Consumer Staples Company Presentation Chad Hackett Adam Gale
Consumer Staples Analysis + Dividends, Dividend yield is higher than S&P Earnings are declining relative to S&P Growing economy – Sector performs poorly during growth relative to S&P 500
Consumer Staples Composition SIM Companies Procter & Gamble, 4.20% (Household Products) Walgreens, 2.11% (Retail Drugs) Anheuser-Busch, 3.94% (Beverage - Alcoholic)
Procter & Gamble
Business Analysis Businesses Baby, feminine & family care Fabric & home care Health care Beauty care Food & beverage Main Brands Pampers, Always Tide, Bounty, Downy Crest, Pepto Bismol Cover Girl, Pantene, Herbal Essences Folgers, Pringles
Business: Demand Expected EPS for 2005 : $2.59 11% increase from 2004 Solid marketing and product innovation skills Established brand recognition both domestic and international Constant demand for P&G products
Business: Supply P&G’s growth for the future relies on foreign acquisitions and internal expansion overseas i.e. Wella AG acquisition in 2003 India and China remain strong growth drivers Increased business in health and beauty- care by purchasing Clairol
Financial: DuPont Analysis
Valuation Analysis
Recommendation Hold Procter & Gamble. Remaining a strong player in the consumer staples sector Internal growth abroad Foreign market expansion through acquisition James Gamble William Proctor – 1837
Anheuser-Busch
Business Analysis Businesses: Domestic and International Beer Packaging Theme Parks Main Products Budweiser Michelob Busch Natural Light
Business: Demand Consumption is up.8% from 2003 International growth has contributed to at least 20% of A-B’s earnings over the past five years Anheuser-Busch and Tsingtao Close China Investment Agreement Increased profits in China by 45% Demographics – Growth of the 21 to 27 year old age group Inelastic demand for alcohol in general
Financial: DuPont Analysis
Valuation Analysis
Recommendation Sell Anheuser-Busch Issues Revenues shrinking from year to year Pre-tax margins at all-time high, but price to sales and price to earnings at median levels Hugely competitive market with Miller, other brewers
Sysco Corporation
Business Analysis Businesses: Food distributor Supply distributor (plates, silverware, etc Main Customers Restaurants Health-care facilities Education facilities
Business: Demand Revenue is increasing from year-to-year Expected increase in the number of people in healthcare facilities Growing economy stimulates consumer spending (dining out)
Financial: DuPont Analysis
Valuation Analysis
Recommendation Buy Sysco Corporation Reasons Growth rate estimates at an all-time high relative to consumer staples sector Price-to-earnings and price-to-sales do not reflect this expectation Certain demand increases via healthcare and increased discretionary consumer spending
CVS versus Walgreen Corporation
CVS versus Walgreen Business Walgreen currently largest U.S. Retail Drug Store with 37.5 billion dollars in sales CVS is second with 22.6 billion dollars in sales
Demand Increased need for prescription drugs as population continues to grow older Continued expansion in opening of new stores for both companies CVS through acquisition (Eckerd from J.C. Penny)
Dupont - CVS
Dupont - Walgreen
Valuation – CVS versus Walgreens CVSWAGIndustry Market Cap:18.50B40.34B285.75M Employees:110,000117, Rev. Growth (ttm):10.00%13.30% Revenue (ttm):29.12B37.51B573.99M Gross Margin (ttm):26.21%27.19%26.21% EBITDA (ttm):1.94B2.14B11.62M Oper. Margins (ttm):5.31%5.71%2.27% Net Income (ttm):912.60M1.36B6.20M EPS (ttm): PE (ttm): PEG (ttm): PS (ttm):
Recommendation Sell Walgreen Corporation to acquire CVS More potential for growth in 2005 Retail drug market is expanding Large acquisition of Eckerd will be more beneficial in 2005 Walgreen Corporation above industry ratios
Questions