners 0.81 11.2 (4.5) 12.1 0.3
Drug Retail 7.99 1.2 7.0 10.0 0.7
Food Distributors 1.60 (3.0) (10.6) 4.7 0.7
Food Retail 4.08 1.5 13.3 2.6 0.9
Household Products 21.48 (1.0) (1.5) 6.2 0.3
Hypermarkets & Super Centers 11.61 5.9 8.6 NA NA
Packaged Foods & Meats 14.00 4.5 8.3 6.8 0.4
Personal Products 1.79 0.6 17.7 17.9 0.3
Soft Drinks 17.91 5.6 8.9 4.7 0.7
Tobacco 13.44 2.4 9.5 15.5 0.8
Consumer Staples – Household NamesRank Symbol Company
Market Cap (Billions)
21SWY Safeway Inc. 15.73
22HNZ Heinz (H.J.) 15.23
23CPB Campbell Soup 15.21
24CAG ConAgra Foods Inc. 13.33
25SLE Sara Lee Corp. 12.7
26CCE Coca-Cola Enterprises 11.71
27HSY The Hershey Company 11.68
28SVU Supervalu Inc. 9.99
29CLX Clorox Co. 9.55
30 EL Estee Lauder Cos. 9.11
31BF.B Brown-Forman Corp. 8.94
32TSN Tyson Foods 8.51
33UST UST Inc. 8.4
34TAP
Molson Coors Brewing Company 8.3
35PBG Pepsi Bottling Group 8.16
36WFMI Whole Foods Market 5.73
37STZ Constellation Brands 5.05
38MKC McCormick & Co. 4.82
39 DF Dean Foods 4.11
Rank Symbol CompanyMarket Cap (Billions)
1 WMT Wal-Mart Stores 201.95
2 PG Procter & Gamble 197.31
3 MO Altria Group Inc. 150.8
4 KO Coca Cola Co. 122.68
5 PEP PepsiCo Inc. 108.89
6 KFT Kraft Foods Inc-A 57.57
7 CVS CVS Caremark Corp. 56.87
8 WAG Walgreen Co. 44.91
9 BUD Anheuser-Busch 38.61
10 CL Colgate-Palmolive 35.01
11 KMB Kimberly-Clark 30.57
12 COST Costco Co. 27.58
13 ADM Archer-Daniels-Midland 23.91
14 K Kellogg Co. 20.77
15 GIS General Mills 20.50
16 KR Kroger Co. 20.44
17 SYY Sysco Corp. 20.31
18 RAI Reynolds American Inc. 19.46
19 AVP Avon Products 17.15
20 WWY Wrigley (Wm) Jr. 15.77
S&P500 vs. SIM Portfolio
Consumer Staples S&P500: 9.18% SIM: 7.72%
SIM underweight 146 bp In recent quarters SIM has typically been underweight more
0.00% 5.00% 10.00% 15.00% 20.00% 25.00%
Cons Discr
Con Staples
Energy
Utilities
Info Tech
Telecom
Industrials
Materials
Financials
Health Care
% of Total Portfolio
S&P
SIM
Historical Sector Performance
•Sustained growth trend over last 4 years (red line)
•Currently locked in a narrow trading range with support at $48 and resistance around $50.50 (orange band)
Performance Relative to S&P500
Agenda
Sector Overview Sector Factors Economic Factors Financial Analysis Valuation Recommendations Questions
Sector Factors Defensive (non-cyclical)
Consistent returns irregardless of economic conditions
Good dividend yieldsGenerally lags market during periods of growth
Composed of stable, slow growth multinational companiesWal-MartProctor and Gamble
Necessities consumers use on a daily basis
Sector Status
Sector Demand
Relative inelastic demand for products Steady demand in US Sector relying on international expansion
to spur growth Branding important to differentiate an
undifferentiated product
Sector Characteristics High barriers to entry
Dominated by large, well-established companies
High capital requirements to enter sector
Mature industry with strong brand identities
Difficult to create wide distribution network
High buyer power
Undifferentiated product equates to low switching cost
Sector Characteristics (Cont.) Low Supplier Power
Long-term contracting/agreements common High threat of substitution
Multiple brands competing in same product line High threat of competition
Consumers are price sensitive (despite brand loyalty) with undifferentiated products
Agenda
Sector Overview Sector Factors Economic Factors Financial Analysis Valuation Recommendations Questions
Economic AnalysisDEMAND:
GDP growth (+)Population growth – especially growth in
middle class of developing nations (+)Unemployment rate (+)Consumer Price Index (-)Personal Income (+)
Economic Analysis (cont.) SUPPLY:
Energy Prices – increase cost of operations (-)Commodity Prices – increase price of inputs (-)Foreign Exchange Rates – reduces profits from
international operation (+/-) Inflation – increase input costs (commodities,
labor, raw materials) (-)
(Increasing supply costs reduces profit margins when demand is stable)
Commodity Price Impact
Agenda
Sector Overview Sector Factors Economic Factors Financial Analysis Valuation Recommendations Questions
Financial Analysis
•% Revenue growth is currently above average and trending down
•Year over year net profit margins changes are negative.
% Net Profit Margin is currently decreasing
•Growth rate is decreasing
•Dividend Yield is stable
Wal Mart (WMT)Industry: Hypermarkets & Super Centers
Procter and Gamble Co. (PG)Industry: Personal and Household Products
ALTRIA (MO) Industry: Tobacco
Income Statement AnalysisSP30 and S&P 500
•Gross Profit margins have decreased slightly
•Net Profit Margin also continues to decline year over year
•Gross Profit Margins are increasing slightly
•Net Profit Margin is significantly higher than SP30
Cash Flow Analysis – SP30
User of Cash Flow !!
Agenda
Sector Overview Sector Factors Economic Factors Financial Analysis Valuation Recommendations Questions
Absolute Valuation – SP30
On an absolute basis sector looks slightly undervalued.
Absolute Valuation - SP5A
On an absolute basis S&P500 appears fairly valued.
SP30 Relative Valuation
On a relative basis SP30 appears fairly valued.
Agenda
Sector Overview Sector Factors Economic Factors Financial Analysis Valuation Recommendations Questions
Recommendations
Defensive Sector – outperforms S&P 500 when economy is poor. We believe the economy will continue to fair well in the near term
Consumer staples will continue to underperform relative to the S&P500 Growth rate is decreasing and net profit margins have declined
each year since 2000. Recommend underweighting of sector by 50 basis points
now, with possible further underweighting in the future based on economic indicators (GDP growth, unemployment, inflation)
Questions