Consumer Staples
Sector Presentation
Buseck, Charles Frederick
Davia, Jonathan Allen
Eve, John Candler
Zong, Feiqian (Sunny)
July 28th, 2010
Table of Contents
1.
2.
3.
4.
5.
6.
Size and Composition
Business Analysis
Economic Analysis
Financial Analysis
Valuation Analysis
Recommendations
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Size & Composition
Market Capitalization
• S&P 500 = $9,977,542 million
• Consumer Staples = $1,144,790 million
• CS Sector accounts for 11.47% of S&P500
• CS Sector accounts for 11.72% of SIM portfolio
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Sector Industries
Agricultural Products
Brewers
Distillers & Vintners
Drug Retail
Food Distributors
Food Retail
Household Products
Hyper Markets & Super Centers
Packaged Foods & Meats
Personal Products
Soft Drinks
Tobacco
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Top Companies in Sector
200
180
Total Market Cap of these 5 companies is 60% of sector
160
140
120
100
80
60
40
20
0
WalMart
Proctor and
Gamble
Size &
Composition
Coca Cola
Business
Analysis
Pepsi
Economic
Analysis
Financial
Analysis
Phillip Morris
Valuation
Analysis
Recommendations
Consumer Staples vs. S&P 500 YTD
Index Name
S&P 500
Energy
Materials
Industrials
Cons Disc
Cons Staples
Health Care
Financials
Info Tech
Telecom Svc
Utilities
Size &
Composition
Quarter
Year
6.98%
‐1.12%
7.75%
‐6.43%
12.39%
‐2.99%
9.51%
7.39%
8.16%
5.69%
6.51%
1.98%
0.94%
‐8.91%
5.55%
1.11%
8.92%
‐3.06%
6.18%
‐5.49%
7.93%
‐2.01%
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Business Analysis
Life Cycle
International Markets
Sales
US Markets
Time
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Sector Overview
Defensive Sector
ƒ Stable returns and non‐cyclical
ƒ Performs well in recessionary environment
ƒ Great addition to a portfolio to reduce risk
Inelastic demand
ƒ Consumers needs remain constant
– Both a curse and a blessing
– Greatest opportunity for expansion is in international markets
– Domestic Expansion is primarily done through innovation
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Sector Characteristics
Consumer Power
ƒ Drives low margins
ƒ Substitution is major threat
ƒ Differentiation is relatively insignificant
High Barriers of Entry
ƒ Very saturated market
ƒ Hard to get market share from strong, mature companies
ƒ Extensive capital is required
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Sector Characteristics
Intensive Competition
ƒ Consumers are very price sensitive regardless of brand names
External Factors
ƒ Commodity prices
ƒ Climatic environment
ƒ Regulatory environment, both domestically and abroad
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Economic Analysis
Size &
Composition
Business
Analysis
Economic
Economic
Analysis
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
10-Year Strong Correlation Coefficients
Sector
Economic Variable
Status
CPI: Lodging
0.85
Imports Computer
0.84
Increasing
Vacancy Rate, Residential
0.82
Stable (Higher than Average)
Consumption: Alchoholic Bev
0.82
Increasing
Sales: Full Service Restaurants
0.80
Imports Apparel
0.79
Increasing
Consumer Credit Outstanding
0.78
Continued decrease since ‘09
Public Construction: Highways
0.77
Increasing
Dollars/Euro
0.77
Slight increase in June
Trade Balance w/ China
‐0.79
Slight decrease over Q2
Canadian Real Trade Balance
‐0.81
Slightly Decreasing
Size &
Composition
Business
Analysis
Economic
Economic
Analysis
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
10-Year Modest Correlation Coefficients
Economic Variable
Sector
Status
Commercial and Industrial Loans
Non‐Residential Construction
S&P 500 Price
Consumption: Tobacco
ISM Prices Paid Index
