Chowdhury121osuedu Chris Coyle Coyle151osuedu Aadya Budna Budna4osuedu Table of Contents Sector Overview Consumer Staples Noncyclical does not fluctuate much based on economic cycle ID: 1020492
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1. Consumer Staple SectorAmeen ChowdhuryChowdhury.121@osu.eduChris CoyleCoyle.151@osu.eduAadya BudnaBudna.4@osu.edu
2. Table of Contents
3. Sector Overview Consumer Staples: Non-cyclical – does not fluctuate much based on economic cycle Consistent dividends and earnings High barriers to entry Sector underperformed during economic recovery Sector performs well during periods of high inflation
4. Sector Overview Cont.Some of the larger companies in the sector include the following:
5. Portfolio Updates
6. Business AnalysisSource: CapitalIQ; return comparison of S&P 500 vs. Consumer Staples Sector
7. Mondelēz International Business OverviewOne of the largest snack companies in the worldGlobal revenues over $28.0 billionCompany offers well known snacks such as Chips Ahoy and Sour Patch Kids79% of the Company’s sales are generated from Biscuits & Chocolates line of businessSells products in over 150 countries
8. MDLZ Valuation AnalysisPeer group valuation analysisPeer group averages shown in ExhibitCompared against MDLZUsed industry average of peer group for P / EPS and P / CF since investors in sector focus on earnings and CF
9. MDLZ Valuation AnalysisMarket-based approach yielded an implied stock price of $62.98
10. MDLZ DCF Approach Limited sales and earnings growth potentialConsistent margins forecasted – similar with historical resultsImplied stock price of $56.48 which is 9.3% below current stock price
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12. MDLZ ConclusionCompany’s dividend is below the peer group’s averageMDLZ has only generated modest sales growth over the last five yearsMDLZ has limited sales growth potentialThe market-based multiples of the companies in the Consumer Staples Sector are more attractive
13. Mondelēz International RecommendationCurrent stock price of $62.26 as of 11/5/2021.
14. Constellation Brands Business Overview Global producer and marketer of beer, wine and spiritsOperations in the U.S., Mexico, Italy, and New ZealandOne of the largest beer imports in the United States and the third largest beer company.Three main segments: Beer, Wine & Spirits and Canopy (Equity Investment)Total revenue of $8.61 billion with Beer segment making up more than 50% of the total revenue
15. STZ Valuation AnalysisAnalysis of peer group valuations vs. STZArrives at implied share value for STZTrading comps for STZ
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17. STZ DCF ConclusionTarget price derived from DCF was centered on discount rate of 7.97% and terminal growth rate of 4.0%Growth in the first few years given by the following factors:Capture and identify new trendsInnovation – e.g., new Corona line of business
18. STZ Valuation ConclusionCurrent stock price is: $215.45 as of 9/16/2021Implied upside of 21.12%Target price: $260.96Rating: Buy
19. Costco Business Overview Engages in membership warehousing operationsOffers bulk items to consumers at discounted pricesBranded label products in a range of merchandised categories
20. Costco Growth OpportunitiesGeographical expansionInternational expansion into ChinaChannel ExpansionEcommerce growthInorganic growth opportunitiesMergers and acquisitionsMembership programIncrease renewal rates
21. Relative ValuationSector valuation is near the high over the historical period analyzedCostco near high, with expectation company will growCompared to peers, Costco has higher multiples for all companies except Amazon
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23. Costco Stock RecommendationImplied stock price: $544.40Current Stock price (10/18/2021): $461.95Implied upside: 17.9%Stock Rating: Buy
24. Other investment options to consider:PEP: room to increase dividend and growth potential is strong going forwardPG: diversified product offerings, strong market multiples, and room for growth
25. ConclusionCurrent SIM sector holding is 5.63%Recommendation increase weighting to around 7.0%Constellation Brands: increase SIM percentage from 1.97% to 3.0%Costco: increase SIM percentage from 3.66% to 4.5%Reasons: growth potential, stable market, constant dividend yields