Erika Brendan Ying (Charlene) Zhang. Sector Analysis

Transcription

1 Erika Brendan Ying (Charlene) Zhang Sector

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4 Size of Sector Market Cap (as of March 17, 2015): $3.49T 38 Companies

5 Products categories represented in this sector include beverages (alcoholic and non), food, tobacco, personal and household items. Demand less impacted by economic downturns (defensive not cyclical) (low beta) Some firms may see positive growth in economic downturns (discount retailers, tobacco and alcohol) Low correlation to S&P 500

6 Industry Components (last updated 3/24/15 12:55p) Last % Change YTD 1-Y 3-Y 5-Y Consumer Staples 0.00% 0.99% 15.48% 45.22% 75.24% S&P 500 Index -0.22% 2.21% 12.75% 51.09% -0.22% Beverages 0.58% 1.03% 14.69% 40.91% 66.28% Food & Staples Retailing 0.27% 6.52% 26.76% 85.81% % Food Products -0.12% -1.74% 8.03% 45.67% 74.47% Household Products -0.32% -4.82% 9.15% 33.41% 44.11% Personal Products 1.52% 3.33% 1.27% -0.10% 3.95% Tobacco -0.87% 2.38% 16.93% 22.13% 94.20%

7 Largest Companies in Sector (Market Cap) Wal-Mart ($266.30B) Proctor & Gamble ($225.65B) Coca-Cola ($176.97B) Pepsi Co ($139.54B) Philip Morris International, Inc. ($120.49B) CVS ($115.92B) British American Tobacco ($102.24B)

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9 -0.33% 1.67% 3.56% 7.31% -0.03% -4.04% -6.20% -3.60% 21.61% 22.95% 32.17% 40.62% 21.48% 5.93% -6.74% 19.13% 5.95% 8.63% 1.46% 7.00% 2.31% -2.33% 2.58% -0.43% % 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% S&P 500 Consumer Staples Beverages Food & Staples Retailing Food Products Household Products Personal Products Tobacco Revenue Growth Current Historical (2010) Future (2016)

10 80.00% 60.00% 40.00% 20.00% 0.00% Earnings Growth Current Historical (2010) Future (2016) 41.82% 41.59% 31.54% 24.75% 16.71% 12.88% 11.66% 11.54% 13.20% 5.56% 7.38% 9.90% 10.86% 9.31% 7.37% 2.54% -0.02% -0.67% 69.21% 44.72% 20.36% -7.36% -0.14% % % -45% % S&P 500 Consumer Staples Beverages Food & Staples Retailing Food Products Household Products Personal Products Tobacco

11 Current Major Companies Food & Staples Retailing Household Products Beverages Food Products Tobacco S&P 500 Consumer Staples Beverages Food & Staples Retailing Food Products Household Products Personal Products Tobacco Wal-Mart Proctor & Gamble Coca-Cola Con-Agra Philip Morris Operating Margin 13.33% 9.26% 17.58% 4.7% 7.53% 16.54% 9.17% 39.71% 5.59% 16.63% 21.11% 3.67% 39.31% Profit Margin 9.16% 5.86% 12.04% 2.72% 4.99% 10.97% 1.83% 25.32% 3.37% 11.69% 15.43% 2.41% 25.17% Current Ratio P/E Ratio

12 Historical & Future CS v. S&P CY 2008 CY 2009 CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 Current CY 2015 Est CY 2016 Est Months Ending Metrics Price/Earnings S&P 500 Index EV/EBITDA S&P 500 Index Dividend Yield S&P 500 Index Fundamentals Gross Margin S&P 500 Index Operating Margin S&P 500 Index Profit Margin S&P 500 Index Return on Assets S&P 500 Index Return on Equity S&P 500 Index Source: Bloomberg

13 Current Major Companies Food & Staples Retailing Household Products Beverages Food Products Tobacco Wal-Mart Proctor & Gamble Coca-Cola Con-Agra Philip Morris D/E Ratio N/A A/R Turnover Inventory Turnover Asset Turnover ROA 8.01% 6.84% 7.8% 2.00% 20.43% ROE 20.76% 14.15% 21.77% 7.29% N/A R&D (% Sales) N/A N/A N/A N/A N/A

14 Historical (2010) Major Companies Food & Staples Retailing Household Products Beverages Food Products Tobacco Wal-Mart Proctor & Gamble Coca-Cola Con-Agra Philip Morris D/E Ratio A/R Turnover Inventory Turnover Asset Turnover ROA 8.61% 9.68% 19.51% 6.36% 20.86% ROE 21.17% 20.58% 42.5% 15.05% %