Unemployment Duration
Federal Debt
0.63
0.61
0.48
0.48
0.34
0.32
0.29
Continued Decrease since ‘08
Decreasing
Slightly increasing
Increasing
Case Schiller Index
Trade Balance
Consumer Bankruptcies
Labor Force Participation
‐0.58
‐0.58
‐0.56
‐0.54
Slight increase, back to ‘03 levels
Continued decrease since ‘92
Increasing
Pretty steady since ‘05
Inventory/Sales Ratio
30 Year Bond
‐0.48
‐0.40
Inv. sharply reduced since Q1’09
Decrease
Real Disposable Income
‐0.36
Slight increase
Real Consumer Spending
‐0.34
Slight increase
Size &
Composition
Business
Analysis
Longest wait on record
Increasing
Economic
Economic
Analysis
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Overall Economic Indication
• Less Sensitive to Economic Cycles – fewer swings in
demand – low price elasticity of demand
• Susceptible to feeble consumer spending during an
economic downfall w/ high unemployment rates
• Longest duration of unemployment ever, economy still needs to rebound
• Inventory is being tightly controlled – No major
inflation/deflation
• Moderate correlation w/ the S&P 500 – good
diversification for portfolio (defensive)
• Slight decline after rise in ‘09
Size &
Composition
Business
Analysis
Economic
Economic
Analysis
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Financial Analysis
Earnings Per Share
Absolute Value
Year to Year Growth
100
92.19
88.17
90
80
50
65.27
56.34
22%
21%
17%
16%
7%
0%
-5%
30
21.04
20
8.67
0
2000
12%
10%
5%
45.17
40
10
20%
15%
70
60
25%
2000
2006
2008
2010
-10%
-20%
2004
2004
-4%
-15%
11.28
2002
2002
2006
Consumer Staples
Size &
Composition
2008
2010
-20%
Consumer Staples
SP500
SP500
Business
Analysis
-20%
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Earnings Per Share
Consumer Staples Relative to S&P 500
•The sector has been steadily growing since
2000, but growth rate is in an opposite trend
to the S&P 500.
0.30
0.282
0.28
•Less vulnerable to economic downtime than
S&P 500.
0.26
0.243
0.24
0.228
0.22
0.20
CS
0.18
0.16
0.14
Average
0.158
0.154
0.12
0.10
2000
2002
2004
2006
2008
14.39
3.964
CS Growth
8.4%
0.057
S&P500
69.04
15.747
S&P500 Growth
5.8%
0.154
CS vs. S&P500
0.21
0.042
2010
Consumer Staples Relative to SP500
Size &
Composition
Std Dev
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Revenue Per Share
Absolute Value
Year to Year Growth
25%
1200
1061.28
943
1000
800
600
15%
12%
10%
663.21
675.93
5%
344.1
333.03
141.41
2001
1999
-10%
0
1999
-5%
2003
2005
Consumer Staples
Size &
Composition
2007
2009
2001
2003
2005
2007
2009
-8%
-11%
-15%
Consumer Staples
SP500
SP500
Business
Analysis
3%
2%
0%
400
200
20%
20%
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Revenue Per Share
Consumer Staples Relative to SP500
0.40
0.36
0.35
•The sector goes about the same trend as
that of S&P 500
•Similar Volatility
Average
0.30
CS
0.25
226.52
75.821
9.7%
0.053
826.50
145.127
S&P500 Growth
3.9%
0.073
CS vs. S&P500
0.27
0.047
CS Growth
0.21
0.20
S&P500
0.15
0.10
1999
2001
2003
2005
2007
2009
Std Dev
Consumer Staples Relative to SP500
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Return on Equity
Absolute Value
Year to Year Growth
40.0%
35.0%
40.0%
34.1%
30.0%
30.0%
20.0%
25.0%
24.0%
21.1%
21.0%
20.0%
15.0%
39.0%
15.1%
14.6%
10.5%
10.0%
10.0%
5.7% 7.6%
0.0%
-10.0%
2001
2003
2005
2007
2009
2011
-20.0%
5.0%
-30.0%
0.0%
2001
2003
2005
2007
Consumer Staples
Size &
Composition
2009
2011
-40.0%
SP500
Business
Analysis
-30.0%
Consumer Staples
Economic
Analysis
Financial
Analysis
Valuation
Analysis
SP500
Recommendations
Return on Equity
Consumer Staples Relative to SP500
2.60
•The sector is much less volatile than S&P 500
•Although declining, is better than S&P500 in
general, especially in recession period.
