Company Presentation Consumer Staples Jarred Blumensheid, Jordan Buchanan, Ken Bickle, Chris Bartkowski Student Investment Management Summer 2017

Agenda Sector Overview Recommendation and Company Overviews Millers Coors Procter & Gamble Wal-Mart Tyson Kroger Valuation Analysis of Stocks Summary Q & A

Sector Overview Consumer Staples: Market Cap is around $2.21 Trillion Accounts for 9.37% of the S&P 500 Percentage of SIM Portfolio: 8.89%

Breakdown of Sector

Largest Companies in Sector Name Ticker Market Cap Wal-Mart Stores Inc WMT 228.14B Procter & Gamble Co PG 222.90B Coca-Cola Co KO 191.62B Philip Morris International Inc PM 182.42B PepsiCo Inc PEP 164.98B Altria Group Inc MO 143.85B Kraft Heniz Co KHC 104.28B Reynolds American Inc RAI 92.77B Walgreens Boots Alliance Inc WBA 83.80B CVS Health Corp CVS 81.97B

Recap of Recommendation Currently “Underweight” in the portfolio We recommend we stay at “Underweight” given the economic expansion, rising interest rate environment, and overall sector returns. Our sector will not perform as well during economic expansions. All industries in this sector are a little “frothy” at this point in time. If we have to be overweight in specific industries, we would choose “Food Staples and Retail” and “Food Products”. These ratios perform better than that of other industries in the sector

Current Companies in SIM Portfolio Procter & Gamble Co (PG) 1.50% in Portfolio Wal-Mart Stores, Inc (WMT) 4.33% in Portfolio Tyson Foods Inc (TSN) 3.06% in Portfolio

Sector Stock Recommendations Company Ticker Current Weight Proposed Price Target Upside / Downside Decision Wal-Mart WMT 4.33% 3.50% $75.05 $80.65 7.5% HOLD (Trim) Molson Coors TAP 0.00% $86.85 $94.02 8.3% HOLD Tyson Foods TSN 3.06% $61.67 $70.15 13.8% BUY Procter & Gamble PG 1.50% 1.00% $87.55 $90.91 3.8% Kroger Co KR $22.37 $26.41 18.1% TOTAL SECTOR 8.89% 8.50% Reduce Position

As of 7/11/17 Market Capitalization: $18,521M Current Price: $85 As of 7/11/17 Market Capitalization: $18,521M Current Price: $85.92 Target Price: $94.02 52-Week High: $112.19 52-Week Low: $85.34 Analysts’ 12M Target: $104.25 Dividend Yield: 1.91% P/E (TTM): 24.63 Beta: 0.63

TAP Key Ratios Peer Key Ratios Absolute Basis High Low Median Current 32.24 10.05 15.11 27.19 P/B 3.97 0.91 1.24 1.76 P/S 6.53 1.20 2.50 3.05 P/EBITDA 26.20 5.15 8.53 Ticker P/E TTM P/S TTM P/B P/CF TTM EV/EBITDA TTM Average 26.92 2.03 4.07 24.58 14.26 TAP 27.19 3.05 1.76 31.26 18.72 ABI BB 167.10 4.30 3.20 19.60 21.25 STZ 4.92 5.11 46.07 17.82 SAM 21.44 18.06 9.52

Competition in North American Market

Molson Coors Anheuser-Busch Inbev

Recommendation: HOLD Lots of competition in the North American market. Long-term debt rose a lot with the acquisition of MillerCoors to over $11 billion. This is a large debt load for Molson Coors to carry and management has even stated that paying down debt is a priority. Molson Coors has popular beers in the United States and Canada. However, volume is on a slight decline and there is some share loss happening in the United States. North America is Molson Coors’s most important market, thus, any slowdown of sales in the United States or Canada is a cause for concern. Right now, the spirits and wine industry do not seem to be as big of a threat as the craft beer industry. Molson Coors may be able to compete with the craft beer producers by purchasing popular craft beer companies, but Molson Coors’s competitors can do the same thing.

Procter & Gamble As of 7/17/17 Market Capitalization: $223.92B Current Price: $87.55 Target Price: $90.91 52-Week High: $92.00 52-Week Low: $81.18 Analysts’ 12M Target: $91.59 Dividend Yield: 3.17% P/E (TTM): 16.10 Beta: 0.56 Symbol: PG

Procter & Gamble The Procter & Gamble Company, incorporated on May 5, 1905, is focused on providing branded consumer packaged goods to consumers around the world. The Company sells its products in approximately 180 countries and territories primarily through mass merchandisers, grocery stores, drug stores, department stores, e-commerce, pharmacies, etc. The company owns and operates approximately 20 manufacturing sites located in over 20 states in the United States. In addition, it owns and operates over 100 manufacturing sites in approximately 40 countries.

