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UBS Sees Developed Market Challenges in Home & Personal Care, Beverages Sectors

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In a note released Tuesday, UBS analyst Stephen Powers compared pre-recession performance in the Home & Personal Care and Beverages sectors to current challenges facing these companies. Before the 2008 recession, companies in the HPC and beverage groups were, “simple, profitable, and highly cash-generative businesses,” as well as optimistic about “ever-rising consumption” from emerging markets, according to Powers. Moving to present day, Powers sees the following challenges:
  1. “Developed market growth is likely to remain slow and price-competitive,
  2. Emerging market growth is also likely to face structural challenges, and
  3. External forces (e.g., regulation, taxation, commodity/FX volatility, new technologies, channels shifts, etc.) are going to make the operating environment consistently more complicated.”
Powers is a buyer of Estee Lauder (NYSE: EL), Monster Beverages (NASDAQ: MNST), Church & Dwight (NYSE: CHD), and Colgate-Palmolive (NYSE: CL). Powers is staying on the sidelines on Proctor & Gamble (NYSE: PG), PepsiCo (NYSE: PEP), Coca-Cola (NYSE: KO), Coca-Cola Enterprises (NYSE: CCE), and Dr Pepper Snapple (NYSE: DPS). He is recommending investors sell shares of Energizer (NYSE: ENR), Avon Products (NYSE: AVP), and Clorox (NYSE: CLX).

Latest Ratings for EL

DateFirmActionFromTo
Apr 2015CLSAUpgradesUnderperformOutperform
Apr 2015Stifel NicolausMaintainsBuy
Mar 2015Piper JaffrayUpgradesNeutralOverweight

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