2.10
Average
1.60
CS
Std Dev
0.26
0.043
‐3.5%
0.079
1.10
CS Growth
0.60
S&P500
0.16
0.027
0.10
S&P500 Growth
1.5%
0.205
CS vs. S&P500
1.66
0.382
2001
2003
2005
2007
2009
2011
Consumer Staples Relative to SP500
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
EBITDA Margin
Absolute Value
Year to Year Growth
40.0%
30.0%
25.0%
30.0%
25.6%
21.8%
20.0%
15.0%
19.4%
14.6%
20.0%
15.0%
10.0%
13.8%
13.1%
10.0%
0.0%
5.0%
-20.0%
0.0%
2001
2003
2005
2007
Consumer Staples
Size &
Composition
2009
2011
2003
2005
2007
2011
-25.4%
Consumer Staples
Economic
Analysis
2009
-15.1%
-30.0%
SP500
Business
Analysis
4.8%
-1.4%
2001
-10.0%
12.8%
Financial
Analysis
Valuation
Analysis
SP500
Recommendations
EBITDA Margin
Consumer Staples Relative to SP500
0.80
•The sector is smoothly declining since the last
decade and maintains at 13% level
•Non‐cyclical sector, less volatile than S&P 500
in recession period.
0.70
0.60
0.50
Average
0.40
CS
0.30
CS Growth
0.20
0.13
0.010
‐0.7%
0.104
0.21
0.024
S&P500 Growth
‐0.7%
0.113
CS vs. S&P500
59.2%
0.079
S&P500
0.10
2001
2003
2005
2007
2009
2011
Consumer Staples Relative to SP500
Size &
Composition
Business
Analysis
Std Dev
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Net Profit Margin
Absolute Value
10.0%
Year to Year Growth
40.0%
9.3%
9.0%
30.0%
8.0%
7.0%
6.0%
7.5%
7.1%
6.2% 6.3%
6.5%
5.0%
5.1%
4.0%
5.5%
20.0%
14.5%
10.0% 12.7%
5.7%
0.0%
3.0%
2001
-10.0%
2.0%
1.0%
2003
2005
2007
2001
2003
2005
2007
Consumer Staples
Size &
Composition
2009
2011
2011
-23.5%
-30.0%
Consumer Staples
SP500
Business
Analysis
2009
-11.3%
-20.0%
0.0%
8.7%
3.8%
1.9%
Economic
Analysis
Financial
Analysis
Valuation
Analysis
SP500
Recommendations
Net Profit Margin
Consumer Staples Relative to SP500
1.10
•The sector has been declining since 2002
•More resistant to recession compared to S&P
500
0.90
Average
0.70
CS
0.50
CS Growth
Std Dev
5.7%
0.007
‐1.2%
0.075
8%
0.011
0.30
S&P500
0.10
S&P500 Growth
2.8%
0.119
CS vs. S&P500
0.756
0.159
2001
2003
2005
2007
2009
2011
Consumer Staples Relative to SP500
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Cash Flow to Earning
Absolute Value
Year to Year Growth
40%
160.00
140.00
30%
138.18
120.00
119.96
100.00
20%
21%
15%
98.76
10%
80.00
60.00
0%
40.00
-10%
2%
2001
2003
2005
2007
2009
2011
24.57
20.00
-20%
0.00
2002
2004
2006
Consumer Staples
Size &
Composition
2008
2010
-30%
Consumer Staples
SP500
Business
Analysis
-20%
Economic
Analysis
Financial
Analysis
SP500
Valuation
Analysis
Recommendations
Cash Flow to Earning
CF / E Ratio
•This sector provides more cash flows as time
goes and is less vulnerable to recession
2.0
Average
1.8
1.6
CS
19.79
4.098
CS Growth
6.0%
0.064
CS CF/E
1.34
0.073
111.26
16.964
4.0%
0.128
1.59
0.145
S&P500
1.4
S&P500 Growth
1.2
2003
2005
2007
Consumer Staples
Size &
Composition
2009
2011
Std Dev
S&P500 CF/E
SP500
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Financial Analysis Summary
• EPS is smoothly increasing and is less volatile than S&P 500.
• Revenue per share is relative to S&P500 with a climbing trend
• ROE has been declining for the past decade, it was less hit by the
recession but climbing far slower than S&P 500.
• EBITDA decline at the beginning of the decade but has maintained
the same level till 2004. Growth rate has an up trend since 2006.
• Net Profit Margin was at the same level as S&P 500 in 2001&2002,
diverted from it with a smooth declining until 2006, having an
increased growth rate since then till 2009.
