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

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

3. 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%

4. Breakdown of Sector

5. 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

6. 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

7. 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

8. 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

9. 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: $ Week High: $ Week Low: $85.34
Analysts’ 12M Target: $104.25
Dividend Yield: 1.91%
P/E (TTM): 24.63
Beta: 0.63

10. 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

11. Competition in North American Market

13. Molson Coors
Anheuser-Busch Inbev

16. 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.

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

18. 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.

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

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

21. 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

22. Procter & Gamble

23. Procter & Gamble
Discounted Cash Flow Analysis Continued

24. Procter & Gamble

25. 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

26. 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: $ Week High: $ Week Low: $65.28
Dividend Yield: 2.78%
P/E (TTM): 17.04
Beta: 0.07

27. 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

28. 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.

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

30. Sensitivity Analysis

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

32. 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.

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

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

38. Sensitivity Analysis

39. 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

40. 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:
$ $36.85
Market Cap:
Billion
Diluted Shares Outstanding:
Million
Dividend Yield:
2.17%

41. Free Cash Flow

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

43. Free Cash Flow

44. Additional Stocks…

45. 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%