Procter & Gamble Majority of business outside the US Declining year-over-year net sales Main growth opportunities in developing markets

Foreign Currency Exchange Procter & Gamble Consumer Price Index Important Economic Factors Foreign Currency Exchange Consumer Sentiment

Procter & Gamble PG Key Ratios Peer Key Ratios Absolute Basis High Low Median Current P/E 23.24 11.76 17.84 22.06 P/B 5.60 2.84 3.96 5.38 P/S 1.53 0.72 1.14 1.47 P/EBITDA 12.63 6.50 9.67 12.30 Ticker P/E TTM P/S TTM P/B P/CF TTM EV/EBITDA TTM Average 22.28 2.90 6.46 22.56 14.66 PG 3.49 4.14 23.50 14.95 CL 25.29 4.33 - 25.13 15.77 KMB 20.18 2.49 330.96 19.36 13.26 EL 26.94 8.16 19.73

Procter & Gamble

Procter & Gamble Discounted Cash Flow Analysis Continued

Procter & Gamble

Procter & Gamble Recommendation: HOLD Competing in a highly competitive and saturated market A decline in top-line sales growth and unfavorable currency fluctuations have been two of the main controversies surrounding the stock Company is in the middle of a turn around strategy to reduce the # of brands and implement $10B of cost savings Despite all of that, the stock price has been resilient and the annual dividend (3.20%) has been dependable With a target price of $90.91, there is a potential 3.8% upside

As of 7/13/17 Market Capitalization: $227. 52B Current Price: $75 As of 7/13/17 Market Capitalization: $227.52B Current Price: $75.05 Target Price: $80.65 52-Week High: $80.47 52-Week Low: $65.28 Dividend Yield: 2.78% P/E (TTM): 17.04 Beta: 0.07

WMT Key Ratios Peer Key Ratios Absolute Basis High Low Median Current 57.60 12.01 20.79 17.97 P/B 12.68 2.47 4.25 3.21 P/S 1.99 0.41 0.64 0.49 EV/EBITDA 34.03 6.84 12.52 8.51 Ticker P/E TTM P/S TTM P/B P/CF TTM EV/EBITDA TTM Average 19.48 0.67 3.80 10.22 9.71 WMT 17.97 0.49 3.21 7.82 8.51 TGT 10.96 0.44 2.71 4.71 5.6 COST 32.34 0.63 6.1 15.24 15.07 DG 15.65 0.9 3.57 12.3 9.14 DLTR 20.49 0.89 3.42 11.01 10.21

Current Competition Wal-Mart remains the world’s largest retailer with its closest competitor in the U.S. being CostCo. However, with the further increase in popularity of ecommerce, Wal-Mart is facing new challenges.

Ecommerce Competition: Amazon remains the dominant online retailer, accumulating 81.90% of 2016 online market share. Wal-Mart has experienced significant growth in ecommerce sales as of recent, gaining ground in the ecommerce market.

Sensitivity Analysis

DCF Target Price of $80.65 calculated based off 9% TDR and 3.5% FCF growth rate. Possible return of 7.5%.

Recommendation: Hold Based off of current weighting of 4.33% and estimated return of 7.5%, recommendation is to hold. Economy is an expansion cycle, a time in which stocks in the consumer staples sector under perform. Wal-Mart is currently in direct competition with Amazon for an increased share in the ecommerce market. While Wal-Mart has implemented free 2 day shipping and discounted prices for in store pickup of items ordered online, Amazon has countered with discounted Amazon Prime memberships for low income subscribers. There is uncertainty in whether Wal-Mart will continue to gain ground in the ecommerce realm.

Company: Tyson Foods Inc. Ticker: TSN Current Stock Price: $61.93 Target Price: $70.15 Total Upside: 13.3% 52 Week Price Range: $55.72 - $77.05 Market Cap: 22.522 Billion Diluted Shares Outstanding: 390 Million Dividend Yield: 1.56%

Relative Valuation: The top table is based on annual data. The bottom is the most current data

Sensitivity Analysis

Recommendation: Buy Short term news announcements are impacting the stock Shooting Recalls Investigations These announcements will most likely not have a negative impact on long term cash flows There are multiple risks for this recommendation such as: Competition from China Increased regulations surrounding Agri Stats Decreased restaurant sales Little control over beef prices Tyson has significant cost advantages for its chicken business as well as its prepared foods segment. These segments are higher margin businesses and should present growth opportunities for Tyson Relative to peers, Tyson’s relative valuation based on P/E, P/S, P/B, P/CF, P/EBITDA is extremely attractive

Additional Stocks… Summary: Company: The Kroger Company Ticker: KR Current Stock Price: $22.37 Target Price: $26.41 Total Upside: 18.1% 52 Week Price Range: $20.46 - $36.85 Market Cap: 20.648 Billion Diluted Shares Outstanding: 897.346 Million Dividend Yield: 2.17%

Free Cash Flow

Relative Valuation The top table is based on annual data. The bottom is based on current data

Free Cash Flow

Additional Stocks…

Recommendation: BUY Negative news is impacting the short-term performance of this stock: Amazon buying Whole Foods Missed revenue estimates based on their most recent announcement Increased competition from overseas Kroger still has stable cash flows and the DCF performed by our team forecasted revenues and earning to be below consensus estimates The stock still has a significant upside regardless of our conservative estimates Despite a higher discount rate and bearish estimates, the stock still yields an upside of 18.1%