• Cash Flow to Earnings is declining in the past recession
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Valuation Analysis
Consumer Staples Sector Valuation
Absolute Valuation Ratios
Consumer Staples Sector
Relative Valuation Ratios
Consumer Staples vs. S&P 500
3
40
35
2.5
30
2
25
High
20
Low
15
High
1.5
Low
Median
Median
Current
Current
1
10
0.5
5
0
P/Trailing E P/Forward E
P/B
P/S
Size &
Composition
0
P/CF
P/Trailing E P/Forward E
Business
Analysis
Economic
Analysis
Financial
Analysis
P/B
P/S
Valuation
Analysis
P/CF
Recommendations
Consumer Staple by Industry: Trailing P/E
Consumer Staples by Industry
Trailing P/E
Trailing P/E Consumer Staples by
Industry vs S&P 500
25
1.4
1.2
20
1
15
0.8
10
0.6
0.4
• Lowest Current Trailing P/E – Brewers at 12.3x
• Highest Current Trailing P/E – Personal Products at 20x
• Current sector and industry Trailing P/E levels are lower than
their medians except for Tobacco
Size &
Composition
Business
Analysis
Median
Sector
Tobacco
Soft Drinks
Personal Products
Packaged Foods & Meats
Household Products
Hypermarkets & Supercenters
Food Retail
Food Distributors
Drug Retail
0
Brewers
Current
Sector
Tobacco
Soft Drinks
Personal Products
Packaged Foods & Meats
Hypermarkets & Supercenters
Household Products
Food Retail
Food Distributors
Drug Retail
Brewers
Distillers & Vintners
Agricultural Products
0
0.2
Distillers & Vintners
Median
Agricultural Products
5
Current
• Current Trailing P/E of Food Distributors, Distillers &
Vintners, Softdrinks and Personal Products are notably higher
than the sector.
• Current Trailing P/E cheap compared to their medians
relative to the S&P 500 except for Distillers & Vintners, Food
Retail, Tobacco & Personal Products
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Consumer Staple by Industry: Forward P/E
Consumer Sector by Industry Forward P/E
Forward P/E Consumer Staples by
Industry vs S&P 500
1.4
25
1.2
20
1
15
0.8
10
0.6
0.4
Lowest Current Forward P/E – Agricultural products at 10.4x
• Highest Current Forward P/E – Personal Products at 16.3x
• Current sector and industry Forward P/E levels are lower
than their medians except for Tobacco
•
Size &
Composition
Business
Analysis
Sector
Tobacco
Soft Drinks
Personal Products
Packaged Foods & Meats
Hypermarkets & Supercenters
Household Products
Food Retail
Food Distributors
Drug Retail
Current
Median
0
Distillers & Vintners
Sector
Tobacco
Soft Drinks
Personal Products
Packaged Foods & Meats
Hypermarkets & Supercenters
Household Products
Food Retail
Food Distributors
Drug Retail
Distillers & Vintners
Brewers
Agricultural Products
0
0.2
Brewers
Median
Agricultural Products
5
Current
• Current Forward P/E of Drug Retailers, Brewers, Agricultural
Products and Tobacco are lower than the sector.
•Current Forward P/E are cheap compared to their medians
relative to the S&P 500 except for Distillers & Vintners, Food
Retail and Tobacco.
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Consumer Staple by Industry: Price-to-Book
Consumer Sector by Industry Price-to-Book
16
14
12
10
8
6
4
2
0
Price-to-Book Consumer Staples
by Industry vs S&P 500
6
5
4
3
2
1
Median
Sector
Tobacco
Soft Drinks
Personal Products
Packaged Foods & Meats
Hypermarkets & Supercenters
Household Products
Food Retail
Food Distributors
Drug Retail
Distillers & Vintners
Current
Brewers
0
Agricultural Products
Sector
Tobacco
Soft Drinks
Personal Products
Packaged Foods & Meats
Hypermarkets & Supercenters
Household Products
Food Retail
Food Distributors
Drug Retail
Distillers & Vintners
Brewers
Agricultural Products
Median
Current
Current Price‐to‐Book of Softdrinks, Tobacco and Personal Products are
notably higher than the sector.
•
Lowest Current Price‐to‐Book–Agricultural products at 1.1x
• Highest Current Price‐to‐Book – Tobacco at 11.2x
• Current sector and industry Price‐to‐Book levels are lower than
their medians except for Tobacco
•
• Current Price‐to‐Book are cheap compared to their medians relative to
the S&P 500 except for Distillers & Vintners, Food Distributors,
Hypermarkets, and Tobacco.
