House & Home
House and Home
House and Home 
Tue, December 23, 2008
Zacks Analyst Interview Highlights: Colgate Palmolive, Procter & Gamble, Anheuser-Busch and Molson Coors
CHICAGO--([ BUSINESS WIRE ])--Zacks.com releases the latest Analyst Interview. Today's interview is with senior analyst Steven Ralston, who discusses Colgate Palmolive (NYSE: [ CL ]), Procter & Gamble (NYSE: [ PG ]) Anheuser-Busch (NYSE: [ BUD ]) and Molson Coors (NYSE: [ TAP ]).
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Since product demand is relatively stable, the companies should report earnings in line with expectations and, hence, the stocks have outperformed. Generally speaking, food companies generate earnings growth at a mid-to-high single-digit rate. Beverage companies, however, are structurally able to grow faster at the high single-digit to low double-digit rate.
But personal product companies can grow earnings a percentage point or two above beverage companies. The earnings of personal product companies, like Colgate Palmolive (NYSE: [ CL ]) and Procter & Gamble (NYSE: [ PG ]) have the potential to stand out during a recession. Both companies are rated Buy.
Over the last two years, I was a table-pounding buyer of Anheuser-Busch (NYSE: [ BUD ]) under $50. With a friendly offer of $70 per share from InBev on July 14th, I finally downgraded the rating to a Sell.
However, more is brewing in the beer industry: a structural change is about to occur. The excess costs will be wrung out of Anheuser-Busch by InBev. In addition, a joint venture between Molson Coors and SABMiller should produce a more competitive brewer with greater scale, resources, and distribution synergies from the optimization of production and distribution networks.
Therefore, the cost rationalization at Anheuser-Busch (instigated by the merger with InBev) and the joint venture between Molson Coors and SABMiller are expected to spark more intense competition, resulting in the loss of the positive pricing trends enjoyed by the industry for the last two years, in other words -- a beer war. Most likely, both companies will pursue higher levels of promotional initiatives and marketing spending. As a result, overall profitability for the industry is expected to suffer. Molson Coors (NYSE: [ TAP ]) is rated a Sell.
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