Global Consumer_ Citi’s World of Staples – The data you need on performance, valuation and earnings momentum for global consumer staples

Summary of Key Points from the Conference Call Industry Overview - Global Consumer Staples underperformed the wider market by -1% last month, with European Staples up by +3% and US Staples by +2% [1] - Tobacco and Food Retail sectors led the group with increases of +6% and +5% respectively, while Beverages faced challenges, declining by -1% in both the US and Europe [1] European Beverages & Tobacco - Small adjustments to European Beverage estimates ahead of Q4 earnings due to muted outlooks from early reporters like Rémy [2] - Sub-sector valuations are at long-run lows, suggesting potential for stock rallies if Q4 results meet expectations [2] - Positive outlook for Carlsberg and support for ABInBev and CCEP due to buybacks [2] - Tobacco remains resilient, bolstered by regulatory changes from the new administration [2] - Buy recommendations for Imperial, BAT, and PM [2] European Food & HPC - Caution regarding Q4 results as the sector polarization from 2024 may not change significantly [3] - Preference for companies with self-help stories or those in late-stage turnarounds, such as Beiersdorf and Henkel [3] - Concerns about Nestlé due to trade-offs between EBIT and volume recovery amid COGS inflation [3] - Risks identified for L'Oréal regarding market growth and Q1 guidance [3] U.S. Beverages & HPC - General softness observed in the 4Q24 earnings season with pricing deceleration and subdued volumes [4] - Increased FX headwinds and commodity inflation are additional risks [4] - Suggested barbell investment approach focusing on high-quality names like Coca-Cola and Colgate, alongside recovery potential names like Keurig Dr Pepper [4] U.S. Food - US food stocks started 2025 slowly, with large-cap median declining by 5% in January compared to SPX +3% [5] - Concerns about inflation in commodities and potential disappointing outlooks from companies like Hershey and Mondelez [5] - Caution expected from companies like J.M. Smucker and General Mills at the upcoming CAGNY Conference [5] Investment Ratings and Recommendations - Coca-Cola: Buy, with a market cap of $273 billion and a target price of $85 [10] - PepsiCo: Buy, target price of $195 [10] - Monster: Buy, strong long-term growth story [10] - Kraft Heinz: Buy, under-appreciated growth prospects [10] - Nestlé: Neutral, with earnings downside risk [10] - Danone: Buy, potential for margin accretion [10] - Philip Morris: Buy, strong pricing power and diversification into Next Gen Products [10] Additional Insights - The report highlights the importance of macroeconomic factors such as interest rates, commodity prices, and currency fluctuations on the consumer staples sector [8] - Analysts emphasize the need for investors to remain cautious and selective in their investment choices, particularly in the current economic climate [4][5][10]