c
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Consumer Staple by Industry: Price-to-Sales
Consumer Sector by Industry Price-to-Sales
Price-to-Sales Consumer Staples
by Industry vs S&P 500
3
2.5
2.5
2
2
1.5
1.5
1
1
0.5
•
Lowest Current Price‐to‐Sales– Food Retail at 0.2x
• Highest Current Price‐to‐Sales – Brewers at 2.7x
• Current sector and industry Price‐to‐Sales levels are lower
than their medians except for Brewers, Food Distributors and
Tobacco
Size &
Composition
Business
Analysis
Sector
Tobacco
Soft Drinks
Personal Products
Packaged Foods & Meats
Hypermarkets & Supercenters
Household Products
Food Retail
Drug Retail
Food Distributors
Current
Median
0
Distillers & Vintners
Sector
Tobacco
Soft Drinks
Personal Products
Packaged Foods & Meats
Household Products
Hypermarkets & Supercenters
Food Retail
Food Distributors
Drug Retail
Brewers
Distillers & Vintners
Agricultural Products
0
Brewers
Median
Agricultural Products
0.5
Current
• Current Price‐to‐Sales of Brewers, Distillers & Vintners, Soft
Drinks, Tobacco and Household Products are much higher
than the sector.
• Current Price‐to‐Sales levels are mixed relative to the S&P
500.
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Consumer Staple by Industry: Price-to-Cashflow
Consumer Sector by Industry Price-to-Cashflow
Lowest Current Price‐to‐Cashflow– Food Retail at 4.8x
• Highest Current Price‐to‐ Price‐to‐Cashflow– Personal Products at
14x
• Current sector and industry Price‐to‐Cashflow levels are lower
than their medians except for Tobacco.
•
Size &
Composition
Business
Analysis
Sector
Tobacco
Soft Drinks
Personal Products
Packaged Foods & Meats
Household Products
Hypermarkets & Supercenters
Food Retail
Food Distributors
Drug Retail
Brewers
Current
Median
Distillers & Vintners
Sector
Tobacco
Soft Drinks
Personal Products
Packaged Foods & Meats
Hypermarkets & Supercenters
Household Products
Food Retail
Food Distributors
Drug Retail
Distillers & Vintners
Brewers
Agricultural Products
Median
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
Agricultural Products
18
16
14
12
10
8
6
4
2
0
Price-to-Cashflow Consumer
Staples by Industry vs S&P 500
Current
• Current Price‐to‐Cashflow of Food Retail is much lower
than the sector.
• Current Price‐to‐Cashflow levels are mixed relative to the
S&P 500.
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Consumer Staple Company Valuation
Trailing
P/E
Name
Drug Retail
CVS Caremark Corp (CVS)
Walgreen Co (WAG)
Drug Retail Industry Valuation
Food Distributors
Sysco Corp (SYY)
Food Retail
Kroger Co/The (KR)
Safeway Inc (SWY)
SUPERVALU Inc (SVU)
Whole Foods Market Inc (WFMI)
Food Retail Industry - Valuation
Hypermarkets & Super Centers
Costco Wholesale Corp (COST)
Wal-Mart Stores Inc (WMT)
Hypermarkets & Super Centers Industry Valuation
Brewers
Molson Coors Brewing Co (TAP)
Distillers & Vintners
Brown-Forman Corp (BFB)
Constellation Brands Inc (STZ)
Distillers & Vintners Industry Valuation
Size &
Composition
Business
Analysis
Forward Price to Price to Price to
P/E
Book
Sales Cashflow
11.50
14.00
12.30
10.8
12.8
14.2
1.2
2
1.4
0.4
0.4
0.4
8.4
9.5
8.8
16.80
15.3
4.5
0.5
12.4
12.80
13.10
5.70
33.40
15.10
11.5
11.3
6.5
25.8
12.2
2.6
1.5
0.8
3
2
0.2
0.2
0.1
0.8
0.2
5.2
4.3
1.7
14.1
4.8
20.10
13.70
14.60
17.9
12.6
13.4
2.3
2.8
2.7
0.3
0.5
0.3
12.2
9
9.8
12.70
13.3
1.2
2.7
9.9
20.40
9.90
18.00
19.3
9.9
14.9
4.9
1.4
2.5
2.9
1.1
1.7
18.1
6.9
11.8
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Consumer Staple Company Valuation
Name
Trailing Forward Price to Price to Price to
P/E
P/E
Book Sales Cashflow
Soft Drinks
Coca-Cola Co/The (KO)
Coca-Cola Enterprises Inc (CCE)
Dr Pepper Snapple Group Inc (DPS)
PepsiCo Inc/NC (PEP)
Soft Drinks Industry Valuation
