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

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 EL, Monster Beverages MNST, Church & Dwight CHD, and Colgate-Palmolive CL. Powers is staying on the sidelines on Proctor & Gamble PG, PepsiCo PEP, Coca-Cola KO, Coca-Cola Enterprises CCE, and Dr Pepper Snapple DPS. He is recommending investors sell shares of Energizer ENR, Avon Products AVP, and Clorox CLX.