15 Consumer Staples: Net User or Generator of FCF? CY 2008 CY 2009 CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 Current CY 2015 Est CY 2016 Est Months Ending Cash Flow Items per Share Cash From Operations S&P 500 Index Cash Flow From Investing S&P 500 Index Cash From Financing S&P 500 Index Capital Expenditures S&P 500 Index Free Cash Flow S&P 500 Index Reference Items Free Cash Flow Yield S&P 500 Index Source: Bloomberg

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17 MACROECONOMIC FACTORS Consumer Sentiment Initial Jobless Claims US Dollar Revaluation Commodity Prices

18 REGRESSION ANALYSIS ELATIVE TO S&P 500

19 CONSUMER SENTIMENT

20 INITIAL JOBLESS CLAIMS

21 US DOLLAR REVALUATION

22 US DOLLAR REVALUATION CONT. Trailing Returns of US Dollar Total Returns 1 Month 3 Month 6 Month USD/Euro -3.87% % % JPY/USD 0.76% -0.57% 9.52% USD/GBP -4.25% -4.45% -8.97% RUB/USD -5.41% 9.57% 51.56%

23 COMMODITY PRICES Bloomberg Commodity Index

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25 S&P 500 High Low Median Average Current P/E P/B P/S P/EBITDA P/FCF Numbers are based on trailing 5 years

26 Consumer Staples High Low Median Average Current P/E P/B P/S P/EBITDA P/FCF Numbers are based on trailing 5 years Relative to S&P 500 High Low Median Average Current P/E P/B P/S P/EBITDA P/FCF Numbers are based on trailing 5 years

27 Industry Comparison 1 Month 3 Month YTD 1 Year Price to Price to Dividend Earnings Sales Yield Consumer Staples -0.96% -0.45% 1.52% 18.74% % Food Staples & Retailing 2.22% 5.93% 6.92% 29.45% % Food Beverage & Tobacco -2.61% -1.22% 1.08% 17.23% % Household & Personal Products -0.58% -5.91% -3.71% 10.55% %

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29 -- US Cycle

30 -- Cycle Sensitivity Consumer Staples Defensive Sector Constant Demand Sector Sensitivity Breakdown: Beverages: low Food & Staples Retailing: low Household Products: low Tobacco: low Food Products: low/ moderate Personal Products: moderate

31 -- Cycle Sensitivity Companies Ticker Industry Beta Procter & Gamble PG Personal Products 0.82 Coca Cola KO Beverages-Soft Drinks 0.81 Philip Morris PM Cigarettes 1.03 Anheuser Busch BUD Beverages-Brewers 1.16 AmBev ABEV Beverages-Brewers N/A PepsiCo PEP Beverages-Soft Drinks 0.59 Diageo DEO Beverages-Wineries & Distillers 0.88 CVS Caremark CVS Health Care Plans 0.96 Altria MO Cigarettes 0.66 Colgate-Palmolive CL Personal Products 0.82

32 -- Growth Drivers Demand People cannot cut consumer staples Supply Little room to increase price Reducing Cost Innovation Shifting focus on Healthy and Wellness Divestitures and Restructuring Initiatives Acquisition and Strategic Partnerships

33 Profitability and Pricing -- Five Force Power Model Threats of Potential Entrants (Moderate) Bargaining Power of Suppliers (Low) Intensity of Rivalry within the Industry (High) Bargaining Power of Buyers (High) Threats of Substitute Products (Low)

34 Profitability and Pricing -- Five Force Power Model Bargaining Power of Buyers High Price Sensitivity: High Brand Loyalty: Low Switching Costs: Low Retailer Power: High Quality Demand: Increasing Bargaining Power of Suppliers Low Quantity of Suppliers: High Raw Material Price Flexibility: Low

35 Profitability and Pricing -- Five Force Power Model Threats of Potential Entrants Moderate Economies of Scale: Moderate R&D: Moderate Capital Requirement: Moderate Access to Distribution Channels: Low Threats of Substitute Products Low Demand Consistent: High Intensity of Rivalry within the Industry High Diverse Competitor Products difference: Low

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37 SIM Portfolio S&P 500 Index Consumer Staples: 9.32% Consumer Staples: 9.80% SIM Portfolio under weight compared to S&P 500 Strong dollar currency Declining global economy

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