16.40
17.10
19.90
16.80
17.10
15.2
16.6
16
14.8
15.6
5.1
15.1
3.2
4.9
5
4
0.7
1.8
2.1
2.2
14.1
7.6
13.9
13.2
13.6
Agricultural Products
Archer-Daniels-Midland Co (ADM)
10.80
10.4
1.2
0.3
7.1
Packaged Foods & Meats
Campbell Soup Co (CPB)
ConAgra Foods Inc (CAG)
Dean Foods Co (DF)
General Mills Inc (GIS)
Hershey Co/The (HSY)
HJ Heinz Co (HNZ)
Hormel Foods Corp (HRL)
JM Smucker Co/The (SJM)
Kellogg Co (K)
Kraft Foods Inc (KFT)
McCormick & Co Inc/MD (MKC)
Mead Johnson Nutrition Co (MJN)
Sara Lee Corp (SLE)
Tyson Foods Inc (TSN)
Packaged Foods & Meats Industry Valuation
Size &
Business
Composition
Analysis
14.80
13.80
9.10
15.20
18.80
16.00
15.10
14.40
15.00
14.20
15.70
23.60
15.30
12.00
15.10
Economic
Analysis
14
11.4
12.5
2.1
11.3
1.6
14.3
3.8
18
14.3
15
7.7
15.2
2.5
13.7
1.4
14.2
8
14.4
1.5
15
4.1
22.2NM
14.7
5.6
9.3
1.4
14.6
2.8
Financial
Analysis
1.6
0.9
0.2
1.6
1.9
1.4
0.9
1.6
1.5
1.2
1.6
3.9
0.9
0.2
0.9
Valuation
Analysis
11.3
9.7
4.3
11.7
14.2
12
11.3
10.7
11.5
11.1
12.2
20.9
8.8
6.4
11.2
Recommendations
Consumer Staple Company Valuation
Trailing Forward Price to Price to Price to
P/E
P/E
Book
Sales Cashflow
Name
Tobacco
Altria Group Inc (MO)
Lorillard Inc (LO)
Philip Morris International Inc (PM)
Reynolds American Inc (RAI)
Tobacco
12.40
12.40
13.90
12.00
13.20
11.4
10.8
11.9NM
12.8
19.3
11.3
2.6
12.5
11.2
1.9
2.1
3.5
2
2.5
11.5
12
12.3
10.9
12.3
Household Products
Clorox Co (CLX)
Colgate-Palmolive Co (CL)
Kimberly-Clark Corp (KMB)
Proctor & Gamble (PG)
Household Products Industry Valuation
15.40
18.30
12.50
14.80
15.10
14.8
17.1
12.9
16.1
15.8
51.2
16.8
4.9
2.7
3.4
1.7
2.6
1.3
2.3
2.2
11.8
15.8
9.3
11.7
12
Personal Products
Avon Products Inc (AVP)
Estee Lauder Cos Inc/The (EL)
Personal Products Industry Valuation
16.30
23.50
20.00
14.3
21.1
16.3
10.1
6
7.8
1.2
1.6
1.2
13.2
15.8
14
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Consumer Staples Valuation Trends
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Consumer Staples Valuation Trends
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Consumer Staples Valuation Trends
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Consumer Staples Two-Year Technical Chart
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Consumer Staples Six-Month Technical Chart
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Consumer Staples Valuation Analysis Summary
• Industry valuations within the sector vary widely.
• Company valuations in some industries can vary widely.
• Most industry current valuations are lower than the long‐term
historical medians except for the Tobacco Industry.
• The valuation ratios are leveling off after the rise from the lows of
2009. They are now falling in line with the downward trendline of
the 10 year chart.
• The S&P 500 Consumer Staples index has reached the upper
bollinger band.
• Relative Strength Index of the sector is between 30‐70.
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recommendations
Recommendations
Recommendation
How Consumer Staples is weighted is a key indication of what our
class thinks of the economy.
What is the Reality of the US economy?
Negative
ƒ The index of U.S leading indicators fell .2 percent.
ƒ This is the second decline in three months.
ƒ Unemployment still at 9.5%
ƒ Housing market is still 76% below peak in July 2005
Positive
ƒ S&P 500: Out of 152 companies that have reported 127 have beaten analysts
estimates. (Perhaps a sign of investors being overly negative?)
Recommendation: We are currently overweight in Consumer Staples by 25
basis points. We recommend NO CHANGES!
Size &
Composition
Business
Analysis
Economic
Analysis
Financial
Analysis
Valuation
Analysis
Recomme
Recommendations
ndations
Q&A